Medicare and Federal Benefits: What Employees Need to Know as They Approach 65

Nathan Kennedy
December 18, 2024

Key Takeaways

Turning 65 can impact your federal benefits and healthcare options, so understanding the integration of Medicare with your benefits is essential.
Planning ahead ensures you avoid penalties, maximize your benefits, and maintain seamless healthcare coverage.

Understanding Medicare Basics as You Approach 65

If you’re nearing your 65th birthday, it’s time to take a closer look at how Medicare might fit into your healthcare plan. Medicare is a federal health insurance program primarily for people aged 65 and older. However, as a public sector employee or retiree, you have unique considerations due to your federal benefits.

Medicare has four main parts:

Part A (Hospital Insurance):
Covers inpatient hospital stays, skilled nursing facility care, hospice care, and some home health services. Most people qualify for Part A without a premium if they’ve paid Medicare taxes for at least 10 years.
Part B (Medical Insurance): Covers outpatient services, doctor visits, preventive care, and durable medical equipment. Part B requires a monthly premium, which changes annually.
Part C (Medicare Advantage): Combines Parts A and B through private insurance and often includes additional benefits.
Part D (Prescription Drug Coverage): Provides coverage for prescription medications.

For federal employees and retirees, integrating Medicare with your Federal Employee Health Benefits (FEHB) program is critical. Let’s explore how you can prepare.

When Should You Enroll in Medicare?

Timing is everything when it comes to Medicare enrollment. Missing key deadlines could lead to penalties or coverage gaps. Here’s what you need to know:

Initial Enrollment Period (IEP): This seven-month period begins three months before your 65th birthday month, includes the birthday month, and ends three months after. Enrolling during this time avoids late penalties.
Special Enrollment Period (SEP): If you’re still working and covered by FEHB, you can delay Part B enrollment without penalties. Once you retire, you’ll have an eight-month SEP to enroll in Part B.
General Enrollment Period (GEP): If you miss the IEP and don’t qualify for SEP, you can enroll from January 1 to March 31 each year, but coverage starts July 1, and you might face late penalties.

Plan ahead by understanding your employment status and current coverage to determine the right time to enroll.

How Medicare Coordinates with FEHB

As a federal employee or retiree, your FEHB plan remains a valuable part of your healthcare coverage. But how does it work with Medicare?

While Employed: If you’re still working at 65, your FEHB plan typically remains your primary coverage, and Medicare acts as secondary insurance if you choose to enroll. Many delay Part B enrollment during this time to avoid paying extra premiums.
After Retirement: Medicare usually becomes your primary insurance, with FEHB serving as secondary coverage. This setup can reduce your out-of-pocket costs by covering what Medicare doesn’t, such as copayments and deductibles.

Should You Enroll in Part B?

Deciding whether to enroll in Medicare Part B depends on your individual situation. Here are some points to consider:

Cost: Part B premiums change annually and may be income-based. Weigh the costs against the benefits of reduced out-of-pocket expenses.
Coverage Coordination: Part B covers services like preventive care and outpatient procedures that your FEHB plan might not fully cover.
Penalty Avoidance: If you delay Part B without qualifying for a SEP, you’ll face a 10% late enrollment penalty for every 12-month period you were eligible but didn’t enroll.

Many retirees find that enrolling in Part B enhances their healthcare coverage by filling gaps left by their FEHB plan.

Exploring Medicare Part D Options

Prescription drug coverage is another important factor as you approach 65. FEHB plans often include prescription benefits, so you might not need Medicare Part D. However, there are situations where enrolling in Part D could be beneficial:

If your FEHB plan doesn’t fully cover the medications you need.
If you anticipate reaching the Medicare “donut hole” coverage gap, which increases out-of-pocket costs for prescriptions.

Be sure to compare your FEHB prescription benefits with potential Part D plans to decide what works best for you.

Medicare Advantage Plans and Federal Employees

Medicare Advantage plans, also known as Part C, are private insurance plans that combine Parts A and B and may include additional benefits. While these plans offer attractive features, federal retirees often prefer sticking with Original Medicare and FEHB. Why?

FEHB provides robust coverage that works seamlessly with Original Medicare.
You might lose your FEHB benefits if you drop them for a Medicare Advantage plan.

Staying with FEHB and Original Medicare is often the safest choice for comprehensive coverage.

Understanding Medicare Costs

As you plan your Medicare journey, understanding the costs involved is crucial. Here’s a quick breakdown:

Part A: Free for most people who worked at least 10 years. If you don’t qualify, premiums can be as high as $505 monthly in 2024.
Part B: The standard premium is $174.70 monthly in 2024, with a $240 deductible. High-income earners may pay more.
Part D: Premiums vary but average around $55.50 monthly, with deductibles up to $545.

These costs change annually, so staying informed is key to budgeting effectively.

Avoiding Common Medicare Mistakes

Navigating Medicare can be tricky, especially for federal employees and retirees. Here are common mistakes to avoid:

Missing Enrollment Deadlines: Know your IEP, SEP, and GEP timelines to avoid penalties.
Skipping Part B Without Coverage: Ensure you qualify for a SEP before delaying enrollment.
Overlooking Coordination of Benefits: Understand how Medicare and FEHB work together to optimize your coverage.

By planning ahead and staying informed, you can avoid costly errors.

What Happens If You Don’t Enroll in Medicare?

While you’re not required to enroll in Medicare, skipping it altogether could have consequences:

FEHB Penalties: Some FEHB plans might increase premiums or reduce benefits if you don’t enroll in Medicare.
Coverage Gaps: Medicare offers benefits not fully covered by FEHB, such as skilled nursing facility care.
Higher Costs: Without Medicare as primary insurance, you could face higher out-of-pocket expenses.

Choosing not to enroll is a personal decision, but understanding the potential downsides is essential.

Preparing for Open Season

Medicare planning often coincides with FEHB Open Season, which typically runs from mid-November to mid-December each year. During this time, you can:

Review your FEHB plan to ensure it meets your healthcare needs.
Compare options for Medicare Part D or Medicare Advantage plans (if applicable).
Make changes to your benefits before they take effect the following January.

Use Open Season as an opportunity to align your Medicare and FEHB choices.

What Should You Do Next?

Now that you have a clearer understanding of Medicare and its role in your federal benefits, take these steps:

Assess Your Needs: Evaluate your current health coverage and anticipated medical needs.
Mark Important Dates: Keep track of your Medicare enrollment periods and Open Season timelines.
Consult Experts: Speak with your HR representative or a benefits counselor for personalized advice.

Taking proactive steps ensures you’re ready to make the best decisions for your healthcare.

Planning Your Healthcare Coverage Beyond 65

Reaching 65 is a milestone, and with proper planning, you can enjoy seamless, comprehensive healthcare. By understanding how Medicare integrates with your FEHB plan, you’ll be well-prepared to make informed decisions. Keep track of deadlines, evaluate your options carefully, and use your resources to maximize your benefits.