The Foreign Service Journal, May 2007

MA Y 2 0 0 7 / F OR E I GN S E R V I C E J OU R N A L 59 A F S A N E W S Retiree Issues Medicare Basics BY BONNIE BROWN, RETIREE COORDINATOR Q: What kinds of coverage are provided by Medicare Parts A, B and D? A: Medicare Part A, which is hospital insurance, helps pay for inpatient hospital care, skilled nursing facility care and home health and hospice care. Medicare Part B, which is medical insurance, helps pay for doctors’ services, outpatient hos- pital services and diagnostic tests. The newMedicare Dprovides prescription-drug benefits. Q: Who may be covered by Medicare Parts A and B? A: Medicare Part A is provided at no cost to all federal employees actively employed on and after Jan. 1, 1983, those eligible for Social Security benefits or who paid Medicare taxes for 10 years while employed by the federal government, and those whose spouses are eligible for Part A. Those who do not qualifymay buy Part A. Part B is available to anyone 65 and older who is either a U.S. citizen, or a lawfully admitted alien, who has resided in the U.S. for five years. Q: What are the premiums for Medicare Parts A and B? A: Part A is free for most people. The 2007monthly pre- mium for Part A, if one is not eligible for free cover- age, is $410 (or $226 if one has 30 to 39 quarters of Medicare- covered employment). The 2007 premium for Part B, which everyonemust pay, is $93.50 amonth. Starting this year,Medicare B premiums will be means-tested: approximately 4 percent of Medicare Part B enrollees with high incomes (incomes in excess of $80,000 for individuals or $160,000 for couples) will pay a high- er premium. MedicareBpremiums canbededucted fromSocial Securitypay- ments, but they cannot be deducted fromForeign Service annuity payments. Medicare sends a bill every quarter to enrollees with- out automatic deductions. The billmust be paidpromptly to avoid cancellation of coverage. Q: Do I have to apply for Medicare coverage? A: If you are already getting Social Security benefits at age 65, you do not have to apply. Rather, Medicare will automatically enroll you in both Parts A and B and send you a Medicare card about three months before your 65th birthday. If you don’t want Part B, follow the instructions on the card. If you are not getting Social Security benefits by threemonths before you turn 65, apply for Medicare at any Social Security Administration Office. This marks the beginning of a seven- month initial enrollment period. If one waits 12 ormoremonths to enroll, the premiums will go up by 10 percent for every 12- month delay. Q: Should I enroll in both FEHB and Medicare B? A: The Federal Employee Health Benefits Program is regarded as the gold standard in health insurance, so the question retirees generally ask is whether it makes sense to also enroll in Medicare B. The answer to this is an individual one, based on health and financial considerations. Whena federal retiree enrolls inFEHBandMedicareB,Medicare Bbecomes theprimaryprovider. It pays formost services for retirees in fee-for-service plans, such as Blue Cross or American Foreign Service Protective Plans. The FEHBP fee-for-service plan thenpays a portion or all of the services not covered by Medicare, waiving most of itsdeductibles, coinsurance andco-paymentswith the excep- tion of prescription drugs. This results in nearly complete cover- age for all out-of-pocket expenses. Medicarepays theprovider charges first and then sends the claimelectronically to the FEHBhealthplan, reducing paperwork and the burden on enrollees. In deciding whether to have both FEHB and Part B, you can run the numbers yourself. Look at the health services you general- ly require and calculate the amount of out-of-pocket expenses you ordinarily incur for these services during a year. Then balance this against the amount you would pay in Part B premiums for a year. In2007, thiswouldbe$1,123 formost enrollees. If youspendapprox- imately this amount or more, then purchasing Part B couldmake sense. Of course, you cannot anticipatewhat your healthneedswill be in the future. Also, becausemeans-testingwill be phased in, you shouldcontinue to reviewanydecision to see if it continues tomakes economic sense. On the other hand, be aware that a 10-percent penalty applies for waiting to enroll in Part B for each year after you reach the age of 65. Retirees in FEHBP health maintenance organizations may not need Part B coverage because HMOs provide a full range of ser- vices and the co-payments are usually low. However, there may be other considerations; for example, retirees may need coverage when traveling outside the HMO service area or require an out- of-network specialist. Finally, since FEHB enrollees have prescription-drug coverage that is as good as or better than Medicare Part D, they need not sign up for Part D. Q & A