Your FEHB vs. Medicare Decision at 65
Unlike employees in the private sector, federal employees have the option to continue their existing Federal Employee Health Benefits (FEHB) plan into retirement. This unique situation means that for federal workers, Medicare eligibility at age 65 does not automatically trigger mandatory enrollment. The decision of whether to enroll, and what parts to enroll in, is a personal one that depends heavily on your financial situation and healthcare needs. The key is to understand how your existing FEHB plan interacts with Medicare.
The Breakdown of Medicare Parts for Federal Employees
To make an informed choice, you must consider each part of Medicare and how it affects your FEHB coverage. The coordination of benefits between these two programs is central to your decision.
Medicare Part A (Hospital Insurance)
For most federal employees, Medicare Part A is essentially free. Since you paid Medicare taxes for at least 10 years while working, there is no premium for this coverage. Because of this, the Office of Personnel Management (OPM) strongly advises federal employees to enroll in Part A when they become eligible, even if they plan to continue their FEHB plan.
- Free and Recommended: Enrolling in premium-free Part A is a low-risk, high-reward decision. It costs nothing and provides an extra layer of hospital coverage.
- FEHB Becomes Secondary: With both plans, your FEHB plan becomes the secondary payer for inpatient hospital stays. This coordination of benefits can significantly reduce your out-of-pocket costs, as Medicare will pay first.
Medicare Part B (Medical Insurance)
This is the most critical and complex part of the decision. Medicare Part B covers doctor visits, outpatient care, and durable medical equipment, but it comes with a monthly premium. The cost of this premium is a major factor, especially when considering that your FEHB premiums do not decrease if you enroll in Medicare.
- Is Part B worth the premium? You must weigh the cost of the Part B premium against the potential reduction in your out-of-pocket expenses. For some, the added coverage of Part B will make little financial difference, while for others, it can provide critical gap coverage.
- Late Enrollment Penalties: While you are an active federal employee and covered by FEHB, you can delay enrolling in Part B without penalty. You will have a Special Enrollment Period (SEP) to sign up for Part B when you retire. Failing to enroll during your SEP could result in a permanent late enrollment penalty.
Coordination of Benefits: FEHB + Medicare
When you have both FEHB and Medicare, the two plans work together to pay for your healthcare. The primary and secondary payer status depends on your employment status.
- Active Employee (age 65+): Your FEHB plan is the primary payer, and Medicare is the secondary payer.
- Annuitant (retired): Your Medicare is the primary payer, and your FEHB plan becomes the secondary payer. In this arrangement, Medicare pays its share first, and your FEHB plan covers many of the remaining costs, potentially reducing your copayments and deductibles.
Comparison: FEHB Alone vs. FEHB with Medicare
| Feature | FEHB Only (Active Employee or Annuitant) | FEHB with Medicare Part A & B (Annuitant) |
|---|---|---|
| Monthly Premiums | Pay full FEHB premium. | Pay full FEHB premium AND Part B premium. |
| Primary Payer | FEHB plan. | Medicare Parts A and B. |
| Secondary Payer | None. | FEHB plan. |
| Hospital Coverage | Covered by FEHB, subject to its deductibles and copays. | Medicare Part A pays first, potentially reducing your hospital costs. |
| Outpatient Coverage | Covered by FEHB, subject to its deductibles and copays. | Medicare Part B pays first, potentially reducing your outpatient costs. |
| Catastrophic Costs | Covered by FEHB, with an out-of-pocket maximum. | Lower overall out-of-pocket risk with Medicare as primary. |
| Global Coverage | Most FEHB plans offer coverage outside the US. | Medicare does not cover care outside the US. |
Important Considerations for Active Federal Employees
If you are a federal employee who continues to work past age 65, here are some key points to consider:
- Health Savings Account (HSA) Compatibility: If you are enrolled in a High-Deductible Health Plan (HDHP) with an HSA, enrolling in any part of Medicare will prevent you from making further contributions to your HSA. This is a major factor for some federal employees.
- Special Enrollment Period (SEP): The rules for active employees are designed to prevent penalties for those who continue working. You have an eight-month SEP to sign up for Part B without penalty after your employment or coverage ends, whichever comes first.
Conclusion: Making the Right Call
The ultimate decision on whether to enroll in Medicare at 65 is a strategic one for federal employees. You are not required to do so, but enrolling in premium-free Part A is almost always the financially sound choice. For Medicare Part B, you must evaluate the costs of the monthly premium against the benefits of coordinated coverage with your FEHB plan, especially once you retire. The best approach is to fully understand your options and analyze your potential healthcare costs in retirement. For authoritative guidance on this matter, it's always wise to consult official sources, such as the Office of Personnel Management's detailed information regarding Medicare and FEHB coordination: FEHB and Medicare: What you need to know
