MEDICARE DRUG PLAN ADVISORY: Upgrades May Require Action for 65+ Wage Earners with Employee Prescription Plans

By Stephen J. Silverberg
New York Elder Law Attorney

If you’ve delayed signing up for Medicare prescription drug coverage (Part D) because you’re still working and have health insurance through your employer, you must know about some changes that may affect your budget in 2025.

Working people who qualify for Medicare sometimes delay applying, which is fine if you meet the requirements. Your employer’s prescription plan must pay as much on average as the standard Medicare plan for prescription drugs. Simple enough, right?

However, changes are coming because of upgrades that are part of the Inflation Reduction Act, which takes effect on January 1, 2025. Some employer plans that qualified because benefits were as good as Part D before this change may no longer be eligible. One example: the out-of-pocket maximum under Part D will be $2,000 yearly, starting on January 1.

If your private plan doesn’t cap the amount you need to pay at $2,000 a year or less, the policy may no longer qualify as a substitute for Part D, which means it won’t let you delay signing up for Part D without a penalty.

If you are working and eligible for Medicare and your job prescription plan is deemed not credible, you must immediately apply for Part D coverage. If you are not enrolled in Medicare, you must apply for Part A regardless of your employer’s health plan. If the plan does not provide credible coverage, you must also apply for Part D. If you delay enrolling, you may face a substantial penalty.

The penalty will hit your Medicare bill if, after your initial enrollment period, you have 63 or more sequential days without Medicare drug coverage or another creditable prescription drug plan.

What will the penalty be? Multiply 1% of the “national base beneficiary premium” — $34.70 – by the number of whole months you didn’t have Part D or creditable coverage rounded to the nearest 10 cents. Your monthly Part D premium is increased by this amount for life.

Take a breath – Medicare-eligible policyholders must be notified by law whether their prescription drug coverage meets the standard for being “creditable.” But if you are 65+, working and getting health benefits through your employer, and haven’t heard from your employer or the insurance company, now would be an excellent time to determine whether you need to make any coverage decisions when the Part D rules change.

About the Author
Stephen J. Silverberg is nationally recognized as a leader in the areas of estate planning, estate administration, asset preservation planning, and elder law. He is a past president of the prestigious National Academy of Elder Law Attorneys (NAELA), and a founding member and past president of the New York State chapter of NAELA.