Should Federal Annuitants Enroll in a FEHB Medicare Part D Plan?

Medicare Part D (Prescription Drug Program) has been available to Medicare beneficiaries since 2006. Part D has benefited millions of Americans who have excessive prescription drug expenses. Federal retirees have good prescription drug coverage through the Federal employees Health Benefits (FEHB) program and most retirees did not have a need to enroll in Medicare Part D. If at some time a federal retiree enrolled in Medicare Part A does incur excessive prescription drug expenses, then the retiree can enroll in a Medicare Part D prescription drug plan and not be subject to a late enrollment penalty.   

As a result of the Inflation Reduction Act (IRA) of 2022, enrollment in Medicare Part D has gotten more attractive to federal retirees. Among the provisions passed into law following the IRA passage is a strengthening of Medicare Part D through several reforms. The most significant reform is an improvement to Medicare Part D catastrophic cost protection to an annual maximum out-of-pocket prescription drug expense of $2,000, lowered from $8,000 during 2024 and effective January 1, 2025.

The Office of Personnel Management (OPM), who runs the FEHB program, is now strongly encouraging FEHB program health plans to adopt the improved Medicare Part D prescription drug coverage as an alternative to FEHB prescription program coverage for federal retirees enrolled in an FEHB program and Medicare. 

This column explains what federal annuitants enrolled in certain FEHB program health plans and Medicare need to know about their automatic enrollment in a Medicare Part D prescription drug plan.

The following 20 FEHB program health plans offer Medicare Part D prescription drug coverage during 2025:

• BSBC – Standard, Basic, FEP Blue Focus
• GEHA – High, Standard
• NALC – High, CDHP
• MHBP – Standard, Value, Consumer Option
• APWU – High
• Compass Rose – High
• Foreign Service
• SAMBA – High, Standard
• Health Partners – High, Standard
• Aetna Direct – Consumer Option
• Aetna Open Access – High, Basic -DC, MD, VA

Auto Enrollment in Medicare Part D

Federal retirees (annuitants) enrolled in Medicare Part A (Hospital Insurance), or Medicare Part A and Medicare Part B (Medical Insurance) will be auto-enrolled in the Medicare Part D prescription drug plan (PDP) associated with their FEHB program plan. An annuitant’s FEHB program health plan will notify the annuitant when the annuitant has been auto enrolled in a PDP. The annuitant will then have 30 days to decide if he or she wants to keep the PDP or disenroll.

The question becomes: How does an annuitant who has been automatically enrolled in a PDP decide that the PDP prescription drug benefits are as good or better than the prescription drug benefits included in the annuitant’s FEHB program health plan? In addition, are there additional costs associated with Medicare Part D enrollment?

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Understanding How Medicare Part D Works

Medicare Part D helps cover the cost of prescription drugs, including many recommended shots and vaccines. Plans that offer Medicare drug coverage are run by private insurance companies that follow rules set by the Center for Medicare and Medicaid Services (CMS).

In general, when a Medicare beneficiary enrolls in Medicare Part D, the beneficiary must choose a Medicare approved drug plan. Each plan can vary in premium cost and specific drugs covered. The specific drugs covered is called the plan’s “formulary.” Medicare beneficiaries are advised to visit www.medicare.gov/plan-compare to find and compare Part D prescription drug plans in their area.

Unfortunately, Medicare Part D is complex and can come with pitfalls – most significantly, the plan terms and costs change every year. What that means is that a Medicare Part D plan with low premiums when first chosen could become much less affordable in the year a Part D beneficiary enrolls in it.

Prescription drug plans offered vary by zip code. More than two dozen drug plans can be offered by zip code, involving a hodgepodge of premiums, deductibles, drug costs and copayments. The purpose of choosing the right drug plan is that the plan will pay for most of the beneficiary’s drug prescription expenses. This is especially important if the prescription drug expense is significantly large.

The following diagram schematically shows a Medicare Part D beneficiary’s out-of-pocket costs during 2025:

What Federal Annuitants Enrolled in Medicare and the FEHB Program Need to Do and Know

1. Contact his or her FEHB health plan and find out more about the plan’s prescription drug plan associated with Medicare Part D.  .
2. It is always to a federal annuitant’s advantage to keep their FEHB coverage without any changes.
3. A federal annuitant cannot drop only their FEHB program health plan drug coverage without also dropping FEHB program plan coverage for hospital and medical coverage.
4. A federal annuitant who is incurring significant annual out-of-pocket prescription drug expenses must check with their FEHB program plan and find out how much coverage the FEHB program plan offers in prescription drug expense relief. The annuitant must be specific with their particular prescription drug information and for their spouse if applicable who is also in need of prescription drug coverage. If the FEHB program plan prescription offers a sufficient amount of prescription drug coverage to the extent that out-of-pocket annual prescription expenses total less than $590, then the annuitant should be advised by the FEHB program health plan to not enroll in the health plan’s Part D prescription drug plan.   
5. If the annuitant’s expected annual out-of-pocket expense using their FEHB program health plan drug coverage is more than $1,500 to $2,000, then it may make sense for the annuitant to enroll in the health plan’s Part D prescription drug plan. But that depends in part on which prescription drug(s) the annuitant is using and how much the Part D drug plan pays for that particular drug.  
6. If the annuitant joins the FEHB program health plan’s Part D prescription drug plan, the annuitant will have no prescription drop coverage through the FEHB program health plan.
7. A federal annuitant enrolled in FEHB program health plan’s Part D prescription drug plan may be subject to an income related monthly adjustment amount (IRMAA). IRMAAs are normally deducted from a monthly Social Security benefit check or paid directly to Medicare. The 2025 IRMAAs for high income Medicare Part D beneficiaries are shown in the following table:

         8 – Federal annuitants who are enrolling in a Medicare Part D prescription drug plan must be enrolled in Medicare Part A or Medicare Parts A and B           (Original Medicare).

Key Takeaways from OPM’s Encouragement that Federal Annuitants with FEHB Program Health Plans Adopt Medicare Part D as an Alternative to FEHB Plan Drug Coverage 

1. 1. OPM has provided little guidance for federal annuitants.  The 20 FEHB program plans offering a Medicare Part prescription drug plan are supposed to provide guidance. The following is sample guidance from GEHA Standard/High: (Note: FEHB – Federal Employee Health Benefits program,  PSHB – Postal Service Health Benefits program)

   GEHA Prescription Drug Plan (PDP) Important Pharmacy Benefit Plan Information

   If you are a current GEHA member, please find drug cost for your specific benefit by logging into your Caremark.com account Opens Caremark site in a new window. Prescription claim history and specific plan design are considered when your drug costs are estimated.

   Please make sure to scroll to the bottom of the Coverage and Cost Results page to see “Plan Notes” which outline important plan information that may impact your coverage.

   Examples could include the following items that may be shown at the bottom of the page under “Plan Notes”:

   • PRIOR APPROVAL IS REQUIRED – Medications that require Prior Approval and/or Specialty pricing & network.
   • PLAN LIMITATIONS EXCEEDED –  Examples could include quantity or day supply – Medications that have quantity or other limits.
   • NOT COVERED OR MAY NOT BE THE APPROPRIATE REGIMEN as defined by your plan – Medications not covered by the plan

   Pricing for medications with age- or gender-specific benefits will not necessarily provide accurate estimates.

   Medications that consider prescription fill history for co-pay or coinsurance calculations may not provide accurate estimates.

   Check Drug Costs

   How much will you pay? Find a drug cost based on your benefit plan and prescription dosage.

   2025

   • PSHB PDP EGWP Elevate Opens in a new window
   • PSHB PDP EGWP Elevate Plus Opens in a new window
   • PSHB PDP EGWP Standard Opens in a new window
   • PSHB PDP EGWP High Deductible Health Plan Opens in a new window
     High Deductible Health Plan coinsurance reflects the amount after the annual deductible has been met.
   • PSHB PDP EGWP High Opens in a new window
   • FEHB PDP EGWP Standard Opens Caremark site in a new window.
   • FEHB PDP EGWP High
2. High income federal annuitants who enroll in a Medicare Part D plan will likely be subject to IRMAA. The improved prescription drug benefits will supposedly offset IRMAA for many annuitants.
3. Those annuitants enrolled in an FEHB program health plan and who use prescription drug discount cards from drug manufactures will lose access to drug manufactures discount program if they enroll in Part D prescription drug plan. 
4. Those annuitants who spend time overseas are advised to not enroll in a Part D prescription drug plan. This is because a Part D prescription drug plan will not provide prescription drug coverage while the annuitant is overseas. In case they travel overseas, they would need to purchase medical travel insurance.

Ed Zurndorfer, EA, ATA, CFP®, CLU®, ChFC®, CEBS®, ChFEBC℠: Federal Employee Benefits Expert

A former career Federal employee, Ed has published a staggering 1,200+ separate articles on Federal Benefits and Retirement!
Just “Google” his name, and you are likely to find a plethora of sites that contain his writings. Drawn to its mission to reach, teach
and serve Feds, Serving Those Who Serve is the only financial planning practice with which Ed has chosen to affiliate in over
20 years teaching. In addition to conducting Federal Benefits seminars for Serving Those Who Serve, you can find Ed’s
writings here on our blog in the FedZone, and on Fed-Soup, MyFederalRetirement, FederalNews Radio and NITP.

He is a member of the Maryland Society of Accountants, the National Association of Enrolled Agents, the International Society of Certified Employee Benefits Specialists, the Financial Planning Association, the National Association of Health Underwriters,
and the Society of Financial Service Professionals. Since 1999, Ed has taught many thousands of Federal employees about
their benefits, in person and at Federal agencies all over the country. Ed is a true national treasure.

Edward A. Zurndorfer is a CERTIFIED FINANCIAL PLANNER™ professional, Chartered Life Underwriter, Chartered Financial Consultant, Chartered Federal Employee Benefits Consultant, Certified Employees Benefits Specialist and IRS Enrolled Agent in Silver Spring, MD. Tax planning, Federal employee benefits, retirement and insurance consulting services offered through EZ Accounting and Financial Services, and EZ Federal Benefits Seminars, located at 833 Bromley Street – Suite A, Silver Spring, MD 20902-3019 and telephone number 301-681-1652. Raymond James is not affiliated with and does not endorse the opinions or services of Edward A. Zurndorfer or EZ Accounting and Financial Services. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional.