Medicare and Federal Retirees: Part B or Not Part B?

By on May 28, 2008 in Current Events, Retirement with 20 Comments

If you are nearing 65 years of age, you may be wondering if you should sign up for Part B of Medicare. That is the question that many folks nearing the age of 65 want to have the answer for. In fact, it was the top "vote-getter" in the list of things that FedSmith readers wanted to know about retirement.

Complicating any choice we face is the fact that we can carry our federal employee’s health insurance (FEHB) into retirement. Many private sector employers do not allow their employees to carry their health insurance into retirement, let alone past the age of Medicare eligibility.

Let’s begin the article with a word of caution. The Medicare Trustees say that Medicare will become insolvent in 2019 if changes are not made to the program. They state that the payroll tax would have to double (1.45% to 2.9%) or that benefits would have to be cut by more than half (51% to be exact). If you were born in 1954 you will turn 65 and become eligible for Medicare just at the time it becomes insolvent.

We can expect Congress to act sometime before insolvency hits, but we don’t know when and we don’t know how they will change Medicare. It’s entirely possible that Congress will simply increase the tax and be done with it, but your guess is probably as good as mine as to how Medicare will look in 2019.

Therefore, this article deals with how Medicare is now and how it may be for the next few years. Laura Bush, Nolan Ryan and I will turn 65 on the same day in 2011, and this article is likely to apply to us and the many others who are near our age.

The answer to the question of whether we should elect Medicare Part B or not is "it depends". Let’s look at the two major items on which it depends.

First, it depends on your ability to afford carrying both Part B and your FEHB. For example, Blue Cross/Blue Shield Standard Option (the most popular of the FEHB plans) costs $134.66 per month for self-only. Add that to the $96.40 per month for Part B and you come up with $231.06 per month for one person. Using the self and family monthly premium of $314.47 and two Part B enrollments and you’re facing a monthly bill of $507.27. OUCH!

Of course these are the premiums in 2008, premiums in future years are likely to be higher.

Part B premiums are higher for high-income retirees. For example, a retiree with an income of greater than $164,000 (joint filing status) would pay $122.20 per month per person for Part B. The income levels are high enough that it is unlikely that they would hit too many federal retirees.

Second, it depends on your usage of medical services. Almost all FEHB plans will waive their deductibles and co-pays if you sign up for Part B. They will also pay your share (deductible and co-pay) of Medicare. Individuals who use a lot of medical care might come out ahead financially by selecting both Part B and the FEHB even if they are paying premiums for both of them. What is difficult is determining your need for medical care in future years. We also have to consider the penalty for late enrollment in Part B (more on that later).

If you are curious about whether or not your plan waives all deductibles and co-pays, read the section on coordination of benefits in your FEHB plan’s brochure. Some plans have additional information that can be helpful to the Medicare eligible federal retiree, but the average representative may not be aware of it. Blue Cross/Blue Shield has such a booklet (entitled Pre-Retirement Seminar), but several calls to BC/BS representatives turned up not one who was aware of the booklets existence; this included the representative whose name was listed on the same web link as the booklet was.

The question of whether or not to choose Part B often comes up in the Q&A section of the NARFE magazine, Retirement Life. Until recently, they have advised that if you could afford it, the best possible coverage was under both Part B and FEHB. However, a NARFE official was recently quoted in the Chicago Tribune as saying that healthy retirees might want to wait to enroll in Part B for a few years.

The problem with delaying enrollment in Part B is that, for each year you delay, there is a 10% late enrollment penalty tacked on to the premium. For example, if a 67 year-old enrolled in Part B now, their premium would be $115.69 per month due to the $19.28 late enrollment penalty.

We have not yet addressed the issue of the Medicare eligible military retiree who has Tricare for Life. Tricare for Life requires that you elect Medicare Part B. Having Tricare for life also allows federal retirees to suspend their FEHB while covered under Tricare.

I am sorry to disappoint the readers who were expecting a yes or no answer to the question of whether or not to take Medicare Part B. This truly is a situation that depends on the two items discussed above; ability to pay and expected health care utilization.

John Grobe’s latest book, The Answer Book on Your Federal Employee Benefits, has just been released by LRP Publications. The book is written in an easy to understand question and answer format and covers all areas of federal benefits from the perspective of an employee at various stages of their career. Order your copy at shoplrp.com.

© 2016 John Grobe. All rights reserved. This article may not be reproduced without express written consent from John Grobe.

About the Author

John Grobe is President of Federal Career Experts, a consulting firm that specializes in federal retirement and career transition issues. He is also affiliated with TSP Safety Net. John retired from federal service after 25 years of progressively more responsible human resources positions. He is the author of Understanding the Federal Retirement Systems and Career Transition: A Guide for Federal Employees, both published by the Federal Management Institute. Federal Career Experts provides pre-retirement seminars for a wide variety of federal agencies.

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  1. Secondtimothy says:

    John, While you couldn’t answer the question with a yes or no for us, it might be interesting to learn if you carry part B and why or why not you made that decision.

  2. Masli says:

    I wonder if a federal retiree has a high income job for a few years that will elevate the Medicare B premium to the highest category, does it still make sense to enroll in Medciare B immediately? Assuming that the reitreee will continue to enroll in the highest type of GEHA or BlueCross/BlueShield?

    • Retire says:

      I guess it depends on how you would define ‘still makes sense.’If you are concerned about the penalty for late enrollment because you think you will enroll down the line, then by enrolling when first eligible, you would avoid that extra expense. Some retirees consider enrolling and then taking the less expensive fehb option, this would best be done comparing the less expensive option to your current plan to be sure it is compatible with your individual needs.If you are concerned your income is high and you must pay a higher Part B premium, it will be even more difficult to exceed your Part B premiums paid with savings on waived fehb co-pays, because the premiums paid will be a higher amount.

      • Masli says:

        Thanks. Could you clarify your last sentence? Namely, “because the premiums paid will be a higher amount”: Do you mean the Part B premimum for high income is higher than the wavied co-pays (so it is not worth to get Part B)?
        I guess my choices are high fehb only (have to pay co-pay), high fehb + Part B (no co-pay), and low fehb + Part B (some copy??). I have not double checked but my previous check makes me hesitant to go the low fehb. So I am considering the first two options. What is your advise?

        • Retired says:

          The current Part B premium is about $115 per month, it is means tested, your earlier post implied your income is higher and would require a higher premium to be paid than the $115 per month. I checked yesterday, the highest income level (self) pays a premium of over $300 per month. My point is that, if $115 per month makes for a difficult decision, then having to pay more makes the decision even harder. Most fehb plans waive co-pays (deductibles, coinsurnace, etc) for Part B-type services (example, doctor services) if a retiree has Part B. To be cost effective would mean co-pays waived would have to exceed Part B premiums paid, this may not be easy to attain because co-pays in many fehb plans are low, for example, under BC Std, can visit a primary care doctor for a co-pay of $20. But this is only one type of service under the plan, as you know. I would suggest read your BC brochure very carefully by using the index to look up every page discussing Medicare. This should give you a better insight into the problem. Don’t forget about the penalty for late enrollment in Part B, for example, if you don’t enroll now and decide to do so later, or if enrollment is no longer optional down the line.

          • Masli says:

            Thanks. Yes, I am talking about the highest B premium. Sorry I wasn’t clear in my first post. I (and my wife) would be happy to pay the basic $115 premium per person if we can, but that is not the case. So we are facing the situation of $300 per person and that is what makes me hesistant. Since $300 per person per month means $7200 per year, that seems to exceed the copays and deductibles ane even the maxium out of pocket per year. Meanwhile, the penalty is on the basic premium only, so if we wait for 10 years the penalty is 100% of $115 (plus inflation adjustment), or approximately $1400 per year for the rest of my life, compare this with the $300 per month X 12 X 10 = 36000 savings minus the copays and deductibles.

          • Retired says:

            I would not argue with the numbers you discuss. I think it comes back to your ‘does it still makes sense? question. In other words, to determine what you want to base your decision on. If it’s ’I want as much insurance as I can get,’ that is one way; if you want to make a prudent purchase, that’s maybe another. Incidentally, I notice in the article the suggestion to possibly delay enrollment for a while. I think that is generally unwise because the penalty will be costly especially over time, likely to be more expensive in the long run. However, in a case like yours, high income in the early years, might be different. But how many retirees are in that fortunate situation?

  3. Guest says:

    Standard option, self only is not $134.66 per month, it is $187.18.  Where do you get your figures?  I wish it were only that much.  Each year it goes up and without the COLA, my monthly check goes down.  Over the past few years, my check is almost $50 less.  What a rip off!

    • Guest says:

      This article was written in 2008 when standard option, self only was actually $134.66 per month.

    • BledDry says:

      Definitely a rip off considering you paid around 5% (1-7.65) of your paycheck to Medicare over the previous 40 years of your life. (Employer contributions are part of your paycheck, who cares where the money comes from)

      Even at a low $25,000 a year, $1250 X 40 years = $50,000 you gave the government ALREADY. Why does Part B cost ANYTHING?Average private health insurance premium ~$3000 a year.

  4. Benmiller2 says:

    I am a retired federal employee and kept my Blue Cross and Blue Shield Standard. I also have Medicare Part B.

    Until this year I have not had to pay any copays. This year doctors are requiring me to pay a copay.

    Has something changed or are the doctors wrong?

    • Retired says:

      My first guess would be your provider does not accept Medicare assignment (but does accept patients with Medicare). In this case, provider can charge up to 15% more than the Medicare rate. To check this, review your fehb notification form to see if there are comments on this subject. Also, assuming provider has billed up to the extra 15% allowed, the amount of your out of pocket payment would be equal to .15 x the amount in the plan allowance column.

      Another indicator of this would be if provider does not bill Medicare directly.

      Please make an additional post as I would be interested in learning what you find.

  5. Casantry L Griffin says:

    I’m not there yet (59 years old) but this is a lot of confusion on when you have to sign up for Medicare Part B. A co-worker who recently retired (12/10, age 66, married, TriCare for Life) was already paying the monthly Medicare premium for a little over a year because they said if he didn’t, he would be penalized 10% for every month he did not pay the premium. He was FERS which makes him receive SS but I was previousy CSRS and I paid the Medicare Tax which made me eligible for Medicare(?) I am now a FERS/Transfer so what happens if I don’t pay the Medicare premium when I turn 65 if I am still working? They force you (taken from pay) to pay the tax so you can get Part B, now they are saying if you don’t pay the tax they will take away your SS!!! Why do we have to have Medicae Part B when we have an excellent healthcare plan from our job?

    • Retired says:

      Type your comment here.Feds began paying the Medicare tax in (approx) 1982, if is toward a Part A enrollment without any premium charge beginning at age 65. Generally, if a person at age 65 is still working and covered by a health plan such as fehb, the person can postpone taking Part B until retired; they will then have a period of time when they can first enroll and will also receive a waiver of the penalty for delaying past age 65. Whether or not Part B is necessary is an open question each person must decide for himself or herself. One aspect of the question is whether they might decide to enroll later if their health deteriorates (in which case they will face the penalty for late enrollment and it would have been better to enroll when first eligible), or whether Part B might become mandatory at some future time.

  6. Gmcguffin says:

    In 2004(July) we opted out of B. In November of 2004 my wife had a brain aneurysm in Jacksonville, Florida. Medicare “A” took care of the hospital, St. Luke’s. However the doctors practicing at St. Luke’s came from the Jacksonville branch of Mayo clinic which Blue Cross/Blue Shield was not a preferred provider. Cost me alot. I did a dumb thing and we re=enroilled quickly after the stroke and we’ve gotten along well ever since

    • Tony Shirley says:

      It is Oct. 12, 2011 and I just got my medicare card, I also have FEHB standard opt. so I have to decide about
      Medicare Part B. It says in the 2011 BC/BS guide on page 25 that ‘We limit our payment to an amount that
      supplements the benefits that Medicate would pay under Medicare Part B regardless of whether Medicare pays.’ Does this mean if I decline Medicare Part B, that FEHB only pays the supplement part (20%) for services and I have to pay out of pocket the 80%. If this is true then by all means I’ll have to accept
      Medicare Part B.     Thanks.

      • Retired says:

        No, it does not mean that! You are referring to the section of the brochure covering how BC pays if retiree HAS Medicare (regardless if Medicare pays); in other words, if Medicare is primary (which it will be for you for Part A services if you enroll in Part A, and for Part B services if you enroll in Part B, and for both if you enroll in both), then BC will only pay secondary whether or not Medicare pays as primary.Read page 24 to understand how BC pays if you don’t enroll in Medicare, which is very similar to how it pays prior to your turning age 65 (and where it is not similar, it tends to be in your favor).The concern you raise in your question is a misunderstanding and it is not uncommon for this misunderstanding to be encountered (unfortunately).

  7. guest says:

    You are wrong about the cost of standard blue cross and shield…it is $187.18 for self only, not $134.66

  8. Robertr1_myers says:

    If you are priority 8 in the VA and elect Part B you will lose the coverage that FEPBLUE Basic pays to the VA because you enrolled in Part B. I am paying $115 for part B and $113 for BC/BS Basic and just received a bill from Baltimore VA for $215 for co -pays. Before Part B BC/BS covered most of co-pays. I’m leaving the VA system! So much for thanks for your service.

  9. Chipper96734 says:

    It is my understanding that there is no penalty for medicare part B late enrollment if the reason is that you are still a full time employee at age 65. I undersytand that after you finally retire you have a time window that allows you to start part B without penalty?

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