Answers to Your Medicare and FEHB Questions

One issue that has generated a good deal of interest among Federal Diary readers lately is the relationship between Medicare and private health insurance plans in the Federal Employee Health Benefit (FEHB).

Many people don’t understand how Medicare differs from other insurance and they have good questions: If you are enrolled in one plan, why do you need the other? Do they overlap or are there gaps in coverage even when you have both? How do you decide what coverage is best?

I’m no expert on this, so I turned to someone who is — Tammy Flanagan, the senior benefits director at the National Institute of Transition Planning. Her organization conducts seminars on federal benefits and financial and retirement planning.

She can’t answer all the questions in this space, but she certainly clarifies some of the issues. While retirees and older workers will be especially interested in this column, younger employees might want to keep reading for some useful tips for down the road. Remember, federal employees and retirees can change their insurance selections through January.

Let’s get started with a reader’s question and Flanagan’s response.

Q I have never been able to get a satisfactory answer to the question as to whether I would be better off holding on to my FEHB plan as opposed to electing Medicare. I am 67 years old. So far I have kept the Fed plan primarily due to RX expenses.

A. Medicare by itself is not enough health insurance unless you elect to have a Medicare “Advantage” plan.

Q. Before we go much further, describe Medicare.

Medicare is health insurance. For most of us, we become eligible for Medicare at age 65.
Part A is hospital coverage. It’s free if you or your spouse paid the Medicare tax during your career. In 2009, the deductible is $1,068. When the hospital stay is longer than 60 days, there is a $267 per day copay for the next 30 days. Longer stays have even higher out-of-pocket expenses, so you can see that Part A is not enough by itself.

Part B is insurance for outpatient care. It has a 2009 deductible of $135 and a copay of 20 percent for most covered services. The problem is that not all services you might need are covered and not all doctors participate in Medicare. If you only had Medicare Part B without other health insurance, you could end up paying a lot out of your pocket.

Part C is called Medicare Advantage. If you check out www.9medicare.9gov, you can find a list of health plans approved by Medicare at the link labeled: Compare Health Plans and Medigap Policies in Your Area. If you choose one of these health plans as a federal retiree, the Office of Personnel Management would allow you to suspend your FEHB coverage while using Medicare Advantage. The “advantage” is that the premiums may be less expensive or even free, but the downside is you may have significantly different coverage than you’ve had with your FEHB plan.

Part D is prescription insurance. If you have FEHB health coverage, you already have coverage for your medicine. If you are still spending a lot out of pocket for drugs, you may consider enrolling in a Medicare Part D plan, for a fee, that will cover more of your prescription expenses.

Q. You’re covered by FEHB, you’re retired and you are 65 or older — what are the choices?

1. Keep FEHB and enroll in Part A only. Cost: FEHB premiums plus zero dollars for Part A. This is a good idea! Your FEHB may limit the payments for your care to those payments you would be entitled to if you had Part B, so you may find that your out-of-pocket expenses are higher than before you were 65. Check your FEHB brochure and talk to your doctors about this choice.

2. Keep FEHB and enroll in Medicare Parts A and B: Cost FEHB premiums plus $96.40 per month for Part B, but it’s more if you’re well off. In some cases your FEHB plan will waive your deductibles, co-payments and coinsurance. This can reduce your out-of-pocket expenses to near zero. If you have a lot of trips to the doctor, this can save more than the Part B premium. If you choose to enroll in Part B after age 65, you may have to pay a significant late enrollment surcharge (10 percent for every year enrollment is delayed), so it may pay to sign up when you’re eligible whether you need it or not. You might consider switching to a less expensive FEHB plan that will help free up some of the money you need to pay for Part B.

3. Suspend FEHB and enroll in Medicare A, B, C and possibly D. This may be less expensive than your FEHB premiums, but your coverage may require you to see different doctors or providers in a different network and your out-of-pocket expenses may be higher.

Q. What about if you are still employed or are covered by FEHB through your spouse’s current employment?

You can postpone enrollment in Medicare Part B until you retire (sign up for Part A when you are about three months from your 65th birthday). There is no penalty for late enrollment as long as you enroll within eight months of the retirement date.

Federal Pay Increase

President Bush
signed an executive order yesterday that provides pay raises for white collar federal employees. Workers in the Washington-Baltimore area will get a 4.78 percent increase next year.

Under the new pay scale, which takes effect with the pay period that begins Jan. 4, pay for General Schedule workers ranges from $21,592 at grade 1, step 1 to $153,200 for grade 15, step 10.

The executive order authorizes a national across-the-board pay hike of 2.9 percent, plus locality increases that differ from place to place.

The Federal Diary will be closed until next year. Have a happy holiday!

Contact Joe Davidson at

By Eric Pianin  |  December 18, 2008; 10:10 PM ET
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