Over the last two weeks, I’ve described the origin of the Federal Employee Health Benefits program, focused on how premiums are set, and explored how the eligibility to participate has evolved over the last half century. This time I want to tell you about how the FEHB program and Medicare have evolved to become a big part of most seniors’ health benefits package.
It may be hard to believe, but the FEHB program is five years older than Medicare. And because federal employees were covered by CSRS and didn’t pay Social Security taxes, they weren’t eligible for Medicare when it went on line. As a result, for years there was little interaction between the two benefit systems.
All that changed in 1982 when Congress passed the Tax Equity and Fiscal Responsibility Act. The immediate effect was that all federal employees began paying Medicare’s hospital insurance tax. That made them eligible for Medicare Part A (hospital insurance). Since Medicare taxes are only taken out of earnings from wages or self employment, when you are no longer employed, you don’t have to pay Medicare premiums for Part A (assuming you meet basic length of employment requirements). And when you reach age 65, you’ll receive those benefits at no cost to you, other than required co-insurances and deductibles.
In general, plans in the FEHB program help pay for the same kind of expenses as Medicare. Among these are hospital stays, post-hospital skilled nursing care, and home health care. However, there are differences. And the only to be sure what those difference are is to review what your plan covers and compare it with what Medicare Part A covers. Still there are overriding differences that are important to understand. If you are retired and age 65 or older, Medicare will be your primary payer and your FEHB plan secondary. As a result, your plan will usually cover a share of your Medicare deductibles and coinsurance. In addition, your plan will continue to provide reimbursement for service that it covers but Medicare doesn’t.
If 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 deductible, coinsurance, copayment or readmission certification penalty. The good news is that hospitals may not collect either from you or your plan more than the amount determined to be the equivalent of the Medicare payment.
Next time I’ll introduce you to Medicare Part B.
