Medicare Part D When You Have Drug Coverage from Elsewhere

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You don’t need Medicare Part D if you already have creditable drug coverage from another source. Creditable means something that can be credited or counted. So under Medicare rules, your drug coverage is creditable if its value is at least as good as Part D’s — specifically, if whoever sponsors it pays at least as much money overall for everybody in the plan as Medicare would.

You can’t determine this accountancy measure on your own, so the following lists provide the rules of thumb on which kind of coverage is, may be, or definitely isn’t creditable.

In general, having creditable coverage means you don’t need to enroll in Part D and would be able to switch to a Part D drug plan without penalty if you lost this coverage sometime in the future.

But you may want to consider signing up with Part D anyway if it would benefit you significantly — for example, if you’re eligible for the Extra Help program, which provides low-cost drug coverage to people with incomes under a certain level.

However, don’t even think of dropping your drug insurance from other sources without being sure of the consequences. In some cases, dropping drug coverage may mean losing your medical benefits, too. Contact your health plan for information before taking any action.

Drug coverage that’s creditable

You can assume your coverage is creditable — allowing you to stay out of Part D without risking late penalties — if you have it from any of the following:

  • The Federal Employees Health Benefits Program (FEHBP) for federal workers or retirees (and their covered spouses)

  • The TRICARE or TRICARE For Life program for active or retired military personnel (and their covered spouses)

  • The Veterans Administration (VA) health program for veterans

  • Federal health programs for Native Americans

  • State Pharmacy Assistance Programs (SPAPs) if qualified under Medicare rules

If your current drug coverage comes from Medicaid, you’ll be automatically transferred to Part D when you become eligible for Medicare. So although Medicaid provides coverage that’s as least as good as Part D, creditability isn’t an issue.

Drug coverage that you need to check out

Some types of drug coverage may or may not be creditable. So you need to find out — by looking at your plan’s enrollment materials or by contacting its administrators, who are legally required to provide this information — if your coverage comes from any of the following:

  • A current or former employer or union

  • COBRA temporary insurance

  • Individual (nonemployer or nonunion) insurance that you pay for yourself

Drug coverage that isn’t creditable

If you get drug coverage under a Medigap supplemental insurance policy, you have an older type of policy (labeled H, I, or J) that dates from before 2006. You’re free to keep this policy if you choose, but be aware that the drug coverage it provides isn’t creditable. So if you switch to Part D now or in the future, you’ll face late penalties.

And the longer you continue to keep this type of policy, the more expensive it will become; because it’s no longer sold, over time the pool of people who have it will dwindle — and the higher the penalties will grow.

Drug coverage that isn’t coverage

This category causes people to sometimes think they have coverage when they really don’t. The term coverage means insurance for which you (or maybe a third party, such as an employer or the government) pay premiums to reduce your drug costs in the future as well as now. So the following don’t count as creditable coverage for Part D purposes:

  • Pharmacy discount programs

  • State drug discount programs

  • Drug manufacturers’ assistance programs

  • Patient assistance programs or charities

  • Low-cost drugs from Canada, Mexico, or other foreign countries

  • Low-cost drugs from medical clinics

  • Free samples from doctors

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