FEHB or Medicare: Can You Really Have the Best of Both Worlds as a Retired Federal Worker?

Key Takeaways

1. Federal retirees have the unique opportunity to combine FEHB and Medicare for comprehensive healthcare coverage, but understanding the integration is essential.

2. Careful planning during your transition to retirement ensures you maximize benefits and minimize unnecessary expenses.

Planning for Retirement Healthcare: Your Options as a Federal Worker

As a retired federal worker, you’re in a unique position to access some of the best healthcare coverage options available. However, navigating the complexities of the Federal Employees Health Benefits (FEHB) program and Medicare can be daunting. Should you stick with FEHB, enroll in Medicare, or do both? The answer depends on your healthcare needs, financial situation, and understanding of how these programs work together.

FEHB and Medicare: How They Work

FEHB is a comprehensive health insurance program for federal employees and retirees. It provides a broad range of coverage options, including medical, dental, and vision care, along with nationwide and local plans. As a retiree, you’re eligible to keep your FEHB coverage for life, provided you meet certain criteria.

Medicare, on the other hand, is the federal health insurance program for individuals aged 65 and older. It consists of several parts:

• Part A covers hospital care and is generally premium-free if you or your spouse paid Medicare taxes while working.

• Part B covers doctor visits and outpatient services, requiring a monthly premium.

• Part D provides prescription drug coverage, also requiring a premium.

Both programs serve different purposes, and when used together, they can provide robust coverage. But first, let’s break down their integration.

Why Combine FEHB and Medicare?

Many federal retirees wonder if they should keep FEHB, enroll in Medicare, or opt for both. The good news is you don’t have to choose one over the other—you can integrate them for more comprehensive benefits.

Here are a few reasons why combining these programs might make sense:

• Reduced Out-of-Pocket Costs: Medicare often covers expenses like deductibles and coinsurance that FEHB plans might not.

• Prescription Drug Savings: While FEHB includes prescription drug coverage, adding Medicare Part D can help reduce costs even further.

• Global Coverage: Some FEHB plans offer better international healthcare coverage than Medicare.

Transitioning to Medicare: Timing Is Everything

Timing is crucial when deciding how to integrate FEHB with Medicare. Most federal retirees become eligible for Medicare at age 65. At this point, you’ll need to make decisions about enrollment:

• Initial Enrollment Period (IEP): This seven-month window starts three months before you turn 65, includes your birthday month, and extends three months after. Missing this period could result in late penalties for Medicare Part B or D.

• Special Enrollment Period (SEP): If you’re still working and covered by FEHB, you can delay Medicare enrollment without penalties until you retire.

How to Integrate FEHB and Medicare

Combining FEHB and Medicare effectively requires a clear understanding of how they interact. Here’s what you need to know:

Medicare as Primary Coverage

Once you enroll in Medicare, it becomes your primary payer, with FEHB serving as secondary coverage. This means Medicare pays first for covered services, and your FEHB plan covers any remaining costs, such as coinsurance or deductibles. This coordination can lead to significant savings on out-of-pocket expenses.

Choosing to Delay Medicare Part B

Some federal retirees opt to delay Medicare Part B enrollment due to its monthly premium, especially if they find their FEHB coverage sufficient. However, delaying Part B without qualifying for a SEP could result in permanent late enrollment penalties.

Prescription Drug Coverage (Part D)

If your FEHB plan includes robust prescription drug coverage, you might not need Medicare Part D. However, it’s essential to verify whether your FEHB plan qualifies as “creditable” coverage under Medicare guidelines to avoid penalties.

Costs to Consider

Understanding costs is a key part of your decision-making process. While FEHB premiums remain the same whether or not you enroll in Medicare, Medicare premiums will add an extra expense.

FEHB Costs

In 2025, the government covers approximately 70% of FEHB premiums, leaving retirees responsible for the remaining 30%. Your out-of-pocket costs will vary based on the plan you choose.

Medicare Costs

• Part A: Usually premium-free but has an inpatient deductible of $1,676 per benefit period.

• Part B: The standard monthly premium is $185 in 2025, with an annual deductible of $257.

• Part D: Premiums vary by plan, and the deductible can go up to $590 in 2025.

Pros and Cons of Combining FEHB and Medicare

Advantages

• Comprehensive Coverage: Together, FEHB and Medicare cover a wide range of healthcare needs, reducing gaps in coverage.

• Financial Protection: Lower out-of-pocket costs for services like hospital stays and outpatient care.

• Flexibility: Access to both FEHB’s nationwide plans and Medicare’s broad provider network.

Disadvantages

• Higher Costs: Paying for both Medicare Part B and FEHB premiums can strain your budget.

• Complexity: Navigating the rules of both programs requires careful planning.

• Duplicate Coverage: Some benefits may overlap, leading to unnecessary spending.

Making the Right Choice for You

Your decision to combine FEHB and Medicare should be based on your unique circumstances. Consider factors such as:

• Healthcare Needs: If you anticipate frequent doctor visits or hospital stays, the additional coverage from Medicare can be beneficial.

• Budget: Evaluate whether you can afford the combined costs of FEHB and Medicare.

• Long-Term Plans: Think about your retirement goals, travel plans, and any potential changes to your healthcare needs.

Tips for Managing Your Coverage

1. Review Your Options Annually: During the Medicare Open Enrollment period (October 15 to December 7) and the FEHB Open Season (typically mid-November to mid-December), compare plans to ensure they meet your needs.

2. Consider a Medicare Advantage Plan: If you’re willing to forgo FEHB, a Medicare Advantage Plan might offer comprehensive coverage, but carefully weigh the pros and cons.

3. Use Coordination of Benefits (COB): Contact your FEHB insurer to understand how they coordinate with Medicare.

4. Seek Professional Advice: A benefits counselor can help you make informed decisions tailored to your situation.

Key Deadlines to Keep in Mind

• Medicare Initial Enrollment Period (IEP): Seven months around your 65th birthday.

• FEHB Open Season: Mid-November to mid-December annually.

• Special Enrollment Period (SEP): Available for those delaying Medicare while covered by FEHB.

How FEHB and Medicare Work Abroad

If you plan to retire abroad, keep in mind that Medicare generally doesn’t cover healthcare outside the U.S. However, many FEHB plans offer international coverage, making it a critical part of your healthcare strategy if you’re living overseas.

Why Healthcare Planning Matters in Retirement

Healthcare costs are among the most significant expenses retirees face, and federal retirees have the advantage of two robust systems to rely on. By understanding your options and planning carefully, you can achieve peace of mind and financial stability in retirement.

Maximize Your Retirement Health Benefits

Navigating FEHB and Medicare as a retired federal worker can feel overwhelming, but the benefits are worth the effort. By taking the time to understand your options and align them with your healthcare needs, you’re setting yourself up for a secure and well-protected retirement. Make your health a priority and leverage the resources available to you.