Medicare Basics

Q: If I were to pay premiums for both a FEHB health plan and Medicare Part B, how would the two work together?

A: Medicare pays first (or is primary) for most services for Medicare-eligible retirees enrolled in fee-for-service plans, such as Blue Cross and the Foreign Service Benefit Plan. The FEHB plan picks up the difference, or in some cases, pays for the services not covered by Medicare. As a result, Medicare and the FEHB plan combine to provide nearly complete coverage for all expenses, except for prescription drugs.

Fee-for-service plans waive most of their deductibles, coinsurance, and co-payments for Part B enrollees. As a result, FEHBP fee-for-service plan enrollees with Parts A and B find that they have little or no out-of-pocket expenses. Every fee-for-service FEHB brochure provides an explanation of the relationship between its plan and Part B entitled Coordinating Benefits with Other Coverage.

Because health maintenance organizations provide a full range of services to enrollees (whether or not enrolled in Part B) and impose small co-payments, HMO enrollees may find that there is little need for Part B coverage. However, HMO enrollees may wish to purchase Part B for added security – in case they need health care when outside their HMO service area within the United States, wish to see a physician who is not in the network or live in an area that has only one FEHB plan, for example.

Q: How much does Medicare B cost?

A: Part B premiums are based on taxable income. The 2015 premiums for enrollees with taxable income of $85,000 or below (single) and $170,000 for members of a couple (married, filing jointly) will be $104.90 a month. For higher-income beneficiaries, the monthly premium will range between $146.90 and $335.70 dollars per month, depending on income. Income determinations in most cases will be based on 2012 tax returns.

Q: How can I decide whether it makes sense for me to have both FEHB and Medicare B coverage?

A: Retirees should run the numbers. I generally suggest that retirees look at their recent out-of-pocket health expenses over the past year or two and then calculate what they would be if they added Medicare B premiums, assuming that their FEHB plans would waive most of their deductibles, coinsurance, and co-payments. Of course one cannot anticipate future costs, so this is a rough estimate. Enrollees with taxable income of $85,000 or below (single) and $170,000 for a couple filing jointly will pay monthly premiums of $104.90 in 2015.

Q: Are there other considerations?

A: Yes. Because of the almost complete coverage of a combination of FEHB and Medicare, it may make sense to go from high option to standard option FEHB coverage in order to reduce FEHB premiums. (Before doing so, however, check to see that your FEHB plan provides the same level or coordinated benefits for both options). Although the high option usually does not cover enough additional services to warrant paying the higher premium, this may not be case with respect to prescriptions service, choices and cost. Another consideration is that if one does not enroll in Part B at age 65, he or she will be subject to a 10 percent penalty for each year after turning 65 upon enrolling in Part B. Foreign Service annuitants cannot arrange for automatic deductions for Medicare B premiums from their annuities. The department recommends that retirees arrange for automatic bank payments in order to insure against suspension of Part B coverage because of late payments.