Answer from HHS: By now you should have received information to let you know whether your retiree prescription-drug coverage is as good as or better than standard prescription-drug coverage. You need to know this information before you decide whether to join a Medicare drug plan, and if you do not know yet, you should call your former employer. If your coverage is as good or better than Medicare's standard coverage, you will not have to pay a penalty if your employer decides to drop coverage at a later date. If your retiree prescription-drug coverage is not, on average, at least as good as standard Medicare prescription-drug coverage, you may have to pay a penalty if you wait to join a Medicare drug plan until after you are first eligible.
You have a legal right to this information. If you have not received the information, you should ask your former employer or union (or the plan that administers your retiree prescription-drug coverage) for it. Some employers and unions will include this information with other communications they may give you about your retiree prescription-drug coverage.
If your employer chooses to discontinue its retiree coverage at a later date (after May 15, 2006), the employer is required to give you two months' notice and you will have a special enrollment period with the Medicare prescription-drug plans. During the special enrollment period, you can select a plan that will serve your needs without a penalty.
Question from Anthony: I belong to the VA prescription-drug benefits program. Do I still have to sign up for the Medicare program? I just heard Sec. Mike Leavitt say on ABC every senior citizen should sign up even for the lowest program so they won't feel penalized later. What are the facts?
Answer from HHS: As long as you still qualify, your TRICARE, VA or FEHB prescription-drug coverage is not changing. You should contact your benefits administrator or FEHB insurer for information about your TRICARE, VA or FEHB coverage before making any changes. It will almost always be to your advantage to keep your current coverage without any changes. If you lose your TRICARE, VA or FEHB coverage, and you join a Medicare drug plan after May 15, 2006, in most cases, you won't have to pay a penalty, as long as you join within 63 days of losing TRICARE, VA or FEHB coverage.
Question from D.J.: Why is there a penalty period at all?
Answer from HHS: Congress developed the drug-benefit enrollment periods and penalties to encourage people to enroll in the beginning, or when they first become eligible, instead of waiting until they are sick and their health care costs are higher. This policy is intended to ensure affordable premiums for everyone, and it works very similar to Medicare Part B, which covers physician visits and outpatient services. People who sign up later for Medicare Part B also pay more.