Medicare Choices

Little is more confusing for employees and retirees than the decisions that must be made when you become eligible for Medicare. Let's look at two scenarios to see how Medicare and Federal Employees Health Benefits Program can fit into one picture.

Situation 1: Active federal employees age 65 and older

Current employees who turn 65 and are covered by FEHBP through their own employment should consider enrolling only in Medicare Part A. (There is no premium for people who have paid the Medicare 1.45 percent hospital tax during their career.)

The only time you will use Medicare Part A -- the hospital insurance part of Medicare -- is if a doctor orders you to stay overnight in the hospital. Your FEHB plan will be primary if you are still employed, but Medicare Part A may include some expenses that are not covered by FEHB at no additional cost to you.

Spouses who have not worked long enough outside the home to qualify for Medicare Part A through the payroll tax are eligible for premium-free Medicare Part A when they reach age 65 because you have paid the tax that qualifies you both.

Medicare Part B is a different story. It covers outpatient care, doctor visits, some preventive care and other outpatient services. There is not a compelling reason to enroll in Medicare Part B (2012 premium is $99.90 a month or more depending on your adjusted gross income) if you already are covered by health insurance through your current employer (or if you are covered by your spouse's health insurance and he or she is currently employed).

You can avoid a late penalty by signing up for Medicare Part B during the special enrollment period that lasts for eight months following your retirement (or your spouse's retirement if you are covered under that employment health plan).

I suggest beginning the sign-up process shortly after retirement to avoid the penalty because Social Security may need additional documentation showing you had been covered by "current employment" health insurance.

Federal employees and retirees will not need Medicare Parts C and D if they are still employed and covered by their FEHB plan.

Medicare Part C (Medicare Advantage) is health insurance that you might consider using instead of FEHBP after retirement. Retirees can suspend their FEHB plan to enroll in Medicare Part C. If they wish to return to FEHBP, they can cancel the suspension and re-enroll during a future open season.

Medicare Part D, prescription coverage, is likely to be equal or inferior to your FEHB plan.

Situation 2: Retired federal employees age 65 and older

Let's assume everyone who turns 65, whether working or retired, enrolls in Medicare Part A. Once you are retired and no longer covered by health insurance through your current employment (or your spouse's), then Medicare will be the primary payer for your inpatient hospital expenses and for some limited inpatient care at a skilled nursing facility.

Medicare Part B is where it gets a little sticky. Let's start with the premise that if you are healthy, you mainly need health insurance in the event of a catastrophic event such as a major illness or an accident. For either of these situations, your FEHB plan will continue to serve you well without the addition of Medicare Part B coverage, but this doesn't mean you should not enroll in Part B.

There is a late fee of 10 percent of the Part B premium for every 12 months you delay enrollment past age 65 or past your "special enrollment" period if you continued to be covered by "current employment" health insurance past age 65.

Your current health might be great, but what about your health in five, 10, 15 or 20 years? If you decide to enroll in Part B later, then consider that the late enrollment penalty could make it cost-prohibitive even though you might benefit from the additional coverage.

This is an excellent time to consider switching FEHB plans, which can range from less than $100 a month for self-only coverage to almost $800 a month for self and family. It is possible to save the entire amount of the Part B premium by choosing a less expensive federal health plan.

You have a special personal open season when you turn 65, allowing you to change your plan outside of the annual open season periods.

If you choose to enroll in TRICARE for Life or a Medicare HMO or Advantage Plan, then you must enroll in Medicare Part B. With these options, you can suspend rather than cancel your FEHBP coverage.

Most federal retirees I meet are enrolled in Medicare Parts A and B and say they feel very well insured with that combination added to a continuation of their FEHB plan -- many are covered by Blue Cross Blue Shield Standard Option (2012 monthly premiums are $185.42 for self only and $430.04 for self and family coverage).

I usually agree with them on their choice of Medicare Part A and Part B, but I also think there are reasons to consider changing their FEHBP coverage to something that is less expensive, but just as comprehensive.

You probably will not have to enroll in Medicare Advantage (Part C) or Medicare Prescription Drug coverage (Part D). A couple of exceptions: If you find yourself needing to lower your health insurance costs, a Medicare Advantage plan may be available that has no premium other than the cost of Medicare Part B. There may be more restrictions on which providers you can use, but this move could save money. Remember that you would suspend rather than cancel your FEHB plan to use a Medicare Advantage plan.

Medicare Part D might supplement prescription coverage for people in less expensive FEHB plans.

Navigating Plans

If you are considering Medicare Part C or D plans, this online tool from Medicare could help.

There are other resources at www.opm.gov/insure to compare plans and decide what works best for you and your family. OPM also maintains a Medicare section on its website.

You also will find extensive information on Medicare at the National Active and Retired Federal Employee's New York chapter.

Remember that this open season only runs through Dec. 12 -- that is Monday!