Federal Employees and Medicare: What You Need to Know to Save Money and Get the Best Coverage

Key Takeaways:

1. As a federal employee or retiree, understanding Medicare and how it integrates with your Federal Employees Health Benefits (FEHB) can significantly reduce your healthcare costs.

2. Timing and plan coordination are essential. Enrolling in Medicare at the right time and combining it with FEHB ensures optimal coverage and minimizes out-of-pocket expenses.

Why Medicare Matters for Federal Employees and Retirees

Medicare is a cornerstone of healthcare for many Americans, and as a federal employee or retiree, you have unique opportunities to maximize its benefits. Understanding how Medicare works alongside the Federal Employees Health Benefits (FEHB) program can help you navigate retirement with confidence, ensuring comprehensive healthcare without unnecessary spending.

The Basics: Medicare at a Glance

Medicare is divided into several parts:

• Part A (Hospital Insurance): Covers inpatient hospital care, skilled nursing facility stays, hospice care, and some home health services. Most people qualify for premium-free Part A 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. In 2025, the standard monthly premium is $185, with an annual deductible of $257.

• Part C (Medicare Advantage): An alternative to Original Medicare, offering all-in-one coverage through private plans.

• Part D (Prescription Drug Coverage): Covers outpatient prescription medications. In 2025, the deductible is capped at $590, and out-of-pocket costs are limited to $2,000 annually.

FEHB vs. Medicare: How Do They Work Together?

One of the most significant benefits of federal employment is the FEHB program. When you retire, you can continue this coverage. But when Medicare becomes available at age 65, how do the two interact?

Primary vs. Secondary Payer

• If you are still working at age 65 and covered by FEHB, FEHB acts as your primary insurer, while Medicare serves as secondary coverage.

• Once you retire, Medicare becomes the primary payer, and FEHB acts as secondary coverage, filling gaps like coinsurance, deductibles, and additional services.

Why Combine FEHB with Medicare?

• Lower Out-of-Pocket Costs: Medicare covers most major expenses, and FEHB can pick up where Medicare leaves off.

• Prescription Coverage: Many FEHB plans include prescription drug benefits that exceed Medicare Part D coverage.

• Flexibility: You’re not required to enroll in Medicare if you keep FEHB, but the combination often results in better overall value.

Key Enrollment Periods to Keep in Mind

Missing key Medicare deadlines can lead to penalties or coverage gaps. Here’s what you need to know:

Initial Enrollment Period (IEP)

Your IEP starts three months before you turn 65, includes your birth month, and extends three months afterward. Enroll during this time to avoid late penalties for Medicare Part B and Part D.

Special Enrollment Period (SEP)

If you’re still working at 65 and covered by FEHB, you can delay Part B without penalties. You’ll qualify for an SEP when you retire, allowing you to enroll in Medicare without incurring extra costs.

General Enrollment Period (GEP)

If you miss your IEP or SEP, the GEP runs annually from January 1 to March 31, with coverage starting July 1. However, late penalties may apply.

Weighing the Costs: Is Medicare Worth It?

You might wonder if adding Medicare to your FEHB plan is worth the extra cost. Here are some considerations:

• Part A: Since it’s typically premium-free, enrolling in Part A is a no-brainer.

• Part B: The decision is more complex. Some retirees find the $185 monthly premium manageable, while others prefer to rely solely on FEHB.

• Part D: Most FEHB plans already offer robust prescription drug coverage, making Part D unnecessary in many cases.

Strategies for Coordinating Coverage

To get the most out of your benefits, follow these strategies:

Assess Your Healthcare Needs

Evaluate your medical history, anticipated healthcare needs, and budget. This helps you decide whether Medicare Part B or additional coverage is necessary.

Review FEHB Plan Options

During Open Season, explore whether your current FEHB plan integrates well with Medicare. Some plans waive deductibles and reduce premiums for enrollees with Medicare Part B.

Take Advantage of Wellness Benefits

Both Medicare and FEHB offer preventive care services at little to no cost. Utilize screenings, vaccinations, and wellness programs to maintain good health.

Retiree Scenarios: When to Opt for Both Medicare and FEHB

Here are common scenarios that highlight when combining Medicare and FEHB makes sense:

1. High Medical Needs: If you expect frequent doctor visits or hospital stays, Medicare Part B can significantly reduce out-of-pocket costs.

2. Prescription Coverage: If your FEHB plan’s drug coverage is insufficient, consider adding Medicare Part D.

3. Travel Abroad: Some FEHB plans offer global coverage, which Medicare lacks. Keeping FEHB ensures you’re covered internationally.

Understanding Costs in 2025

In 2025, the following costs apply:

• FEHB Premiums: Federal employees pay about 30% of their plan’s premium, with the government covering the rest.

• Medicare Part A: Free for most retirees, unless you have fewer than 30 quarters of Medicare-taxed employment.

• Medicare Part B: Standard premium of $185, with higher-income earners paying more.

• Medicare Part D: Deductible capped at $590 and out-of-pocket costs limited to $2,000 annually.

Benefits of Keeping Both Medicare and FEHB

• Comprehensive Coverage: Medicare covers hospital and outpatient care, while FEHB handles additional services like vision and dental.

• Coordination of Benefits: FEHB plans often waive cost-sharing for Medicare-covered services.

• Peace of Mind: Combining both ensures you’re protected from unexpected medical expenses.

Tips for a Smooth Transition to Retirement

1. Plan Early: Start researching your options a year before retirement to avoid last-minute decisions.

2. Attend Seminars: Many federal agencies offer pre-retirement seminars that explain benefits in detail.

3. Consult Experts: Speak with a benefits counselor or Medicare advisor to clarify your choices.

4. Review Your Finances: Ensure you’re prepared for Medicare premiums and other potential costs.

Making the Most of Open Season

The FEHB Open Season, typically held from mid-November to mid-December, is your opportunity to review and change plans. Use this time to:

• Compare FEHB plans that complement Medicare.

• Switch to a plan offering better benefits for retirees with Medicare.

• Ensure your current plan meets your healthcare needs for the coming year.

Maximizing Your Retirement Benefits

By strategically combining Medicare and FEHB, you can enjoy a financially secure retirement with excellent healthcare. Keep track of enrollment periods, assess your needs annually, and take full advantage of both programs’ offerings.

Ensuring Your Coverage Works for You

Navigating Medicare and FEHB doesn’t have to be overwhelming. With the right approach, you can tailor your healthcare to suit your lifestyle, ensuring you’re covered today and in the future.