Medicare, Part B or Not Part B: That is the question facing many federal employees and retirees nearing the age of 65. 2011 is the year that the first cohort of “Baby Boomers” reaches 65. Fedsmith has been receiving more inquiries than usual about whether choosing Part B is a wise choice. This article represents an update of an article on the same topic that I wrote in 2008.
Complicating any choice we face is the fact that we can carry our federal employees 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.
A Word of Caution
Here is an introductory word of caution.The Medicare Trustees say that Medicare will become insolvent in 2024 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).
It is possible that Congress will act sometime before insolvency hits. We do not know when and we do not know how Medicare may be changed. In fact, House Republicans in their “Path to Prosperity” recommend turning Medicare into a voucher system. Therefore, this article deals with how Medicare is is currently structured.Premiums listed in the article are those for
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, the
retiree premium for Blue Cross/Blue Shield Standard Option (the most popular of the FEHB plans) is $185.42 per month for self-only. Add that to the $99.90 per month for Part B and you come up with $285.32 per month for one person. Using the self and family monthly premium of $430.04 and two Part B enrollments and you’re facing a monthly bill of $629.84. OUCH! Of course. these are the premiums in 2012, premiums in future years are likely to be higher.
Due to a means test, Part B premiums are higher for high-income retirees.For example, a retiree with an income of greater than $170,000 (joint filing status) would pay another $40 per month ($139.90) per person for Part B. The income levels where the means test kicks in 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 (except for prescription drugs) 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. The question of whether or not to choose Part B often comes up in the Q&A section of the NARFE magazine, NARFE. A while ago, they advised that if you could afford it, the best possible coverage was under both Part B and FEHB. However, a few years ago a NARFE official was quoted in the Chicago Tribune as saying that healthy retirees might want to wait to enroll in Part B for a few years.
The Cost of Delay
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 $119.88 per month due to the $19.98 late enrollment penalty.
Medicare and Tricare for Life
We haven’t 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.