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How does Medicare Part D work with other insurance?

Mike Olmos by Mike Olmos | Licensed since 2010
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This article was updated on: 09/03/2017

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Medicare Part D Prescription Drug Plans

If you are a Medicare beneficiary, or will be soon, you might be concerned about getting prescription drug coverage under Medicare Part D. Anyone who has Medicare coverage –Part A (hospital insurance) and/or Part B (medical insurance) — is eligible to receive Medicare Part D prescription drug coverage. It’s optional, but in some cases you could face a late-enrollment penalty if you don’t sign up for this coverage as soon as you’re eligible, and then decide to sign up later on.

Let’s start with a quick overview of how Medicare Part D works. Part D provides prescription drug coverage through private insurance companies contracted with Medicare. You can get Medicare prescription drug coverage from either of two types of Medicare plans offered by private insurers:

  • A stand-alone Medicare Part D Prescription Drug Plan. This type of plan offers only prescription drug coverage, and works alongside your Medicare Part A and/or Part B coverage.
  • A Medicare Advantage Prescription Drug plan that covers both medical services and prescription drugs. This type is for people who choose to receive all their Medicare benefits in one plan. There are several types of Medicare Advantage plans, such as Health Maintenance Organization (HMO) plans and Preferred Provider Organization (PPO) plans.*

When you enroll in either type of Medicare Prescription Drug Plan, you might pay a monthly premium to the insurance company as well as the plan’s copayments, coinsurance, and, if applicable, annual deductible. Some Medicare Advantage plans have premiums as low as $0. With any Medicare Advantage plan or Medicare Prescription Drug Plan, you need to continue paying your Part B premium as well.

If you delay enrollment in a Medicare Prescription Drug Plan, and you don’t have other insurance that provides “creditable” prescription drug coverage, you may have to pay a Part D late-enrollment penalty if you sign up for this coverage later.  Creditable coverage means prescription drug coverage that is (on average) at least as good as Medicare Part D coverage.

The late-enrollment penalty is at least 1% of the national average premium.  It may be added to your premium for each month that you go without creditable drug coverage for more than 63 days. In most cases, you will pay the penalty for as long as you have Medicare Part D prescription drug coverage.

How Medicare Part D works with other insurance coverage.

Perhaps you currently have insurance coverage that includes prescription drug coverage and wonder if you still need coverage under Medicare Part D. That will depend upon the source of your insurance coverage. Here are some things you may want to consider:

  • Will your current insurance plan coordinate benefits with Medicare?
  • If you enroll in a Medicare Prescription Drug Plan, will you lose your other insurance coverage? And if so, will it affect your spouse, partner or others who may be covered by the plan?
  • Does your current insurance provide as good, if not better, prescription drug coverage (on average) as Medicare Part D provides? That is, does it provide “creditable” coverage?

Here are some examples of other insurance coverage that Medicare-eligible people might have:

How Medicare Part D might work with an employer or union plan

An employer or union plan decides how it works with Medicare and whether or not it will coordinate benefits with Medicare.  Your employer or union should tell you if your present prescription drug coverage will change when you become eligible for Medicare. This notification also applies to your spouse if he or she is covered under your employer health plan and becomes eligible for Medicare.

Your employer might do any of the following:

  • Continue your current coverage
  • Offer alternative coverage through a specified Medicare Part D Prescription Drug Plan or Medicare Advantage Prescription Drug Plan
  • Drop your coverage

It may be wise to ask your employer or union if you and/or your family members will be dropped from the plan if you enroll in a Medicare plan that offers prescription drug benefits.

If you like the employer or union plan and/or your family is covered by your plan, you may want to keep it if the plan permits you to do so. If so, look at your plan’s “Notice of Creditable Coverage” (which should be sent to you every year in the fall) to verify that you do have creditable prescription drug coverage. If the plan does not offer creditable prescription drug coverage, you may want to enroll in a Medicare Part D Prescription Drug Plan to avoid a Part D late-enrollment penalty.

How Medicare Part D might work with COBRA

If you lose employer or union plan coverage because the employment ends, you might be eligible for Consolidated Omnibus Budget Reconciliation Act (COBRA) benefits. Under COBRA, you and covered dependents may be able to continue coverage under the employer or union plan for a certain period of time, usually by paying the total premium for coverage that had formerly been shared or paid in full by the employer and an administrative fee. If the COBRA plan doesn’t provide creditable prescription drug coverage, it may be to your advantage to enroll in a Medicare Part D Prescription Drug Plan to avoid potential late-enrollment penalties. You may want to consult with your State Health Insurance Assistance Program (SHIP) to help you understand your options.

How Medicare Part D might work with individual insurance policies

If have an individual insurance policy (non-Medicare) that includes prescription drug coverage, your insurer must notify you whether your current coverage is “creditable” or not. If it’s not creditable, you might want to enroll in a Medicare Prescription Drug Plan as soon as you’re eligible, so you wouldn’t risk a Part D late-enrollment penalty. You might be able to use your individual insurance to supplement Medicare coverage.  You can check the terms in your policy to see if it will coordinate benefits.

How Medicare Part D might work with the Federal Employee Health Benefits Program (FEHBP)

If you are an active or retired federal employee, you generally don’t need to enroll in a Medicare Prescription Drug Plan.  The benefits offered through FEHBP are typically considered to be creditable prescription drug coverage. But if you want to enroll in a Medicare Prescription Drug Plan, you can usually do so without losing FEHBP benefits. If you lose your FEHBP coverage and enroll in a prescription drug coverage under Medicare Part D, you generally won’t pay a late-enrollment penalty as long as your Medicare Part D coverage starts within 63 days of your current coverage.

How Medicare Part D might work with Tricare for Life (TFL)

Prescription drug coverage under the TFL program for military retirees and their dependents is generally “creditable” (at least as good as Medicare Part D coverage on average). You can generally enroll in a Medicare plan offering Part D prescription drug coverage without risk of losing your TFL medical or prescription drug coverage. Furthermore, if you drop or lose TFL prescription drug coverage in the future and enroll in a Medicare plan that provides Part D prescription drug coverage, you will typically not pay a late penalty as long as you don’t go longer than 63 days without this coverage.

How Medicare Part D might work with the Department of Veterans Affairs Health Care Program

Veterans enrolled in the Department of Veterans Affairs (VA) health-care program can generally enroll in the VA pharmacy program and a Medicare Part D Prescription Drug Plan at the same time without losing their VA medical or prescription drug benefits. You can use either your VA benefits or your Medicare Part D Prescription Drug Plan on a per-prescription basis, but you cannot use both sources of prescription drug coverage for the same prescription.  Medicare and the VA pharmacy program do not coordinate benefits.  If you lose VA pharmacy program coverage, you can typically sign up for coverage under Medicare Part D, and you will not incur a late enrollment penalty as long as your Medicare Part D coverage begins within 63 days of losing your VA coverage.  The same rules apply if you’re enrolled in CHAMPVA, the VA program for the dependents of veterans killed or disabled in the line of duty.

How Medicare Part D might work with Medicaid

When you become eligible for both Medicaid and Medicare, you must receive your prescription drug coverage through Medicare Part D and not from Medicaid.  You may automatically qualify for the “Extra Help” (also known as the Low-Income Subsidy) and you generally have no risk for incurring a Part D late-enrollment penalty. If you don’t enroll in a Medicare Prescription Drug Plan when you are first eligible for Medicare, then Medicare will enroll you in a plan so you’ll have continuous prescription drug coverage.

 How Medicare Part D might work with Medicare Supplement (Medigap) plans

Standard Medicare Supplement plans sold today don’t include prescription drug coverage.  If your Medicare Supplement plan doesn’t include prescription drug coverage, you can enroll in a stand-alone Medicare Part D Prescription Drug Plan. The standardized Medicare Supplement plans available in most states won’t coordinate benefits to help pay your Part D plan premium, deductible, copayment or other costs.

Do you have questions about your Medicare plan options or how your Medicare coverage works with your other insurance coverage? I’d like to assist you.  If you prefer to schedule a phone call or receive an email with information just for you, you can arrange it by clicking one of the links below. To see a list of plan options in your area, click the Compare Plans button. You can call me or speak with another Medicare.com licensed insurance agent for immediate assistance at 1-844-847-2660 (TTY users 711) Monday through Friday, 8AM to 8PM ET.

*Out-of-network/non-contracted providers are under no obligation to treat Preferred Provider Organization (PPO) plan members, except in emergency situations. For a decision about whether a provider will cover an out-of-network service, we encourage you or your provider to ask your plan for a pre-service organization determination before you receive the service. Please call your plan’s customer service number or see your Evidence of Coverage for more information, including the cost-sharing that applies to out-of-network services.

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