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How to decide if Medicare Part D is right for you
Although most federal annuitants might benefit from keeping Part D, there are three instances where you could benefit from opting out.
The Inflation Reduction of Act of 2022 included improvements to Medicare Part D, and some have already been enacted—$35 insulin, no more member cost share in the catastrophic phase of coverage, and limits on premium increases. Next year, all Part D plans must include a $2,000/year maximum out-of-pocket limit per enrollee.
To help federal annuitants take advantage of these improvements, OPM allowed FEHB carriers to offer Part D plans this year if they provide prescription drug coverage that, when combined with the FEHB Program coverage, is equal to or better than what’s available through the FEHB plan coverage alone.
For plan year 2024, 17 FEHB plans auto-enrolled their Medicare members into a Part D prescription drug plan, and more FEHB plans may offer PDPs for plan year 2025.
Although most federal annuitants might benefit from keeping Part D, there are three instances where you could benefit from opting out. I’ll also explain other situations where you might think opting out of Part D is the correct decision but may want to keep it instead.
Note: Starting with the 2024 Open Season, United States Postal Service annuitants and their covered family members will be receiving healthcare benefits through the new Postal Service Health Benefits Program. PSHB rules differ from FEHB, so these recommendations are not intended for people in PSHB.
Opt-out Reason #1: International Coverage
Like Original Medicare, Part D does not provide international coverage. If you live abroad or spend a considerable amount of time overseas, you may opt out of Part D and maintain your FEHB prescription drug coverage.
If you’re just traveling overseas, consider keeping Part D. To help with the lack of international coverage from PDPs, you can obtain travel insurance that pays for medical expenses not covered by your health plan.
Opt-out Reason #2: Pharmaceutical Discount Coupons
Having Part D disqualifies you from using pharmaceutical manufacturers’ coupons. There is a U.S. anti-kickback statute that makes it illegal for individuals enrolled in Medicare to use drug-discount programs.
If you currently use one, and the value of that discount is worth more than potential Part D benefits, opt out of Part D.
Opt-out Reason #3: Part D IRMAA
While PDPs offered by FEHB plans don’t have an additional premium, individual tax filers with income above $103,000 and joint tax filers with income above $206,000 are subject to an Income Related Monthly Adjustment Amount, known as IRMAA. In the first IRMAA tier, this would add $12.90/month to the cost of Part D enrollment. Federal annuitants subject to IRMAA will need to evaluate the potential Part D benefits against the IRMAA surcharge when deciding whether to keep Part D.
Don’t Opt Out of Part D For These Reasons
To receive OPM approval, PDPs must provide prescription drug coverage that combined with the FEHB Program coverage is equal to or better than what’s available through the FEHB plan coverage alone. This means that the price you pay for a prescription should be at worst equal to what you pay under the FEHB plan.
However, some federal annuitants opted out of Part D this year when they saw higher prices for the same drug, dosage, and pharmacy in the PDP compared to their FEHB plan. OPM encourages federal annuitants who experienced this to contact their Plan at the customer service number on the back of their enrollment card. Annuitants enrolled in a PDP who still need assistance after speaking with their Plan can reach OPM at FEHB@opm.gov
I’ve heard from federal annuitants who dropped Part D coverage because they thought their PDP wouldn’t cover GLP-1 weight-loss drugs. While it’s true commercial Part D plans only include these medications when they’re prescribed for another condition, such as diabetes or to prevent heart disease, all FEHB plans are required to cover at least one GLP-1 weight-loss drug.
The Final Word
Most federal annuitants will benefit from Part D coverage, and this is especially true next year when all Part D plans will offer a $2,000 maximum out-of-pocket limit, a prescription drug benefit not found in any FEHB plan. If you live overseas or heavily use pharmaceutical discount programs, keeping Part D will be of limited value and you’ll likely be better off with the prescription drug coverage from your FEHB plan. Federal annuitants subject to IRMAA will need to determine whether the surcharge outweighs Part D benefits.
If you believe you have experienced a higher price for your prescription from the PDP compared to your FEHB plan, you can work with your FEHB plan or OPM to get the same FEHB plan price to maintain “equal or better “coverage. It’s important to consider all Part D benefits before making a final decision on which prescription drug coverage path to choose.
Federal annuitants shouldn’t drop Part D over GLP-1 weight loss drug coverage. The FEHB plan must maintain coverage for that drug class.
Kevin Moss is a senior editor with Consumers’ Checkbook. Watch more of his free advice and check if the Guide to Health Plans for Federal Employees is available for free from your agency. You can also purchase the Guide and save 20% with promo code GOVEXEC.