Whether you are turning 65, getting ready to retire, or just gathering information to become better informed, you may need some guidance when it comes to Medicare enrollment and benefits. There are two important questions for federal employees and retirees to consider about Medicare:
- How does adding Medicare help provide more complete health coverage?
- How do you avoid paying a penalty for late enrollment in Medicare Part B?
Federal Medicare beneficiaries are in a unique and sometimes confusing situation when it comes to Medicare enrollment because Federal Employees Health Benefit Program plans continue to cover employees as well as eligible retirees before and after they qualify for Medicare coverage. (A postal reform bill currently under debate in Congress would change this flexibility for postal retirees.) In addition, many federal employees and retirees qualify for coverage through the military’s TRICARE system or via the Veterans Affairs Department.
Because of this complexity, one of the most frequent questions I get at my pre-retirement seminars is, “What do I do about Medicare enrollment when I turn 65?”
According to the Office of Personnel Management, the percentage of federal employees working past age 65 is increasing. In September 2016 there were nearly 80,000 full-time federal employees 65 and over, representing almost 5 percent of the federal workforce. In September 2000, there were less than 25,000 such employees. That’s an increase of more than 55,000 employees who have delayed retirement past the age of qualifying for Medicare.
Medicare has four parts: A, B, C, and D. Most federal employees and retirees who are covered under FEHBP do not need to enroll in Part C (Medicare Advantage) and Part D (which covers prescription drugs).
The majority of federal retirees enroll in Medicare A and B (although enrollment in Part B is falling). Today all federal employees will qualify for premium-free Part A when they turn 65. It helps pay for inpatient hospitalization and care at a skilled nursing facility following a hospital stay.
Your FEHBP plan also covers hospitalization, skilled nursing care, home health care and hospice care. But having Medicare Part A can provide additional benefits that your FEHBP plan may not cover and your FEHBP plan may waive some or all of your out-of-pocket inpatient expenses when Medicare Part A becomes the primary payer.
TRICARE covers inpatient care as well, but TRICARE for Life (covering retirees and their spouses who are 65 and older) requires Medicare Part A and B enrollment to maintain coverage.
There are few reasons to delay enrollment in Part A, unless you are contributing to a Health Savings Account and are covered by a High Deductible Health Plan. There are several HDHP plans with HSA options in FEHBP.
Weighing Part B
Part B is where the decision-making process can get tricky. It covers outpatient services, such as treatment at a doctor’s office. If your FEHBP plan will continue to cover you when you are 65 and older, why do you need to pay an additional health insurance premium for Medicare Part B?
Part B is expensive. Its cost is not covered by payroll taxes, but instead paid for through premiums shared by the enrollee and the federal government. For most beneficiaries, the government pays about 75 percent of the Part B premium, and the beneficiary pays the remaining 25 percent.
But Part B has its benefits. Many FEHBP plans provide a variety of incentives to persuade you to enroll in both parts A and B. 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.
Also, If you choose not to enroll in Part B, you should be aware of the following:
- If you’re retired, over 65 and not covered by a current employment health plan, there is a 10 percent late enrollment surcharge added to your Part B premium for every 12-month period you could have enrolled in Medicare but delayed your enrollment.
- You must wait until the annual Medicare general enrollment period to re-enroll and your coverage will not be effective until July 1 of that year.
If the following are true, then you (and your spouse) can delay Part B coverage without penalty for late enrollment even if you are already age 65:
- You are working and covered by current employment health insurance.
- Your spouse is working and covers you under their current employment health plan.
- You cover your spouse who is eligible for Medicare through your current employment FEHBP coverage.
Under these circumstances, there is an eight-month special enrollment period starting when your current employment health coverage ends. If you prefer, you can enroll in Part B anytime you are covered under current employment health coverage.
If you’re retired and covered by TRICARE for Life, Medicare Advantage, or the health plan for Peace Corps volunteers, you can suspend (but not cancel) your FEHBP coverage using form OPM 2809.
The bottom line is if you’re retired and have FEHBP premiums deducted from your retirement benefit, you should carefully consider whether Part B makes sense for you when you turn 65, and whether you should change FEHBP plans, too. You could find a new plan with lower deductibles, copayments and coinsurance.
Photo: Flickr user Joe Ross