Medicare Part D was created to give prescription drug coverage to Medicare beneficiaries who do not have "as good or better" coverage than Medicare from another source, such as a retiree health benefit. Deciding whether Medicare Part D is right for you depends on your personal situation. (See section below, "Employer and union drug coverage" for further explanation.)

Your first step should be to figure out what, if any drug coverage you have now. Do you have prescription drug coverage from an employer or union? Do you have drug coverage through the Veterans' Administration or the military? Do you get your drugs through your state Medicaid program?

Employer and union drug coverage

If you or your spouse have health benefits from a former employer or union that covers prescription drugs, you should get a letter from that insurer that tells you if your coverage is better or worse than Medicare Part D. If your current coverage is as good as or better than the Part D coverage, you can and should keep those benefits and not enroll in a Medicare Part D plan. If your employer or union benefits are reduced or stopped sometime in the future, you can then enroll in a Medicare Part D plan without any penalty for late enrollment. You will want to keep your letter about your former plan as proof that you had "as good or better" coverage.

If your employer or union plan does not offer drug benefits that are at least as good as the Medicare drug benefits, then you might want to enroll in a Medicare Part D. If you choose not to enroll right now, but change your mind later, you may face a late enrollment penalty. The penalty is equal to 1% of the premium for each month you delay enrollment. You will pay the penalty each month along with your premium for as long as you have a Medicare prescription drug plan.

Carefully read all the information you get from a former employer or union about your existing drug and health coverage before you decide to join a Part D plan. In some cases you may not be able to drop just the drug coverage from your retiree coverage. You may have to drop all coverage, including health benefits, which could mean that you may not be able to get them back.

If you enroll in a Part D plan and also have some drug coverage from an employer or union plan (that is not as good as the Medicare benefit), payments from your private plan for drugs will not count toward your out-of-pocket expenses for purposes of meeting a plan deductible or reaching the out-of-pocket spending limit.

If you are unsure whether to keep your employer or union drug benefits or join a Medicare Part D plan, you should get more information. Your former employer or union sponsor of your retirement plan should be able to help you. Also, each state has a health insurance counseling organization that gives free help. (Contact information is in the "Where can I get more help?" section.)

TRICARE, Veteran's Administration, and Federal Employees Health Benefits Program drug coverage

What if your current drug coverage is through TRICARE (military dependent or retiree health care), the Veteran's Administration (VA), or the Federal Employees Health Benefits Program (FEHB) administered by the US Office of Personnel Management (OPM)? All of these sources of drug benefits are as good as or better than coverage under Medicare Part D. This means it will almost always be best to keep your current coverage. But, in some cases, adding Medicare prescription drug coverage can give you extra coverage and, sometimes, lower co-pays. Get more information from your benefits administrator or your insurer before making any changes. If you lose your TRICARE, VA, or FEHBP coverage and your Medicare drug coverage begins within 63 days, in most cases, you won’t have to pay a penalty.

Medicaid

If you have full Medicaid benefits you are already enrolled in a Medicare Part D drug plan. Medicaid no longer covers most prescription drugs.

Medicare will now cover your prescription drugs. If you did not choose the drug plan, you may not be in the one that has the best formulary for you. (We go over formularies in some detail below.) If you get Medicaid and find that you do not like the Part D plan you are enrolled in now, you can switch to another plan at any time.

Medigap

If you have a Medigap policy that covers prescription drugs (Plan H, I, or J), you can keep your Medigap plan with the drug coverage or you can enroll in Medicare Part D – but you cannot have both. If you do enroll in Medicare Part D, you can still keep your Plan H, I or J, but the drug coverage will be removed from the Medigap policy and the premium will be adjusted to reflect the change. Note that it is highly unlikely that Medigap Plan H, I, or J will give you drug coverage that is "as good as or better than" coverage under Medicare Part D. If you keep your plan H, I, or J drug coverage, you may face a late enrollment penalty if you later decide to enroll in Part D.

Last Medical Review: 10/23/2008
Last Revised: 10/23/2008