When Can Medical Expenses be Deducted?
Last month’s video focused on communicating Medicare Part D’s significantly reduced out-of-pocket maximum of $2000 beginning in 2025. As we’ve reported before, this is a dramatic change in benefit design. From its inception through December of 2023, Medicare Part D had no out-of-pocket maximum and in 2024, it is $8000. In fact, few with expensive medications will spend nearly that amount due to the manner in which discounts and rebates in the coverage gap are applied.
Today’s video is focused on another group – those who are eligible to be on Medicare Part D but have active group coverage through a group of twenty or more employees through their employment or a spouse’s employment. The question we have been seeking an answer to is this:
Are there many with active group coverage whose drug coverage becomes non-creditable as a result of the reduction in Medicare Part D’s out-of-pocket maximum?
If you’ve ever seen a formal Letter of Creditable Coverage, it specifically reads that the coverage one has “is as good as or equal to” Medicare Part D.
If those on active group coverage had coverage deemed non-creditable, many individuals would essentially be forced to enroll in a Part D Plan to avoid late enrollment penalties. I have a particular interest in this issue because I am on my husband’s plan and our out-of-pocket maximum is $8050 this year, clearly a multiple of the $2000 Medicare Part D out-of-pocket maximum, and could increase next year. I crafted an email for my husband to forward to his Benefits staff for their feedback on this issue. I didn’t truly understand the rationale behind the response but the answer was clear: my husband’s employer’s actuaries have deemed the plan creditable for delaying enrollment in Medicare Part D. Needless to say, I saved that email.
Because it is counterintuitive that our coverage is creditable, I sought another corroborating source. That came from an exchange of emails from retired colleagues which included an email from an actuarial expert currently employed by a major insurer which indicated that the government was approaching this issue with unusual flexibility and relying on fifteen-year-old criteria to assess whether group coverage is creditable.
In spite of these assurances, my advice would be for all of those 65 and over who are on active group coverage through an employer of twenty or more, to obtain a letter of creditable coverage if it isn’t mailed to you and do so every year until you transition to Medicare. Save those letters just in case. This information may be sent to you or available online. If it is not, contact your Human Resources Department or whoever is the administrative contact at a small business. Thus far when enrolling in a Part D Plan after age 65 through a Special Enrollment, the form one completes to answer the question about creditable coverage has not, to our knowledge, been challenged by the Part D Plan or Medicare, but better to take steps to protect yourself in case that process changes.
Complexity is one of the many problems, in our opinion, that plague today’s Medicare program. As vexing as that is, if you continue with active group coverage at 65 and over, please take these simple steps to avoid a potential pitfall affecting your future. We hope that’s not necessary, but we can’t know.
