Reg Jones Expert's View

FEHB and Medicare

Here’s question retirees turning age 65 often ask: “Since I paid for Medicare Part A when I was working, do I still need to be covered by the FEHB program after I retire?”

Good question. But the answer is simple. Yes.

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That’s because Medicare Part A only covers hospital costs. In order to get coverage for physicians’ services, you’d have to enroll in Medicare Part B and pay the premiums. And every year the premiums for Part B keep going up.

In 2020 the monthly premium for most individuals with an income of $85,000 or less ($170,000 if filing jointly) is $144.60 a month. The premiums rise for those with at higher income levels.

So, the question becomes, is the combination of FEHB and Medicare Part A enough or do you also need Medicare Part B?

While FEHB and Medicare cover many of the same benefits, neither of them cover exactly the same things or at the same levels. Further, each has deductibles or copayments. And neither Medicare Parts A or B provide prescription drug coverage. You can only get that if you enroll in Medicare Part D, which is an additional expense that will grow over time.

So, what are you to do? The consensus of opinion among the experts is that most Medicare-eligible federal retirees only need their FEHB enrollment and premium-free Part A. That’s because this combination of coverage will give them the greatest protection for the least amount of money. Only those with specific needs covered by Part B need to enroll in that. And even fewer need Part D.

Note: Medicare-covered retirees often think their FEHB premiums should be lower because Medicare pays a lot of their bills. However, group health insurance doesn’t work that way. Premiums are based on an average of the costs incurred by all enrollees. Putting employees and retirees in one risk pool carries out the principle that the healthy should underwrite the less healthy. Fragmenting the enrollment pool would result in miniscule premiums for some enrollees and skyrocketing ones for others.

Medicare Eligibility for Most Starts at 65

Thinking of Returning to the Government as a Retiree?

Taking FEHB into Retirement Without a Hitch

FERS Retirement Guide 2020