Whether you should enroll in Medicare is based on federal law, not personal preference.
If you already have health insurance when you turn 65, signing up for Medicare may seem redundant. Unfortunately, failing to enroll in Medicare Part B when you retire could leave you owing significant late penalties.
This page explains how Medicare works with your Federal Employees Health Benefits (FEHB). We also describe the "parts" of Medicare and when to enroll to avoid those late penalties.
What Are the "Parts" of Medicare?
There are four "parts" to Medicare. Original Medicare includes Part A, hospital insurance, and Part B, medical insurance. Medicare Part A covers inpatient services received in a hospital or skilled nursing facility (SNF). Medicare Part B helps pay for outpatient services such as doctor visits, lab work, mental health care, and durable medical equipment (DME).
There is also Medicare Part C, more commonly known as Medicare Advantage, and Medicare Part D, which provides prescription drug plans (PDPs). Although these parts operate under the guidelines set by the Centers for Medicare & Medicaid Services (CMS), private insurance companies offer and manage these plans – not the federal government.
Every Medicare Advantage plan must provide the same benefits you get with Medicare Parts A and B, but they are not limited to that coverage. Most Advantage plans – around 90 percent – include prescription drug coverage, which is something you don't get with Original Medicare.
How Much Does Original Medicare Cost?
Like other types of health insurance, out-of-pocket Medicare costs include deductibles, premiums, and coinsurance or copayments. Costs for Parts C and D vary, because these are private insurance plans, meaning the insurer sets the rates.
The following Medicare costs are for 2023.
Medicare Part A Costs
The Medicare Part A premium is $506 per month. However, most people get premium-free Part A. And if you're a retired federal employee, you most likely paid Medicare taxes for the required 10 years to qualify for premium-free.
The Part A deductible applies to every benefit period, which begins the day you're admitted as a hospital inpatient and ends once you go 60 consecutive days without receiving inpatient care. In addition to your deductible, you may have to pay coinsurance if your hospital stay lasts longer than 60 days (there is a $0 copay for the first 60 days). The rate is $400 per day for days 61 through 90, and $800 per day for days 91 through your lifetime reserve days.
Your coinsurance rate for skilled nursing facility care is $0 for the first 20 days and $200 for days 21 through 100. After 100 days, you are responsible for 100 percent of all SNF costs.
You get 60 lifetime reserve days with Part A. However, if you join a Medicare Supplement plan, more commonly known as Medigap, you get an additional 365 lifetime reserve days for inpatient hospital care.
Medicare Part B Costs
The standard Medicare Part B premium is $164.90 per month. You pay this amount even if you have a Medicare Advantage plan.
For most Part B services, you must meet the yearly deductible, which is $226 in 2023. Once you meet your annual deductible, you typically have a coinsurance of 20 percent of the Medicare-approved amount. However, Medicare pays 100 percent for some preventive services, such as the Annual Wellness Visit. The Medicare deductible does not apply for these services.
The vast majority of Medicare beneficiaries pay the standard Part B premium (hence the term "standard"), but around 5 percent pay a surcharge known as the Income-Related Monthly Adjustment Amount, or IRMAA. You only owe the higher premium if your yearly household income exceeds $97,000 (filing singly) or $194,000 (married filing jointly).
Should Federal Retirees Enroll in Medicare?
All federal employees have paid the Medicare tax since 1983, which means you qualify for premium-free Part A if you are a federal annuitant age 65 or older. We strongly encourage any federal employee age 65 or older to sign up for Medicare Part A as soon as they become eligible. It costs you nothing and would help cover any out-of-pocket costs you have under your FEHB plan.
We recommend signing up for Medicare Part B for the same reason – nearly complete coverage in exchange for a fairly low monthly premium. This is especially true if you're enrolled in a fee-for-service plan (FFS) like Mail Handlers or Blue Cross Blue Shield. Federal employees enrolled in a health maintenance organization (HMO) may not want to, because they typically have fairly low copays. However, you may still want to sign up for Part B, because it doesn't have the provider network restrictions you have with an HMO. This is especially true if you frequently travel within the United States, as your Part B Medicare coverage travels with you.
It also matters whether you're retired or actively working. You avoid late enrollment penalties as long as you have creditable coverage. But one of the guidelines around "creditable" includes being actively employed. If your coverage is through your employment, then it ceases to be creditable once you retire. The same is true if your current health insurance is through your spouse's employment. Once the covered employee retires, the Medicare program no longer considers the FEHB program to be creditable.
Who Pays First?
Medicare pays first once you retire. However, if you are a rehired annuitant or active federal employee, then your FEHB health plan pays first.
Please note that your FEHB premiums will not change once you enroll in Medicare. You can, however, choose a lower cost FEHB plan. You may also find that your federal plan waives some of your out-of-pocket costs once Medicare becomes your primary payer. Talk to your benefits administrator for more information.
When Should You Enroll in Medicare?
If you're retired, you should sign up for Medicare as soon as you're eligible at age 65. This is known as your Initial Enrollment Period (IEP). It lasts for 7 months, beginning 3 months before your 65th birthday and ending 3 months after your birth month.
For example, if your birthday is June 14, your IEP begins on March 1 and ends on September 30. Those dates move ahead by one month if your birthday falls on the 1st. So, a June 1 birthday gives you an IEP of February 1 through July 31.
If you're still working when you turn 65, you may delay enrollment without penalty (although we still recommend signing up for Part A, since it's free). This is because you qualify for what Medicare calls a Special Enrollment Period (SEP). Upon retirement, you have 8 months to act without incurring late fees.
Those who miss their IEP and do not qualify for a Special Enrollment Period must wait for the General Enrollment Period. This happens every year from January 1 through March 31, with coverage beginning on July 1. If you did not have creditable coverage, you may owe the Part B late enrollment penalty, which is 10 percent for every full year you did not have Part B but could have. So, 12 months equals 10 percent, 24 months equals 20 percent, and so on. You owe this penalty for the entire time you have Medicare.
Once you enroll in Medicare, you may change your FEHB plan. This is because signing up for Medicare is considered a "life event". Your window for making these changes starts 30 days before you become eligible for Medicare and ends 30 days after your Medicare eligibility date.
Enrolling in Medicare is through Social Security. Click here to get started.
What If You Qualify for TRICARE?
If you are a federal annuitant eligible for TRICARE-for-Life, you must enroll in Medicare upon turning 65. Medicare is considered primary with TRICARE as secondary. Once you enroll in Medicare, there is no monthly premium for TRICARE-for-life.
Do You Need Medicare Part C?
You probably don't need a Medicare Part C plan if you already have FEHB coverage. The "advantage" of Medicare Advantage plans is that most of them offer benefits above what you get with Original Medicare. But those plans usually have additional costs, like higher monthly premiums. To determine whether you'd do better with Original Medicare or an Advantage plan, compare benefits and costs carefully, including your Federal Employees Health Benefits.
Do You Need Medicare Part D?
Most federal retirees would do better to keep their FEHB prescription coverage. Medicare designates prescription drug plans as creditable when they offer similar benefits to Part D at a similar price, and FEHB prescription coverage qualifies as creditable.
The only exception is for federal annuitants who have limited income and resources, which may qualify you for Extra Help. This Medicare program covers many of your prescription drug costs. Click here to see if you qualify.
Do You Need a Medigap Plan?
Medicare Supplement Insurance plans help cover your out-of-pocket costs when you have Original Medicare. However, if you're enrolled in both Medicare and an FEHB plan, then your federal plan is your supplemental insurance. Therefore, you don't need the added expense of a Medigap plan.
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