By: Jesse Black
Today, I’m going to cover Medicare part A, Part B, how it works for Federal Employees. This is important to go over, and it is good knowledge to have.
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 is a lot of information to know and I’m going to break it down into a good amount of information so that you will have a good foundation as a federal employee, you can feel confident moving forward.
There are a lot of people who help people acquire Medicare supplements and Medicare Advantage plans, and they’re not well versed in the federal system. There is a lot of misinformation that gets out there because of people who are just trying to sell you a Medicare supplement or Medicare Advantage and they tell federal employees incorrect information. Don’t get me wrong, there are a lot of great people out there that help people with their Medicare as well. There are just some that come from a place of not fully understanding the federal system and therefore some misinformation is out there.
I’ve studied Medicare for a long time and worked with a lot of people on their Medicare planning, and I’ve really done some deep diving into it, so I’ll jump into it a little bit more today.
Medicare Basics
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 first we want to look at is Part A, which is hospitalization coverage, 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, 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, and your FEHB will be your secondary.
Medicare Part B
Medicare Part B is the one I get the most questions on because Part B is the one where there is an additional premium per month., once you get on Medicare.
Part B is outpatient care and doctor’s visits. And as of September 2023, the Part B cost is around $165. It could potentially be higher for you, but it’s 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 become 65, you are not working, you don’t have credible coverage, you’re not working, 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 don’t want Part B, but a few years down the road, you try to get back 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 a 40% penalty for the rest of your life. Your Part B is going to be 40% higher than your friend who got it when they were first eligible.
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 and a part of Medicare, because Medicare will become your primary. So, you have Part A, your primary with hospitalization, then you get Part B and it’s your primary with doctor’s visits and outpatients. You will still have costs involved. Part B will pay first, and then your FEHB 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 Medicare approved. It’s good coverage and on a fixed income, it helps you know what your costs are.
A lot of people say, “Well the Part B is not really worth it because it’s just doctor’s visits.” More and more medical services are shifting to outpatient and a lot of that does fall under Part B. For example, I’ve had a lot of clients that unfortunately have been diagnosed with cancer, or their spouse has, and a lot of those cancer treatments 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 of those cancer treatments, which could be very, very expensive. Whereas if you have the Part B, you wouldn’t pay that 20%.
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 that Part B?” Having both Part A and Part B provides flexibility. If anything changes for 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 the Part B, despite what a lot of “online gurus” will try to tell you. If it was me and I was getting on Medicare, most of the time, if not always, I would get Part B. So, I highly recommend that for most people.
Now there may be times where you don’t want to get Part B. For example, if you and your spouse make more than $194,000 a year, your premiums jump up and it’s a higher cost per year. And then there are a couple of other income thresholds where it just keeps going up and up, and people can be paying quite a hefty Part B premium, and 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, (or $97,000 if you’re an individual), you can fill out a form with OPM and Social Security. This form stats that you’re retiring, and you can prove your income is going to be going down. Then you can get your Part B premium lowered 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 regions 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 that Part B cost.
So, if you can’t afford Part B or you don’t get Part B, or you haven’t got Part B before because you still have good coverages, it’s not the end of the world! You may want to look at getting Part B and see how that would help you. And if you’ve waited a year or only two years and you’re going to pay a penalty, it might still be worth jumping on it before you wait a couple more years and that penalty just grows. It’s worth taking a look at and looking at all 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 be 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 wanted to when you’re suspending for Tricare.
Medicare Part D
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 you switch to a supplement and a drug plan.
There is a plan out there, though, called Medicare Advantage. With certain Medicare Advantage plans, you can suspend your FEHB and you can put it on, not cancel. That’s the keyword is suspend. Don’t Cancel. So you put it on hold essentially, where you can get on this Medicare Advantage plan. And then if you want to get back to your FEHB plan, you can during an open season in the future and then have it restart the following January. I’ve posted that on our Facebook page and people freak out. They’re like, “Don’t ever do that. It’s irreversible. You’ll lose your FEHB. Plus, there’s no plan out there, nearly as good!” and things like that. Again, it’s not irreversible if you’re suspending it. If you’re going to a supplement, you’re canceling. I’m not saying everybody should do that or anything, but the reason I mention this is that there are times where it makes sense depending on your situation. For example, I have some clients who took the Medicare Advantage and are extremely healthy. They don’t have any prescriptions, they don’t go to the doctor almost ever, except for their annual physical. And so, they switched to a Medicare Advantage plan that’s $0.00 a month in addition to what they’re paying for Medicare Part B. So, $0.00 a month and they suspended their FEHB. And then if things change and that Medicare Advantage is not as efficient, or they unfortunately get a catastrophic illness that requires ongoing care and it’s expensive on the Medicare Advantage, they can switch back to the FEHB in the future cause they suspended it, not cancelled it. You can also suspend your FEHB if you have Tricare. Take the Tricare and then if you want to switch back to FEHB, you can in the future.
So again, you don’t need Part D if you already have medical coverage FEHB, and it includes prescription drugs.
Medicare Part C
And then the last one I get a lot of questions about is called Part C, which is actually another name for the Medicare Advantage that I was just talking about. So, you don’t need Part C if you have the FEHB. It’s one or the other. You can suspend your FEHB to get on a Part C, but you don’t need Part C if you do have an FEHB plan. And then you do have the ability to switch in the future. If you want to get on a Medicare Advantage down the road, you can when you’re turning 65. It’s important to do some research, figure out what you’re doing. But look at the ones that are irreversible or cause a penalty because you don’t want to accidentally make a decision that you can’t change.
Stay Informed
If you’re talking to a professional about your Medicare options, start quizzing them about the federal system. They should know the federal system and be able to come up with the answers quickly. If they can’t, they don’t know the federal system, and they could lead you to an irreversible decision that could put you in a situation that is not ideal, or maybe not ideal in the future. So, make sure the person that you’re talking to is able to talk about FEHB and FERS eligibility quickly, so you don’t make a mistake. You also don’t want to make a decision based on what your brother says, or your colleague or your uncle and what they did. That may be good for them, but that doesn’t mean it’s good for you. I’ve talked to a lot of people that have made decisions based on what they’ve heard, and now they’re paying a big penalty.
I’ve talked to people that waited to get Part B was because their income was so high and they didn’t get Part B, 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 you’re talking with people who know what they’re saying. And then lastly, when you’re talking with someone, get in writing so you can double check in and verify it before you make that decision.
If you’re post-office employee, they’re making Part B a requirement. You won’t have a choice when you’re in Medicare eligible and you’re not working in a few years. You will have to get Part A and B. There is also going to be a new Postal Workers Health Plan soon. There is still a lot of information up in the air. And I don’t like to give information unless I’ve seen it in writing from the source. So, I’m still researching that, and I will probably write another article on the new postal system once I have more information. I’m not sure when that information will be coming out but be sure to check back on because I’ll get that information to you.
Conclusion
In conclusion, 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.
This has been a lot of great information. Hopefully it was helpful. It’s about options. It’s about having flexibility, knowing your coverages, knowing what’s going to work best in your specific situation. So hopefully you got a lot of value out of it.
If you think of some questions and you want to look at your specific situation, you can reach out to me at www.fedsmartpodcast.com or www.fedsmartretirement.com, and I can get you some information on Medicare and how it pertains to you and the things to consider for your specific situation. I’d be happy to run through scenarios and answer your questions on that.
And as a reminder, throw out any other article topics that you’d like to see. You can contact me using either of the websites above, or message me through our Facebook page www.facebook.com/FedSmartPodcast. If you don’t follow our Facebook page, it’s a great community full of important retirement information.
And then also lastly, you’ll want to pay attention to our podcast channel. We have a lot of really cool announcements coming, a lot of really cool opportunities to get you even more education and more community. We’re always trying to help Federal employees out; we’ve got some really exciting things coming in the coming weeks and months. So, tune to our future podcasts. You can find FedSmart Podcasts on Spotify, YouTube, Apple Podcasts, Facebook and Amazon Podcasts.
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