Q. In your latest article, you discuss how elder care lawyers help seniors with planning in advance for the financial and health concerns that occur as we age. I really appreciate the assistance and advice your elder law firm provides. I am a retired federal employee who will be 65 next year. I was wondering if since I still have Federal Employees Health Benefits, do I need to sign up for Medicare? If it is optional, would it be advantageous in any way for me to sign up for Part A and/or Part B? If I do end up signing up for Medicare, do federal retirees keep their federal health insurance as primary and Medicare as secondary or vice versa? Or does federal health insurance, including HMOs such as Kaiser, automatically become a Medicare Advantage plan after 65? All of this is very confusing and overwhelming. Hoping you can help clarify all of this for me and others.
A. Thank you for your kind words. As elder care lawyers and estate planning attorneys, we take pride in providing both legal knowledge and helpful recommendations that answer your questions and help direct you to the best solutions.
The Federal Employees Health Benefits (FEHB) Program provides coverage to active and retired Federal employees. Many Federal employees and retirees, such as you, wonder whether they should sign up for Medicare and how the two programs work together to provide them with the most comprehensive health benefits coverage.
Generally, plans under the FEHB Program help pay for the same kind of expenses as Medicare. Some FEHB plans also provide dental and vision care, which original Medicare does not provide. Some FEHB plans even provide coverage for emergency care outside of the United States, which original Medicare does not provide. Medicare enrollment is not a requirement for retired federal employees covered under the FEHB program. However, enrolling in Medicare has its benefits, even though your FEHB coverage can remain your primary coverage in retirement after 65.
Medicare and FEHB: Which is Primary and Which is Secondary?
this is where things get confusing, but there is one basic rule to understand:
- If you enroll only in Original Medicare Part A, your FEHB plan remains primary, and Medicare Part A will become secondary.
- If you enroll in Original Medicare Part A and Part B, then Medicare becomes primary and your FEHB plan becomes secondary. With both Medicare Part A and Part B, you may find that a lower cost FEHB secondary plan is adequate for your needs, especially if you are currently enrolled in a plan’s high option. Also, some FEHB plans waive deductibles, coinsurance, and copayments when Medicare is primary.
Consider the following before deciding whether to enroll in Medicare if you have an FEHB plan:
Advantages of Enrolling in Part A
The federal Office of Personnel Management encourages federal retirees to enroll in Part A if their premiums are free. Medicare Part A is insurance that covers hospital expenses, and one that you pay for through payroll deductions from wages or self-employment. When you reach age 65, you’ll receive those benefits at no cost to yourself, other than any required co-insurances or deductibles.
As a rule, FEHB plans cover the same kinds of expenses as Medicare Part A. Among the most common:
- hospital stays; and
- post-hospital short-term rehabilitation in a rehabilitation facility, a skilled nursing facility, or at home.
However, there are a few differences. To be sure that you know what those differences are, check to see what your FEHB plan covers and compare it with what Medicare Part A covers.
Medicare Part A may also help cover some of the costs that your FEHB plan may not cover, such as deductibles, coinsurance, and charges that exceed the plan’s allowable charges. Medicare also covers some things that FEHB plans may not cover or only partially cover, such as orthopedic and prosthetic devices, durable medical equipment, short-term home health care associated with short-term rehabilitation after a hospital stay, limited chiropractic services, and some medical supplies.
According to OPM, “(i)f you are a retiree who isn’t covered by Medicare, your FEHB plan will only pay benefits at the rates set by Medicare, reduced by any FEHB program deductibles, coinsurances, copayments, or readmission certification penalties. That’s the bad news. However, the good news is that hospitals may not collect from either you or your plan any more than the amount determined to be the equivalent of the Medicare payment.”
Part B and the Potential for Penalties
You can continue to receive full coverage from the FEHB plan after 65. But what happens if you want to enroll in Medicare Part B and what does Part B cover?
Medicare Part B is optional. It covers non-hospital medical services such as doctor’s visits, outpatient medical and surgical procedures and supplies, and clinical laboratory services. Similar to your Part A and FEHB plan, there will often be overlaps and differences you can see by comparing the two benefits packages.
With Part B, by delaying enrollment, you could get stuck with a late enrollment penalty. If you don’t enroll during the initial enrollment period and later change your mind, you’ll be subject to a permanent 10 percent penalty for each year you could have enrolled and did not.
Keep in mind that Part B costs $174.70 a month in 2024 for most people. However, there are surcharges for those whose modified adjusted gross income for income tax purposes two years previously exceeded certain thresholds, which for 2024 is $103,000 for individuals or $206,000 for married couples filing jointly.
With the exception of the cost of prescription drugs, if you enroll in an FEHB plan and Medicare Parts A and B, your out-of-pocket expenses for medical care will be small. However, if you decide to enroll in Part B, you’ll be solely responsible for paying the monthly premiums. More details on Medicare costs are available here.
The amount you pay for Part B can go up and down over time depending on your taxable income. You’ll have to decide if the outlay is worth the expense.
Who is the Primary Payer: FEHB or Medicare?
Let’s say you enroll in both Medicare Part A (but not Medicare Part B) and FEHB. Who would be the primary payer?
If you are 65 or older and retired, Part A will be your primary payer and your FEHB plan will be secondary. Your FEHB plan will usually cover a share of your Medicare deductibles and coinsurance and will continue to reimburse you for service that it covers but Medicare Part A doesn’t.
Your FEHB Plan only pays benefits first when:
- You are an active Federal employee and either you or your covered spouse has Medicare.
- Your FEHB Plan must also pay benefits first for you or a covered family member during the first 30 months of eligibility or entitlement to Part A benefits because of End Stage Renal Disease (ESRD), regardless of your employment status, unless Medicare (based on age or disability) was your primary payer on the day before you became eligible for Medicare Part A due to ESRD.
- Your FEHB Plan must also pay benefits first when you are under age 65, entitled to Medicare on the basis of disability, and covered under FEHB based on you or your spouse’s employment status.
Below is a complex yet helpful chart from Medicare.gov on who the primary payer is in certain instances:
Can You Change Your FEHB Enrollment When You Become Eligible for Medicare?
Federal retirees can change their FEHB enrollment to any available plan or option at any time beginning 30 days before they become eligible for Medicare. They can do this only once. They can also change their enrollment during the annual Open Season, or because of another event that permits enrollment changes (such as a change in family status or entry into a nursing home).
FEHB Coverage and Medicare Advantage
If you enroll in a Medicare Advantage plan (which I generally do not recommend), you may not need FEHB coverage because the Medicare Advantage plan will provide you with many of the same benefits. The reason I do not recommend Medicare Advantage plans as a general rule is because if you wind up in a nursing home, you may have very limited choices of which nursing home you are able to enter. As I explained in a prior article, many seniors don’t realize is that there are almost always hidden downsides of MA plans, such as higher out-of-pocket payments for treatments and a limited number of doctors, hospitals, and rehab/nursing facilities that accept the MA plan. You should review the Medicare Advantage Plan benefits carefully before deciding to suspend or cancel FEHB coverage.
Can I Reenroll in FEHB If I Disenroll from the Medicare Advantage Plan?
If you provide documentation to your retirement system that you are suspending your FEHB coverage to enroll in a Medicare Advantage plan, you may be able to reenroll in FEHB if you later lose or cancel your Medicare Advantage plan coverage. You should also contact your retirement system to discuss suspension and re-enrollment. However, you must generally wait until the next Open Season to reenroll in FEHB, unless you involuntarily lose your coverage under the Medicare Advantage plan (for example, if The insurance carrier discontinues the plan or if you move outside its service area). In this case, you may generally reenroll from 31 days before to 60 days after you lose the Medicare Advantage plan coverage, and your re-enrollment in FEHB will be effective the day after the Medicare Advantage plan coverage ends (or ended).
On our blog, we have written many articles about some of the issues with Medicare Advantage plans and why you may want to consider switching back to Original Medicare if you currently have a Medicare Advantage plan. Or, in the case of retired federal employees, it might be a smart idea to stay with your FEHB insurance (and stay away from Medicare Advantage plans) if it gives you the coverage that you need.
If You’re on Medicare, Review Your Health Plan Every Year and Plan Ahead for Yourself and Your Loved Ones
At the Farr Law Firm, we work with Retirement & Medicare Together to serve the Medicare needs of our clients. If you are turning 65 and getting ready to enroll in Medicare, please reach out to them or another experienced and independent Medicare insurance agent. In addition, if you or a loved one have not yet done Incapacity Planning, Estate Planning, or Long-Term Care Planning, please contact us:
Northern Virginia Medicare Planning: 703-691-1888
Fredericksburg Medicare Planning: 540-479-1435
Rockville Estate Planning: 301-519-8041
DC Elder Law Planning: 202-587-2797
About Evan H Farr, CELA, CAP
