Do You Really Need Medicare and FEHB as a Federal Employee?

I talk to federal employees all the time who have been in their very same health insurance plan for their entire career. And for many of you, that is Blue Cross Blue Shield. That's a very, very popular one out there in the federal community. Now there's others. There's that. Now there's Kaiser. There's tons of different plans. But often, it is very common for federal employees to be in the exact same plan for a long, long time. But then, at 65, something changes. And that is Medicare. And often, that really just changes everything. It changes everything when it comes to what plan you should have and the best strategy to not only save you hundreds, if not thousands of dollars every single year in retirement, but also to give you the confidence and the knowledge to know that no matter what health issues happen to you, your spouse, that you guys are going to be taken care of and that your retirement plan is still going to work. And that is what we're going to talk about today, how your federal health insurance merges and works with Medicare and some of the best options for you. Now before we get started here, this topic is a beast. There's tons of different things to discuss and different options. So there's a link in the description below directly to an article I wrote on this. It'll take you right to it. And there's tons of good visuals. And there's a table of contents. So if you have specific questions about this topic, about Medicare, about your federal health plan, how they work together, the cost, and all those different things, the best options, go to that, check out the table of contents. You can jump to the topics, the pieces of this that are most relevant for you. Now before we dig any further, I do want to make one clarification. And that is today we are not talking about Medicaid. This is about Medicare, okay? These two programs are very, very different. In general, the Medicaid program is for poverty, okay? That comes into play when someone is in severe poverty. Medicare is what the vast majority of Americans use at age 65. So, again, today we're talking about Medicare and your federal health plan. And, again, the Medicare program is a beast. There's so many different things to know. But let's talk about the four basic parts of Medicare. There's Medicare A, B, C, and D, okay? Medicare Part A is free for the most part for most federal employees because you paid into this for a long time. Medicare Part B is not free, right? Medicare Part C is if you get some sort of supplement, advantage plan. That's Part C. And then Part D is prescription drugs. So, for you as a federal employee, Part C and D really don't come into play. First, Part D is prescription drugs, which your federal health plan already covers, what Part D would cover. And you're not going to need a supplement plan because you already have your federal health insurance, right? So, C and D really don't come into play. So, today we're going to be focusing on Parts A and B because those are the parts that are really relevant for you. And so, we're going to start off with Medicare Part A. And Medicare Part A starts at 65. That is when you're first eligible for Medicare Part A. Now, like I was saying, every paycheck, you could probably see it on your pay stub, there's a part of it that goes towards Social Security and Medicare. So, once you turn 65, then it's free. You get it automatically, but of course you paid for it over the course of your career. But once you're retired, of course, it becomes free at age 65. So, basically, for federal employees, it's a no-brainer, right? It's free. And so, when you turn 65, whether you're working or retired, it really doesn't matter. You want to enroll in Medicare Part A because why not? It doesn't cost you anything. Definitely, definitely get enrolled. It's a no-brainer there. And when it comes to the types of things that Medicare A and Medicare Part B cover, like what they cover, the different parts, I'm not going to dig into this because it's hard to do it, whether on the podcast, on YouTube, hard to see and visualize all these things. So, definitely check out the article. Hit the link in the description below. It'll take you to the article and it breaks down the specific things that these different parts cover so that you know what things Medicare might cover and what things your federal health insurance might have to cover. Now, when it comes to getting on Medicare Part A, there is a window, a window of time of seven months around your 65th birthday. So, how it works, let's say your birthday is in January when you turn 65, okay? So, the three months before January you can enroll and the three months after January you can enroll. So, including the month that you turn 65, that's a seven-month window that you are eligible and you can enroll into Medicare. So, if that's coming up for you, put it in your calendar three months before the month you turn 65 to start that process. Go to Medicare.gov and definitely start that process to enroll. And because Medicare Part A is free, it's really a no-brainer. So, it's not a hard decision on, of course, when to get it or if to get it or not, right? Because whether you're working or not, you want to get it and it's free. So, you definitely should. There's no reason not to. But Medicare Part B is really the one that gets controversial because first, it's not free. It costs money. And do you need it or not? That's the big, big question. Now, when it comes to, again, what is covered under Part B, what services are covered, go to my website. There's a long list of things that are covered. But, again, what we're going to focus on in this video and podcast is, okay, what does it cost, right? What is the cost? Well, the cost is actually not as clean-cut either because it's going to depend on your income. And actually, every year, the cost is going to increase with inflation as well. But for now, if your income is in the lowest bracket, and if you, again, go to my website, on the video, I'm going to pop up a chart of the cost for 2022. But long story short, for many federal employees, you're going to be in the lowest bracket, which is about $170 per month per person, okay? So, again, when you're looking at the chart, make sure you understand that is per person, not per couple, okay? So, if you and your spouse have to be on Medicare Part B, then times it by two, right? So, over time, it can really add up because for both of you, you have to pay for it. And for those of you that haven't had a chance to click the link below to go to my website to check out that article and to see the chart of the different costs, well, the long story short is the lowest rate that you're going to be paying is about $170, and that's 2022 rates, okay? And the highest is $500-some, right? So, it can get very, very expensive. So, if you're in the highest income bracket and, you know, it's you and your spouse, and that's $1,000 for Medicare Part B per month, per month. So, that really, really adds up. So, first, you want to check out that chart and say, okay, where am I at? What is my income going to be at 65 and retirement? What is that cost going to be for me? And, of course, the big question is, okay, now that we know a little bit about the cost, am I required to get Medicare Part B? Is this a requirement? Do I have to? And the answer is no, you don't. Generally, as a federal employee, there's no requirement to get on Medicare Part B. But, but, many times, you really want to. You really are going to want to. Now, let me kind of put an asterisk here in this whole thought, okay? If you're on TRICARE, if you're covered under TRICARE and you want to keep TRICARE after you're eligible for Medicare 65, then you are required to get on Medicare Part B. But, if you're not on TRICARE, if you're not a military retiree with TRICARE, then you don't. That doesn't apply to you. But, again, if you're on TRICARE, you are forced, forced, forced is a strong word, but you are required to get on Medicare Part B and A starting at 65. And then, of course, you've got to pay those premiums for Part B as well to keep TRICARE into retirement. Now, when I talk to feds all the time and I talk about getting on Medicare Part B and those sort of things, I hear all the time, like, hey, I've been on Blue Cross Blue Shield, Kaiser, and I've been on this plan forever. It's been working great. Why in the world would I want to get on Medicare Part B, pay the extra cost? What's in it for me? Why in the world would I want to do that in retirement? And, really, there are three main reasons why you probably should at least consider it, at least consider it, if not actually do it. For many feds, it makes sense to get on Medicare Part B. You want to make sure you consider all the different ramifications if you don't, okay? Number one, as you get older, 65+, the odds of you having some serious medical issues or your spouse's medical issues and expenses just go up, right? As someone ages, the medical expenses, on average, goes up. Maybe that won't happen to you. We don't know. You just want to make sure that you have plenty of coverage. And having Medicare Part B and your FEHB really can create a really comprehensive plan so that when you go into the most expensive medical time of your life, that you have a super comprehensive plan that has very limited out-of-pocket costs that can really help you so that no matter what, your retirement plan is going to be okay. And that is a huge, huge advantage. Reason number two, so Medicare and your federal health insurance are two different systems. Really, when it comes to health insurance. And over time, health insurance systems change, right? They adapt. They change over time. And we don't know what Medicare or your federal health insurance is going to look like in 10, 20 years. We don't know. The systems change or the rules change over time. The cost is going to change over time. So for you being able to have access to both of them by being on Medicare Part B and having your federal health insurance gives you really a hybrid approach so that as things change, you can pivot down the road. If the rules change for Medicare where it just doesn't work for you anymore, okay, you can switch back just to your federal health insurance. Or if you say, hey, the rules are changing for my federal health insurance. I want to double down on Medicare. You can do that. You have access to Medicare Part B, right? You have flexibility. You have options, which is crucial, crucial, crucial in retirement. And reason number three why you should really, really consider Medicare Part B, and that is over time, the federal health insurance plans are putting more and more pressure and more responsibility on Medicare, okay? And over time, they change so that maybe something that they would potentially normally cover, but Medicare normally covers it. Hey, they're not going to cover it because Medicare Part B normally covers it. So over time, you may be forced to just have more and more out-of-pocket costs because you don't get on Medicare Part B because the federal health insurance, the plans change every year. They do, right? And over time, they often change so they don't cover as much as what Medicare Part B would. And I've heard many, many stories actually where someone gets, let's say, a surgery, right, at age 64, right? And their federal health insurance pays for it all. They don't have to pay a dime. It's great. And maybe they get the exact same surgery, maybe for the other arm, whatever, once they are 68, once they're past Medicare age, and the plan has changed. And the plan expects Medicare to pick it up, but if you're not on Medicare Part B, then it's not going to be quite the same. So check with your plan. See what they say. And again, the plan changes over time. You want to be every open season, you want to make sure, okay, in the new year, what is changing in the plan? Is there anything that is not going to be covered that was covered? You want to nail these things down so that you know moving into the next year what the thing is going to look like for you. So let me break this down for you. There are really three different options and strategies that feds use in retirement when it comes to health insurance. First is they have their federal health insurance, their FEHB, and Medicare A and B, okay? When it comes to premiums, this is potentially one of the most expensive options, but not all the time. The big advantage, of course, like we've been talking about, is you can get really, really comprehensive coverage that makes sure that you are going to be okay in retirement, which is amazing. We love that, okay? Now, if your income in retirement is relatively very high, then your Medicare Part B payment may be unreasonable. That's something to look into. But for many of you, that's not going to be the issue. And nowadays, many FEHB plans, they love it when you get on Medicare Part B because then Medicare becomes the primary insurer. So, many plans are going to actually offer you a reimbursement for the Medicare Part B premiums. Maybe not all of it, but maybe a good chunk of it, depending on what plan you have. And big insurers like Blue Cross Blue Shield, like Aetna, like Kaiser, these big, big plans, they all have plans that offer a major reimbursement for being on Medicare Part B. So, check with your plan. And maybe, and for many feds, it makes a ton of sense, once you do enroll in Medicare, to actually jump onto a FEHB plan that is really Medicare-friendly, that really merges well with it, that the cost is relatively low, and they reimburse a big chunk of Medicare Part B. And actually, your coverage can improve once you do this, and sometimes the cost every year will go down because of this good merge and the Medicare reimbursement. So, definitely check with your plan. For example, Blue Cross Basic offers a Medicare reimbursement. You know, for being on Medicare Part B. But Blue Cross Standard doesn't, right? It's just kind of a nuance. That is kind of a part of the plan. So, you want to make sure you check with your plan to make sure that you are or not getting the reimbursement and what makes sense for you. Now, option number two, and the strategy that some feds use, is they get on Medicare Part A, and of course they keep their federal health insurance, but they don't get on Medicare Part B. And again, this may happen if, you know, their income is relatively high, so the Medicare Part B premiums become pretty expensive and they don't want to deal with that. Or, like I was saying before, hey, some feds say, hey, I've had this health plan for a long time. It's worked great. Why in the world would I need a different plan? Those are some of the reasons. Now, if this is you, there's a couple things to think about, okay? First, you want to make sure that you never plan on going on Medicare Part B and you're okay with that, okay? Because if you do not get on Medicare Part B right when you're eligible to enroll, then there's a penalty, a big penalty, for not taking it right away. And it's basically a 10% penalty for every year you delay enrolling that you could have delayed or that you could have enrolled, okay? So, for example, let's say you're retired, and at 65 you get on Medicare Part A but not Part B. Well, let's say at age 70, you say, hey, actually, I want Medicare Part B. No problem. You can get on, but because you waited five years, that's a 10% penalty for every year. So that's 50% – your premiums for Medicare Part B are going to be 50% higher than they would have been, and that is a permanent penalty that's going to last the rest of your life, okay? So sometimes it still makes sense to get on Medicare Part B later. You just have to know it's the least expensive option to decide up front, okay, do I need this and do I get on right away so that I don't have to deal with that penalty later on? And let me clarify just one thing, and that is if you choose not to be on Medicare Part B and you never get on Medicare Part B later, there's no penalty. There's no penalty. The only time that a penalty comes into play is if you choose not to be on Medicare Part B, and then later you choose to get on it, okay? Now, there is a couple nuances here, and that is if you are still working, okay, then you often don't have to enroll in Medicare Part B, and the clock for that penalty doesn't start until you retire. So let's say you keep working until 67, and then you retire at that point where the clock doesn't start until 67. Or let's say you are retired, but your spouse is still working, and you're covered under their federal health insurance plan. If that is the case, then you don't have to, you know, the clock for this 10% penalty doesn't start until your spouse retires. Then it would start at that point. So if you're still working at 65 or your spouse is still working and you're 65, then you don't have to enroll in Medicare until you or them are retired. But, of course, if you are still working, you've got to be covered under an FEHB plan. That's one of the rules. Or if your spouse is still working, you've got to be covered under their plan so that you can delay taking Medicare Part B and not have any penalties. All right, option number three. And this is by far the least popular option, and that is some federal employees actually drop, they suspend their federal health insurance in favor of just getting on a Medicare plan. Right? And the average American, that's kind of what they do. When they don't have access to a health insurance plan for their job in retirement, then they get on Medicare, they get AB, and they often get sometimes D for drugs, and sometimes they even get a supplement plan to fill some of the gaps that Medicare doesn't fill. Right? But the vast majority of the time, this is not the best option for feds because the federal health insurance is a great plan, and, like always, the government is paying a big chunk of the premiums for you. You only have to pay a small portion of those premiums, so it's pretty dang cost-effective, hard to beat. And you really want to have a pretty dang comprehensive plan into retirement so that your retirement plan isn't rocked because you have a big health insurance issue. If there's a big medical expense, you want to make sure you have the coverage that makes sense for you and that you can handle it. So, again, this topic is a beast. There's so much to dig into. But if you have more questions, check out the article. Go to the description below. Check that out. It'll take you to my website. There is tons of great information above and beyond what I've already talked about in this video and this podcast, so definitely check that out if you want to learn more on what makes sense for you so that you can, of course, save a bunch of money in retirement, but also to have the peace of mind to say, Hey, no matter what, no matter what happens to me and my spouse, we're going to be taken care of. We have the right insurance we need to be prepared. So, I hope that was helpful. Have an incredible rest of your day. Good luck with everything. And, of course, it is December, let's see, I think 28th when this comes out. So, I hope you're enjoying your holidays. Everything is going so good for you. And have a great rest of your day.