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Choose your own Medicare Adventure: Part D

It’s that time of year again! The leaves turn bright, the scent of sap rises through the woods. You can feel the cooler evenings and find fog on the fields in the early mornings. Yes, it’s Medicare Part D Disclosure Notice time!

We couldn’t think of anything more exciting than making a post that allows you to choose your own Medicare Part D adventure. This means that you can create your own path to make sure you receive and understand any notice/disclosure requirements that your company may have sent you. If you did get something from your employer, you can use this post to help you understand how to take advantage of Medicare Part D, if needed.

What is Medicare Part D? For some of you, the adventure ends here. Yup: if you’re someone whose only understanding of medications is taking probiotics and spoonfuls of elderberry juice every morning, then you most likely aren’t eligible, or just don’t need it. If you (or your dependents) are not eligible for Medicare – and thus not eligible for Medicare Part D – skip to number 6 below.

If you’re not eligible for Medicare Part D, it’s possible that your elders (parents, grandparents, aunts, uncles, etc.) are eligible. But this post is about you, not your relatives. So let’s proceed…

Medicare Part D is a gap coverage federal program to pay for prescription medications. Imagine the “D” standing for “Drugs” – as in prescription drugs and not illicit or illegal drugs. The federal government has been offering Medicare Part D to all Medicare participants since 2006. After 15 years, there are already over 50 million Medicare Part D participants. It is a social insurance program that has a drugs-only focus, and covers 75% of prescription drug costs up to a catastrophic cap. That cap is set at when out-of-pocket expenses exceed a certain amount, anywhere between $1,000 and $5,000 per year. Then the federal program covers 95% of the costs.

In the spirit of the new Matrix movie set to be released soon, you may start choosing your adventure below:

1. We’ve established that you (or your dependents) are Medicare eligible. If not, skip to number 6.

Medicare Part D eligibility is pretty simple: you have to be over age 65, or you have to have a disability or permanent kidney disease/damage requiring dialysis. You can get Medicare Part A (Hospital Insurance) for free if you or your spouse have paid Medicare taxes for at least 10 years. These typically show up on your paystub as “FICA” taxes. If you or your spouse hasn’t paid Medicare taxes for 10 years, but still want Medicare Part A, you can pay for it yourselves. That’s it: pretty simple. Now choose your pill.

2. If you’re a business owner, choose the red pill below, or skip to number 3.

This is the red pill. Read more here about what your employees need to consider when approaching their 65th birthday. They usually need to initiate the Medicare application process themselves, but you as a business owner need to inform them. So make sure your HR function has an eye on this.

Further, you need to discern as a business whether the group health plan you currently offer is Part D creditable or non-creditable in the eyes of the CMS (Centers for Medicare/Medicaid Services). A group health plan’s prescription drug coverage is considered creditable if it covers the same or more than the standard Medicare Part D coverage. If it does not cover as much as standard Medicare Part D coverage, then it is non-creditable.

If it is creditable, the CMS requires a disclosure be sent to your employees before October 15th each year. See number 5 below for the disclosure. You can use this blog post as your fulfillment of that rule.

If it is non-creditable, then a different disclosure needs to be sent to your employees before October 15th each year. We thought we’d be helpful and add this disclosure, too. Go to number 5 as well.

If you want to know the details of what a creditable and non-creditable coverage means, skip below to number 4.

3. Are you or your spouse/dependent eligible for Medicare? Choose the blue pill below.

The blue pill entails plugging into the federal program offering Medicare Part A (and Part B if you want the whole medical insurance). This means you are over 65 or have a disability as described above in number 1.

You will want to determine whether it makes sense now or later to enroll in Medicare. Take a look at our other blog post on this, where we also provide some guidance and contact information to make the best decision. Enrolling now will lock in a certain Medicare premium for you. But your group health plan may be creditable. This means Medicare will look at it as a worthy substitute and will allow you to lock in lower rates for Medicare Part D in the future. If it is non-creditable, then your choice is a different one. Move on to number 4 to continue the excitement.

4. Creditable vs Non-Creditable

If your group health plan is creditable (you may have received notification from your employer indicating this), AND you plan to keep working for some years, then consider postponing enrollment in Medicare. The reason is that CMS will “credit” the coverage you have through your employer “as if it were Medicare”. They therefore won’t ding you with higher premiums when you choose to enroll later. This is because the CMS wants to encourage businesses and insurance providers to relieve the federal programs with private program coverage.

If it is non-creditable (again, hopefully your employer has provided you with this information), then it is probably wise to enroll in Medicare (including Part D) the year of your 65th birthday. The reason is that you will be given the window of opportunity between Oct 15th and Dec 7th in the year you turn 65 to enroll in Part D at a lower premium (price). After Dec 7th, premiums for Medicare Part D may increase. This means you could be stuck with higher prices for as long as you need the coverage. Which is probably not ideal for you. Proceed to number 5 in your adventure.

5. Disclosures (the exciting part… Oooooo!)

If your group health plan is creditable:

Your employer has determined that the prescription drug coverage offered by the [insert your beloved insurance carrier’s name here] is, on average for all plan participants, expected to pay out as much as standard Medicare prescription drug coverage pays and is therefore considered Creditable Coverage. Because your existing coverage is Creditable Coverage, you can keep this coverage and not pay a higher premium (a penalty) if you later decide to join a Medicare drug plan.

If you lose your current creditable prescription drug coverage, through no fault of your own, you will also be eligible for a two (2) month Special Enrollment Period (SEP) to join a Medicare drug plan.

If your group health plan is non-creditable:

Your employer has determined that the prescription drug coverage offered by the [insert the name of your dear insurance carrier here] is, on average for all plan participants, NOT expected to pay out as much as standard Medicare prescription drug coverage pays. Therefore, your coverage is considered Non-Creditable Coverage. This is important because, most likely, you will get more help with your drug costs if you join a Medicare drug plan, than if you only have prescription drug coverage from your current insurance carrier. This also is important because it may mean that you may pay a higher premium (a penalty) if you do not join a Medicare drug plan when you first become eligible.

You can keep your current coverage from your insurance carrier. However, because your coverage is non-creditable, you have decisions to make about Medicare prescription drug coverage. This may affect how much you pay for that coverage, depending on if and when you join a drug plan. When you make your decision, you should compare your current coverage, including what drugs are covered, with the coverage and cost of the plans offering Medicare prescription drug coverage in your area.

Since the coverage under your current plan is not creditable, depending on how long you go without creditable prescription drug coverage, you may pay a penalty to join a Medicare drug plan. Starting with the end of the last month that you were first eligible to join a Medicare drug plan but didn’t join, if you go 63 continuous days or longer without prescription drug coverage that’s creditable, your monthly premium may go up by at least 1% of the Medicare base beneficiary premium per month for every month that you did not have that coverage. For example, if you go nineteen months without creditable coverage, your premium may consistently be at least 19% higher than the Medicare base beneficiary premium.

You may have to pay this higher premium (penalty) as long as you have Medicare prescription drug coverage. In addition, you may have to wait until the following October to join.

Further disclosure for everyone:

More detailed information about Medicare plans that offer prescription drug coverage is in the “Medicare & You” handbook. You’ll get a copy of the handbook in the mail every year from Medicare. You may also be contacted directly by Medicare drug plans. For more information about Medicare prescription drug coverage:

  • Visit www.medicare.gov
  • Call your State Health Insurance Assistance Program (see the inside back cover of your copy of the “Medicare & You” handbook for their telephone number) for personalized help.
  • Call 1-800-MEDICARE (1-800-633-4227). TTY users should call 1-877-486-2048.

If you have limited income and resources, extra help paying for Medicare prescription drug coverage is available. For information about this extra help, visit Social Security on the web at www.socialsecurity.gov, or call them at 1-800-772-1213 (TTY 1-800-325-0778).

6. You have chosen wisely and will live happily ever after.

While this may not be entirely true, at least you did choose wisely. We’ve gotten to this point in the adventure, and now you know what you need to do. Knowledge is power, France is bacon.

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