This article covers Medicare Part A, Medicare Part B, and how they work for federal employees. I get a lot of questions about this topic, and that’s appropriate because there are certain time frames and penalties involved. Certain decisions can have an impact on your premiums, and I think the looming possibility of penalties scares people.
There are a lot of people who help federal employees acquire Medicare supplements and Medicare Advantage plans, but they’re not well-versed in the federal system. There is a lot of misinformation because of people who are just trying to sell a Medicare supplement or Medicare Advantage plan and they give federal employees incorrect information. Don’t get me wrong, there are many great people that help with Medicare, but there are some that do not fully understand the federal system.
Medicare is a federal health insurance program primarily designed for individuals aged 65 and older. While there are exceptions for those on Social Security disability, we will focus on retirement-related eligibility. Turning 65 is generally when you become eligible for Medicare.
Medicare Part A
The main part we want to look at is Part A, which is hospitalization coverage and inpatient hospital care. There is no additional premium when you get on Medicare Part A, you’ve already paid for it with your Medicare taxes throughout your whole career. Even if you’re still working, you want to go ahead and get Part A because there’s no additional cost for it per month. Then if you do have to go to the hospital, even while you’re still working, Medicare will be your primary coverage and your FEHB will be secondary.
Medicare Part B
Medicare Part B is the one I get the most questions about because Part B is the one that has an additional monthly premium once you are enrolled in Medicare.
Part B covers outpatient care and doctor’s visits and as of September 2023, the Part B cost starts at around $165. If you’re still working, you do not have to take Part B, because if you have FEHB, you have your creditable coverage. You can say, “I just want Part A and I can wait on Part B,” and you’ll have a special enrollment period later where you can get it with no penalty.
If you’re still working and you have a spouse who gets to Medicare age first, they’re covered under your plan, they also do not have to take Part B. There’s no penalty if they’re covered under your coverage. However, if they would like to have more coverage, they are able to opt in.
Let’s say you’re 65 and you take Part A, but you wait on Part B because you’re still working. Two years later, around age 65, you separate. Within 63 days of your separation date, you have to get Part B at that time, and you won’t have a penalty.
However, if you turn 65, you are not working, you don’t have credible coverage, and you’re not covered under a spouse’s plan, you have an enrollment period of three months before your 65th birthday, the month of your 65th birthday, and then three months after. That is a 7-month window to get Part B or not. If you get Part B during that time you will pay the premium and you will not have a penalty.
If you decide you decide later to opt into Medicare Part B, you’re going to have a 10% penalty every 12 months. For example, if you waited four years and then you try to get back into Medicare Part B, you’re going to pay 40% more for coverage for the rest of your life.
Advantages of Medicare Part B
Now some people say, “Well, why do I need Part B? I’ve got FEHB. I’ve got my health plan.” You don’t necessarily have to have it, but it can be a good plan to have because Medicare will become your primary insurance coverage. So, you have Medicare Part A, your primary with hospitalization, then you get Part B and it’s your primary with doctor’s visits and outpatients. Part B will pay first, and then your FEHB insurance will fill in the gaps and pay most, if not all, of what’s left, and now you have no co-pays for most services that are covered under Medicare. It’s good coverage, and on a fixed income, it helps you know what your costs are.
A lot of people say, “Well Medicare Part B is not really worth it because it’s just doctor’s visits.” More and more medical services are shifting to outpatient services, which falls under Part B.
For example, I’ve had a lot of clients or their spouses who unfortunately have been diagnosed with cancer, and a lot of those cancer and chemotherapy treatments fall under outpatient care, which falls under Part B. Under some FEHB plans, if you don’t have Part B, you might pay 20% co-pays for those cancer treatments which could be very expensive whereas with Medicare Part B you don’t have to pay the 20% co-pays.
Now again, you might say, “Well, I don’t have cancer and I don’t think I’m going to get it. I’m healthy. Why do I get Medicare Part B?”
Having both Medicare Part A and Part B provides flexibility. If anything changes with FEHB in the future and you don’t want that coverage anymore, or something happens and you decide you want to switch coverage, having both parts of Medicare can prevent penalties and give you greater freedom of choice. There could be a change in FEHB that we don’t see coming. The government may stop subsidizing the FEHB and that cost gets so expensive. Having A and B basically gives you flexibility and gives you the power of choice where you can make a different choice in the future with no penalty in addition to having additional coverage.
It makes a lot of sense to get Medicare Part B despite what a lot of “online gurus” will try to tell you. If I was getting on Medicare, most of the time, if not always, I would get Part B. So, I highly recommend it for most people.
Disadvantages of Medicare Part B
There may be times when you don’t want to get Medicare Part B.
For example, if you and your spouse make more than $194,000 a year, your annual premiums increase. There are a couple of other income thresholds where it keeps going up, and people can be paying quite a hefty Part B premium, so it may not be worth it.
One cool thing, though, is that you can fill out a Life Event Form with Medicare. If you’re retiring and your income is going to go below what your income has been for the last 2 years, or below the $194,000 threshold ($97,000 for individuals), you can fill out a form with OPM and Social Security. This form states that you’re retiring, and you can prove your income is going to be going down. Then you can get your Part B premium reduced into the lower income bracket. So, before you make those decisions, definitely look at all your options with Medicare, know your income, and know there are ways to show that your income is going down.
In some regions, your FEHB plan will reimburse you and pay you a portion of your Part B premiums as well. Not all areas do this, so you will need to look into your FEHB region and see what the coverage is. When you end up getting on Part B, your net cost will end up being a lot lower than you think because some of the plans will send you a check at the end of the year to pay for the Part B costs.
So, if you can’t afford Part B or have not yet got Part B coverage, it’s not the end of the world! You may want to look at getting it to see how that would help you. And if you’ve waited only waited a year or two and you’re going to pay a penalty, it might still be worth getting it before you wait longer and that penalty just grows. It’s worth investigating all of your options.
Tricare and Plan B
For federal employees with access to Tricare, it’s important to note that you will be required to enroll in Medicare Part B. Tricare, the military’s healthcare program, typically covers service members and their families, but Tricare for Life acts as secondary insurance for Medicare-eligible beneficiaries.
Tri-Care can provide coverage in-lieu of FEHB. You can suspend your FEHB to only have your Tricare in retirement. Notice I said suspend in this case, not cancel. You can re-enroll in FEHB in the future if you want to when you’re suspending for Tricare.
Medicare Part D and Medicare Advantage
Now as far as outside Medicare plans, Medicare Advantage, Medicare Part D… Do you need all of that?
If you have FEHB, that counts as credible coverage, so you don’t have to get Part D when you’re first eligible. If you want to switch to that later, you can avoid paying penalties because of your FEHB if it had the drug coverage, but if you switch and you get a Medicare supplement and a Part D drug plan, you’re going to cancel your FEHB, so be careful. You can’t get back into your FEHB if you cancel it and switch to a supplement and a drug plan.
There is a plan called Medicare Advantage. With certain Medicare Advantage plans, you can suspend (not cancel) your FEHB plan. That’s the keyword: suspend. Don’t Cancel. You are essentially putting it on hold to get onto the Medicare Advantage plan. If you want to get back onto your FEHB plan later, you can do do during a future open season and it will restart the following January.
There are times when this makes sense. For example, I have some clients who are extremely healthy and took the Medicare Advantage plan and suspended FEHB coverage. This switch had no additional monthly cost besides what they were paying for Medicare Part B. Should their needs change in the future, such as if there are high ongoing costs under Medicare Advantage associated with a catastrophic illness, they can switch back to their FEHB plans since they were only suspended, not canceled.
You can also suspend FEHB if you have Tricare. Take the Tricare, and then if you want to switch back to FEHB, you can do so in the future.
So again, you don’t need Part D if you already have medical coverage under FEHB and it includes prescription drugs.
Medicare Part C
Medicare Part C is actually another name for the Medicare Advantage. You don’t need Part C if you have FEHB. It’s one or the other. You can suspend your FEHB plan to get on Medicare Part C and you can switch back in the future. If you want to get on a Medicare Advantage plan down the road, you can when you turn age 65. It’s important to do some research. Look at the options that are irreversible or cause a penalty because you don’t want to accidentally make a decision that you can’t change.
If you’re talking to professionals about your Medicare options, start quizzing them about the federal system. They should know the federal system and be able to provide quick answers. If they can’t, they don’t know the federal system which could lead you into an irreversible decision that could put you into a situation that is not ideal either now or in the future. So, make sure the person that you’re talking to understands FEHB and FERS eligibility. You also don’t want to make a decision based on what other people say. That may be good for them, but that doesn’t mean it’s good for you. I’ve talked to a lot of people who have made decisions based on what they’ve heard, and now they’re paying a big penalty.
I’ve talked to people who waited to get Medicare Part B because of how high their income was, and they didn’t know that you could file a Life Event Form. So, make sure you’re making decisions based on correct information.
And then lastly, when you’re talking with someone, get information in writing so you can verify it before making a decision.
If you’re a Post Office employee, know that the Postal Service is making Medicare Part B a requirement. You won’t have a choice when you’re Medicare eligible and you’re not working for a few years. You will have to get Medicare Part A and B.
There is also going to be a new Postal Workers Health Plan soon. There is still a lot of unknown information about that and I don’t like to give information unless I’ve seen it in writing from the source. I’m still researching that and I will probably write another article on the new postal system once I have more information.
Navigating Medicare as a federal employee can be complex, but it’s essential to make informed decisions to avoid penalties and ensure comprehensive healthcare coverage in retirement. Seek advice from experts who understand the federal system, explore your options, and remember that having both Medicare Part A and Part B can provide you with flexibility and peace of mind.
Securities and Advisory Services Offered Through Creative One Securities, LLC Member FINRA/SIPC and an Investment Advisor. FedWise and Client One Securities, LLC are not affiliated. Not Affiliated with OPM or any federal agency.