Posted on Thursday, 12th December 2013 by

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We receive many questions each year about how Medicare interacts with the FEHB program. This is the first of a three part series that introduces the Medicare program including Part A and how to apply. Part 2 discusses what to consider before enrolling in Medicare Part B and Part 3 talks about whether you should consider changing to a lower cost FEHB plan after signing up for Medicare.

Most federal employees and retirees question what they should do when they turn 65 with Medicare and the impact those decisions will have on their FEHB benefits.  I’m at that point in my life and we have many things to consider before making any changes.  There are different rules for active federal employees, retirees, retired but covered under a working federal employee or non fed spouse, or retired military with TriCare.

Medicare Basics

Medicare Parts A & B are included in what is called the Original Medicare Plan with “A” covering  hospitalization and “B” paying for your doctor and outpatient care. Part C is the Medicare Advantage Plan and you can choose between either the Original or Medicare Advantage plans when you sign up.  Part D covers prescription drugs.

The first choice we must make is whether or not to sign up for Medicare at all. Yes, we do have that option if we are not covered under TriCare (the military retirees health care program). OPM along with the FEHB health care providers encourage you to apply for Medicare benefits 3 months before you turn 65. OPM states, “if you are entitled to Part A without paying the premiums, you should take it, even if you are still working. This may 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.”

Original Medicare (Part A & B) or Medicare Advantage Part C?

Secondly, you must decide on whether to sign up for the Original Medicare plan (Part A and B) or Medicare Advantage Part C that offers private sector Health Maintenance Organizations (HMOs) or Preferred Provider Organizations (PPOs) coverage.  Part D, Medicare’s prescription drug benefit,  requires an additional monthly premium and is unnecessary in most cases because our FEHB plans include a comprehensive prescription drug benefit.

Federal retirees with FEHB coverage typically opt for the Original Medicare Plan because it is available nationwide and you can go to any doctor, specialist, or hospital that accepts Medicare. You may find some of the Medicare Advantage Plans under Part C less expensive than our FEHB plans. There are significant differences in coverage between plans and you will need to read the plan brochures carefully to compare coverage in all areas including prescription drugs, dental, deductable, copayments, and coinsurance.

If you sign up for Medicare Advantage Part C FEHB coverage isn’t necessary.  Ann Ozuna, a retired Personnel Management Specialist, our HR Forum Host, and founder of www.TheFederalRetirementLady.com suggests; if you are considering a Medicare Advantage Plan, Part C, instead of the Original Plan, DON’T drop your FEHB, instead suspend with proof of signing up for the Medicare Advantage Plan so you can get your FEHB back the next open season if the coverage doesn’t work out.  Annuitants can call OPM’s Retirement Information Office at 1-888-767-6738 to obtain a suspension form. Callers within the local Washington, DC calling area must call 202-606-0500.

Section 9 of your FEHB plan covers the different Medicare options and what costs they will waive and pay when you sign up.  Your health plan may also offer a booklet on this subject that will help you understand the impact.

Signing Up For Medicare

If you are retired and receiving Social Security you will automatically be enrolled in Part A and B and should receive your Medicare card three months before your 65th birthday. If you decide not to take Part B follow the instructions that you receive with your enrollment package. If you aren’t receiving Social Security you have a 7 month Medicare enrollment window that starts 3 months before your birthday.  You can sign up online at http://socialsecurity.gov/pgm/medicare.htm or you can visit your local Social Security Office to apply. Call 1-800-772-1213 for additional information and assistance. You can also sign up for Medicare at http://www.medicare.gov under the “New to Medicare” section. It takes about 15 minutes to register and sign up online.

If you are retired but covered under a working spouse’s medical plan or you are still working, sign up for Part A and then advise them that you do not want part B because you are covered by your employer or under a working spouse plan as the case may be.  All current federal employees and those retirees with new employer health care coverage or are covered under their spouse should elect this when they turn 65 to delay Part B without penalty until their working spouse retires, or they leave federal service, or their new employer.

Medicare Part A

Federal employees are eligible to receive part A coverage without a premium because we paid Medicare tax on our earnings while employed. Essentially, if you or your spouse worked for 10 years or more in Medicare-covered employment, you are eligible for free Part A hospital insurance.  Applying for Part A is a cost effective option for most because with the majority of FEHB plans your hospital copayments and coinsurance are waived.  They don’t waive prescription copayments or coinsurance.  It’s important to know that when Medicare A coverage limits are reached most plans require the patient to pay any difference between the FEHB provider allowance and the billed amount or pay the inpatient hospital per-day copayments depending on the plan you are enrolled in.

If you decide not to apply for Medicare at age 65 the 2014 Blue Shield plan brochure states,  “Under the FEHB law, we must limit our payments for inpatient hospital care and physician care to those payments you would be entitled to if you had Medicare. Your physician and hospital must follow Medicare rules and cannot bill you for more than they could bill you if you had Medicare. You and the FEHB benefit from these payment limits. Outpatient hospital and non-physician based care are not covered by this law; regular Plan benefits apply.”  Essentially your doctors aren’t going to receive more than the Medicare payment schedule whether or not you elect Medicare coverage.

When you sign up for Medicare and are retired, your FEHB insurance becomes your supplemental coverage and Medicare is your primary health care provider and they pay first. Your FEHB plan picks up the difference to the extent outlined in your plan’s benefit brochure, review Section 9 thoroughly.  If you only pick up Part A your FEHB plan will remain your primary coverage for your medical Insurance including doctor’s visits while Medicare A will be primary for your hospital coverage.  If your spouse is under age 65 their primary provider will be your FEHB plan until they reach age 65.

Cautionary Note

There is another issue with Medicare that is causing many to pause and reconsider their options. Some medical providers are opting out of Medicare and refusing to take new Medicare patients. Angie’s List published an extensive series of articles on this subject titled Doctors Beyond Reach that you may find informative. They interviewed one person who recently moved and was only able to find one out of 10 primary care doctors that he contacted that would accept new Medicare patients.

Angie’s List surveyed 500 primary care doctors and specialists about Medicare and did an online poll of almost 400 members enrolled in Medicare. They found that 30% say they’ve called a doctor who wasn’t accepting new Medicare patients and 18% thought their Medicare coverage is worse than health insurance they had before becoming eligible for Medicare. The article quotes a MedPAC survey that found one-in-four Medicare patients in 2012 who were looking for a new primary care physician had trouble finding one.

If you are on Medicare now or soon will be this is a must read article that gets at the heart of the issue plus offers suggestions on how to find new Medicare providers in this environment.

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The information provided may not cover all aspect of unique or special circumstances, federal regulations, and financial information is subject to change. To ensure the accuracy of this information, contact your benefits coordinator and ask them to review your official personnel file and circumstances concerning this issue. Retirees can contact the OPM retirement center. Our article is not intended nor should it be considered investment advice and our articles and replies are time sensitive. Over time, various dynamic economic factors relied upon as a basis for this article may change. The advice and strategies contained herein may not be suitable for your situation and this service is not affiliated with OPM or any federal entity. You should consult with a financial or human resource professional where appropriate. Neither the publisher or author shall be liable for any loss or any other commercial damages, including but not limited to special, incidental, consequential, or other damages.

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