You May Be Eligible for Medicare Soon—Here’s How It Affects Your Other Coverage

richard jayne
July 12, 2025

Key Takeaways

Turning 65 or becoming Medicare-eligible doesn’t automatically cancel your existing health coverage, but it does affect how your benefits work together.
As a public sector retiree, coordinating Medicare with your federal or Postal Service benefits can lead to lower out-of-pocket costs if you enroll at the right time and choose the right combination.

Understanding When Medicare Kicks In

If you’re approaching age 65, you’re likely starting to receive mail and notices about Medicare enrollment. Eligibility for Medicare

begins at age 65 for most people, though some may qualify earlier due to disability. For public sector retirees, this milestone matters because it intersects with existing federal or Postal Service health coverage in very specific ways.

In 2025, Medicare enrollment still begins with the Initial Enrollment Period (IEP), which spans seven months:

Three months before your 65th birthday
The month of your birthday
Three months after your birthday month

Missing this window can lead to late enrollment penalties unless you qualify for a Special Enrollment Period (SEP).

Your Existing Coverage: What Happens Now?

As a retired public sector employee, you likely already have health coverage through the Federal Employees Health Benefits (FEHB) Program or the Postal Service Health Benefits (PSHB) Program. These plans remain with you into retirement and do not end when you become eligible for Medicare.

Here’s what happens instead:

You remain enrolled in your FEHB or PSHB plan.
Medicare becomes your primary payer once you enroll, and your FEHB/PSHB plan becomes secondary.
If you don’t enroll in Medicare when first eligible, your FEHB/PSHB plan continues as your primary insurance, but you may face higher costs and reduced coordination of benefits.

Coordinating Medicare with FEHB or PSHB

Enrolling in Medicare Part A is straightforward since it typically comes without a premium if you worked at least 10 years. Medicare Part B, which covers outpatient care, requires a monthly premium and becomes a more strategic decision.

When you enroll in both Part A and Part B, your FEHB or PSHB plan will often:

Waive or reduce deductibles
Lower coinsurance or copays
Offer enhanced benefits due to coordination with Medicare

However, not all plans offer the same level of cost-sharing benefits. That’s why it’s important to review your plan brochures and understand how Medicare integration impacts your total costs.

What About Part D?

Most FEHB and PSHB plans include comprehensive prescription drug coverage. If you keep that coverage, you usually don’t need to enroll in Medicare Part D. In fact, enrolling in Part D might:

Lead to unnecessary premiums
Create coordination issues between plans

But starting in 2025, PSHB plans automatically enroll Medicare-eligible annuitants into a Medicare Part D Employer Group Waiver Plan (EGWP), unless you opt out. This adds another layer of coordination that may reduce your drug costs.

Medicare Part B: Is It Required?

Medicare Part B is not mandatory, but your choice affects your overall health coverage.

For FEHB retirees, enrolling in Part B is optional, but often recommended to maximize benefits.
For PSHB retirees, enrolling in Part B is mandatory for most annuitants and eligible family members unless you retired on or before January 1, 2025 or meet a limited exemption.

Failure to enroll in Part B when required can result in the loss of your PSHB coverage entirely.

Key Cost Considerations in 2025

Understanding how the two systems interact is essential for budgeting and minimizing surprise bills. In 2025, here are a few important figures:

Medicare Part A is premium-free for most people.
Medicare Part B has a standard monthly premium of $185 and a $257 annual deductible.
Medicare Part D has a maximum deductible of $590 and a new $2,000 annual cap on out-of-pocket prescription drug costs.
PSHB and FEHB plans may reduce or waive these costs if you’re enrolled in both Medicare Part A and B.

Always verify how your current plan works with Medicare before making changes. Not all plans offer identical levels of cost-sharing or benefits for Medicare enrollees.

Special Enrollment Periods (SEP) and Penalties

If you delay Medicare enrollment past your IEP because you were still working and covered under a group plan, you may qualify for a Special Enrollment Period. This avoids penalties and allows you to enroll in Part B without a lifelong surcharge.

But once you retire and no longer have “active employment” coverage, the SEP ends. From that point forward:

You may face a 10% penalty for every 12-month period you delay Part B enrollment
This penalty is permanent and added to your monthly premium

For PSHB annuitants who are required to enroll in Part B, these penalties are even more important to avoid.

How Medicare Affects Other Retirement Benefits

Medicare eligibility can affect more than just your health plan. It may also intersect with other benefits, including:

Survivor Benefits: Coordination between FEHB or PSHB and Medicare ensures continued coverage for eligible survivors, but may require the survivor to enroll in Part B to retain PSHB benefits.
Long-Term Care Needs: Medicare offers limited long-term care coverage. You might need to explore separate options through FLTCIP or private insurance.
Flexible Spending Accounts (FSAs): Once retired, you generally lose access to FSA accounts unless you are re-employed.

Planning Around Medicare and Your Retirement Timeline

The decision to enroll in Medicare should align with your retirement status and future plans. Some tips to guide your decision-making include:

If you’re still working at 65, you might delay Part B if you have group coverage.
If you’re retired and covered by FEHB, consider enrolling in Part A and evaluate the benefits of enrolling in Part B.
If you’re retired under PSHB and meet the eligibility rules, Part B enrollment is essential to keep your health plan.

Your strategy should factor in your income, expected health needs, and whether your spouse or dependents rely on your coverage.

What Happens If You Move Abroad?

Medicare generally doesn’t cover health care outside the U.S., with a few rare exceptions. If you move abroad in retirement:

You might delay Part B to avoid unnecessary premiums
You may retain FEHB coverage that offers international benefits
If you are a PSHB retiree, you might qualify for a Part B exemption if permanently living outside the U.S.

Carefully check whether your plan continues to offer meaningful coverage overseas and whether you meet exemption criteria for Medicare enrollment.

Enrollment Steps and Timeline

Navigating your Medicare enrollment in 2025 requires attention to detail and timing:

Mark your calendar three months before your 65th birthday
Decide whether to enroll in Parts A, B, and possibly D, based on your plan
Coordinate with your existing plan to understand how benefits will work
Review OPM or USPS materials sent during Open Season (November to December) to see if changes are needed
Speak to a licensed agent if you’re unsure how your personal situation fits these rules

Why It Matters to Make the Right Choice

Failing to coordinate Medicare with your public sector retirement benefits can lead to unexpected costs, gaps in coverage, or even the loss of your current plan. On the other hand, enrolling strategically can lead to:

Reduced out-of-pocket expenses
Access to enhanced benefits
Improved financial planning for retirement

Careful review of your plan, your Medicare options, and your timelines is essential.

Aligning Your Medicare Decision with Retirement Needs

Getting close to Medicare eligibility is a good time to reassess your entire retirement health strategy. The decisions you make now will affect not just your premiums but also your access to doctors, hospitals, and prescription drugs.

Make sure to compare how your current plan works with Medicare, whether you qualify for any exceptions, and how changes will impact your family members. When in doubt, get in touch with a licensed agent listed on this website for professional advice tailored to your situation.