The Most Common Question About Federal Retirement

For the first column of the new year I thought I would go back through my emails and find the most common question from 2017. Since many of the employees and retirees who send me emails are either retiring soon or have already retired, it is not surprising that the winner is…

Should I sign up for Medicare Part B?

There were, of course, many variations on that general question, depending on the circumstances of the individual emailer. But there are some general principles that apply to all of those facing this decision.

First, here are some basic facts: Medicare Part A pays for inpatient hospital stays, care at skilled nursing facilities and some home health care. Part B, which is expensive, is insurance that helps pay for doctors' services and outpatient care. It also covers other medical services, such as physical and occupational therapy, and some home health care.

Your Federal Employees Health Benefits Program plan will cover you after you turn 65 even if you do not enroll in Medicare. But your FEHBP plan would like for you to sign up for Medicare, since Medicare would then be the primary payer of your health expenses. Many FEHBP plans provide a variety of incentives to persuade you to enroll in both parts A and B. For example, when Medicare is your primary insurance, many FEHBP plans will waive their deductibles, copayments and coinsurance for services that are covered by both Medicare and the plan.

As you start to weigh your options, consider the following:

• The age to qualify for Medicare is 65. Many people are enjoying great health at that age and may not be thinking in terms of needing a lot of health care. At 65, you may have another 20 to 30 years to live.
• The standard Part B premium in 2018 will be $134 per month—or higher, depending on your income. Although this is unchanged from 2017, the income thresholds for those who have to pay higher premiums have been lowered for 2018. This means many more people will be paying higher premiums for Medicare this year.
• According to a December report from the Employee Benefit Research Institute, Medicare beneficiaries could need as much as $370,000 for health expenses, up from $350,000 in 2016. In 2014, Medicare covered 64 percent of the cost of health care services for beneficiaries aged 65 and older, while out-of-pocket spending accounted for 12 percent of incurred costs, and private insurance covered 14 percent.

As a starting point for making your Medicare decision, the Centers for Medicare and Medicaid Services has put together a helpful fact sheet covering many common decision points. Here are some other things for federal employees and retirees to consider:

• Check Section 9 of your FEHBP plan brochure to see if your plan will waive some of your out-of-pocket expenses when Medicare is the primary payer for your medical expenses.
• The savings you may gain if your FEHBP plan waives deductibles, copayments and coinsurance can exceed the cost of Medicare Part B if you are treating multiple chronic illnesses. It is hard to know at age 65 if this will be necessary as you get older, but that's why they call it insurance.
• To avoid a late enrollment penalty for Medicare Part B, you must be covered by health insurance through current employment (not retirement). There are certain special circumstances under which you can enroll after 65 without a penalty. Once your initial enrollment period ends, you may have the chance to sign up for Medicare during a special enrollment period.
• Most people should enroll in Medicare Part A when they turn 65, even if they are covered by FEHBP. It has no monthly premium. However, some people may want to consider delaying Part A until a later date, such as people who contribute to a health savings account. You will not be able to contribute to an HSA with a high deductible health plan if you or your spouse is covered by Medicare A and/or B.

You don’t have much choice on how much Medicare costs, only whether or not to enroll. You do, however, have plenty of choices regarding FEHBP plans. And that could be the key to solving your dilemma.

Consider changing FEHBP plans when you become eligible for Medicare, especially when Medicare becomes the primary payer (generally after you have retired and your FEHBP premiums are being deducted from your—or your spouse’s—federal retirement benefit). Start with the Office of Personnel Management’s FEHBP plan comparison tool. This decision could lower your monthly premiums, provide more comprehensive coverage for your health care expenses, and secure your future against unforeseen illnesses that could result in very expensive ongoing care and treatment.

Photo: Flickr user Bilal Kamoon