[784caroline]

Retirees With Medicare

Obviously, if Medicare covers you, the rankings in our regular cost comparisons do not apply, since Medicare is “primary” for retirees and will pay most expenses. Therefore, we present tables for single persons and couples with either both Part A and Part B of Medicare, or Part A only. Although these tables are presented in terms of preferred providers, it is important to understand that the main advantage of preferred providers, guaranteed low rates, is available from almost any doctor you use whether or not you have Medicare Part B.

You should not drop out of the FEHBP just because Medicare covers you. Medicare has filled its largest coverage gap, since it now covers prescription drugs for an extra Part D premium. However, it requires you to pay 20 percent of the cost of doctors’ fees, and deductibles. In 2014 the Medicare Part A hospital deductible will be about $1,200 and the Part B medical deductible about $150. To obtain Medicare coverage roughly comparable to FEHBP plans you would have to pay a Part B premium of about $106 a month, or about $1,300 for the year (some pay more), and a Part D premium of about $40 a month and $480 for the year (there is a wide range of prescription drug premiums, some lower and some higher). The total premium cost of about $1,800 a person is higher than in most FEHBP plans and the coverage inferior to most. Therefore, if paying both FEHBP and Medicare premiums presses you financially, and you are not sure which program to retain, the FEHBP alone is a better bargain than Medicare alone. Moreover, almost all Federal annuitants over age 65 have premium-free Medicare Part A, and in combination with almost all FEHBP plans will never have to pay for any hospital costs. Finally, FEHBP plans, unlike Medicare (except in parts of Canada and Mexico), cover you if you travel or live abroad.

There are advantages to enrolling in Part B as a complement to the FEHBP (technically, Medicare is “primary” and pays first). Almost all of the national PPO/fee-for-service plans waive their hospital and medical deductibles and coinsurance for members enrolled in both Medicare Part A (hospital) and Part B (medical). HMOs generally have only nominal deductibles or copayments and most of them do not provide such waivers. However, some do. For example, in the Washington, DC area CareFirst and M.D. IPA provide waivers to retirees with both parts of Medicare. At worst, with Medicare Parts A and B and most national Federal plans, you will have close to 100 percent coverage of medical bills. Coverage for dental and prescription drug expenses will still differ depending on which plan you choose.

However, Medicare Part B will rarely save you nearly as much money as you spend on the Part B premium. This is because the cost sharing for physician visits and tests in almost all FEHBP plans is already so low.

We present cost comparisons for those with Medicare Part A only, and for those with both Parts A and B. (The online Guide also presents a comparison for couples in which one spouse does not have Medicare and the other has both Parts A and B.) Each comparison takes into account:
•premium costs for the FEHBP plan and, in the “both Part A and B” tables, for Medicare Part B (Part A has no premium);
•each plan’s coverage for services, such as dental, that are not covered by Medicare; and
•the waivers of copayments or deductibles offered by each plan for Medicare Part A and B enrollees.

By comparing tables for those with Part A only, versus those with Parts A and B, you will see that in most plans you are likely to spend several hundred dollars a year more for this combination than by retaining the FEHBP plan alone. Simply put, Medicare Part B is of limited value to someone already covered by a good health plan. If you join an HMO, the Medicare premium gains you very little in dollar benefits. If you are willing to use preferred providers in national plans, or to join an HMO and use its network, you can save several hundred dollars per year or more by dropping Medicare Part B. Even if you do not use preferred providers, you will do almost as well without Medicare Part B, because of the special rate ceiling discussed above.


Note :Comparison chart will not fit properly here!


However, Part B does have some advantages. It provides modest extra benefits in a few categories, such as physical therapy and home health care, and it covers more of the costs of prostheses and durable medical equipment than many HMOs. Therefore, dropping Medicare Part B is not a guaranteed cost saver. For those plans that waive copayments for services covered by Part B, it will likely save you several hundred dollars a year (but nowhere near the “for sure” premium cost) in copayments.

There is, however, a very important advantage of Part B for persons enrolled in all FEHBP plans, not just HMOs. Part B gives you the freedom to go outside the plan’s network. For example, for access to a specialist at the Mayo Clinic, without the HMO plan’s permission, you could simply go the specialist and charge the visit to Part B.

Also importantly, Part B gives you the option of joining a Medicare Advantage plan—either PPO or HMO—through Medicare and suspending your FEHBP enrollment and premium payment, as discussed below.

For everyone, enrollment in Part B gives you some “political insurance” against the possibility that the Congress would enact some major detrimental change to retirement coverage in the FEHBP.

Finally, there is an important innovation under way that reduces the cost of enrolling under both programs. The new Aetna Direct plan lets you use your personal care account to reimburse most of your Medicare Part B premium. This gives you the advantage of “wrap around” coverage at a significantly lower cost than you would otherwise pay. Since the plan also waives its deductible and other cost sharing if you have parts A and B, this plan winds up costing less with Medicare than without Medicare.

If you do decide to drop (or not start) Part B you can join it later. But there is a 10 percent a year penalty if you later decide to join or rejoin. As a financial matter, however many years you elect to do without Part B, you will be money ahead for approximately the first five or six years after joining or rejoining. After that, the penalty will outweigh your earlier savings. If you never join or rejoin, you will (on average) save annually roughly the amounts indicated in the table. Thus, dropping Part B is not an irrevocable decision, and later rejoining Part need not be highly costly.

There are some circumstances to which the conclusions above do not apply:
•Working employees over age 65 with Medicare Parts A and B coverage face a slightly different situation. The special waivers of deductibles and coinsurance do not apply, because Medicare is by law the secondary rather than primary payer (except for firms with fewer than 20 employees). Your best choice is to stay in your preferred FEHBP plan, and postpone joining Medicare Part B until you actually retire. There is no penalty for joining after age 65 if you were working and covered by employer insurance (subject to the same exception for small firms).
•A few people over age 65 did not earn Medicare Part A and can join by paying a very substantial premium—about $5,000 a year. We recommend strongly against this purchase. Almost all FEHBP plans charge you at most a few hundred dollars for hospital admissions, far less than the Part A premium.
•If you have Part B but not Part A coverage, consider a plan with particularly good hospital and prescription drug coverage, such as Blue Cross Basic or NALC, or almost any HMO.

Income-Related Part B Premiums

Historically, the taxpayer has funded three-fourths of the Medicare Part B premium and the enrollee has paid only one fourth of the cost. Under current law, however, some higher income enrollees pay more than the traditional one-fourth share.

This only affects individuals with Adjusted Gross Income (AGI) of $85,000 or more, and married couples filing jointly with income of $170,000. These thresholds are not adjusted for inflation. The actual calculation includes adding some forms of income, such as tax-exempt interest income, to AGI. The resulting annual Part B premium is about $1,800 for individual AGI of $85,000 to $107,000; $2,500 for income of $107,000 to $160,000; $3,300 for income of $160,000 to $213,000; and $4,000 for income of more than $213,000. The corresponding amounts for married couples filing jointly are twice as high.

There are additional factors that may determine whether this affects you. For example, if you marry or divorce or suffer a casualty loss you may become exempt. If your income fluctuates from year to year you may be subject to the increase one year but not the next (generally, the calculation is based on your AGI two years previously). The “bottom line” is that if your income is above these thresholds and likely to remain there, the case for enrolling in both the FEHBP and Medicare Part B becomes far weaker. Dropping Part B will not affect your continued premium-free enrollment in Part A. The sensible solution will be to drop out of Medicare Part B and rely on your FEHBP plan. Why pay $1,800 or more for a Part B benefit that rarely results in reduced cost sharing of as much as $1,000?

[Average Guy]

Thanks for posting this article. Can you please identify the source of the article?

[rubicon]

What is FEHBP? What is the sources of this article and while i appreciate the laborious undertaking you had to endure to get this info to us a one sentence summation would have been helpful. The rest we could have searched if we felt this applied to us.

Personal Best Regards:

[KayakerNC]

It's a NARFE article on the Federal Employee Health Benefit Plans and Medicare.

https://sites.google.com/site/narfec...aise---finally

[OBXNana]

Originally Posted by rubicon

What is FEHBP? What is the sources of this article and while i appreciate the laborious undertaking you had to endure to get this info to us a one sentence summation would have been helpful. The rest we could have searched if we felt this applied to us.

Personal Best Regards:

Federal Employee Health Benefit Plan. For those of us dealing with Open Season the information is helpful, those not currently or previous Federal Employees, may want to skip the threads.

[rubicon]

Originally Posted by KayakerNC

It's a NARFE article on the Federal Employee Health Benefit Plans and Medicare.

https://sites.google.com/site/narfec...aise---finally

thank you I can sleep well tonight

[RErmer]

Thanks for the post. In my experience as a SHINE volunteer, many former federal employees are confused about this topic.

[mixsonci]

Thank you for sharing this. What a great help it was. I am in the process of retiring next month and turning 65 and have been driving myself crazy trying to make this decision. I have not made my decision based on this article. So thank you.

[KayakerNC]

Originally Posted by Summit Medigap

Here is an article about the 5 Common Medigap Myths that you may find helpful.

5 Common Medigap Insurance Myths Every Retiree Should Know | Medicare Supplement Insurance Information | Summit Medigap

Regards,
Bill

I can't imagine ANY situation that would cause a Federal Retiree to give up their FEHB Plan for a Medigap Plan. If any insurance agent advises that...run!

[MikeV]

Originally Posted by KayakerNC

I can't imagine ANY situation that would cause a Federal Retiree to give up their FEHB Plan for a Medigap Plan. If any insurance agent advises that...run!

I totally agree. I will not give up my FEHB and I didn't enroll in Part B Medicare.

[mixsonci]

Originally Posted by mixsonci

Thank you for sharing this. What a great help it was. I am in the process of retiring next month and turning 65 and have been driving myself crazy trying to make this decision. I have not made my decision based on this article. So thank you.

Sorry, that was a typo, I meant to say, I have NOW made my decision (not NOT)

[Villageswimmer]

Again, thanks for posting that article. Weve decided to opt out of Part B. As I suspected, we're overinsured.
Does anyone know--can one cancel Part B any time?

[784caroline]

There is no "Open Season " with Medicare Part B. Once you are in you can opt out of it any time but I understand this cannot be done electronically and you may have to go through a counseling session with SSA/medicare people before the opt out is final.