If you are struggling to unravel the confusing world of Medicare, then don’t worry, you’re not alone.
In fact, when surveyed, 60% of Americans approaching retirement conceded that they found Medicare too confusing and 70% of retirees don’t fully understand their coverage.
If those figures weren’t eye opening enough, the reality for federal retirees is even tougher.
Navigating Medicare with the Federal Employee Health Benefit (FEHB) program is an even harder mountain to climb.
In this article I’m going to hopefully bring a little clarity to where you stand as federal retiree with FEHB and Medicare, the options open to you and how to avoid the pitfalls that could see you overpaying or even paying up to 50% penalties for life.
Why Medicare is so complex for federal retirees
As a federal retiree it won’t be a shock to hear that large, government run programs inevitably snowball into bureaucratic behemoths that end up creating more problems than they solve.
In the case of Medicare, the pressures of providing a system for over 55 million people, all with varying needs and different financial circumstances cannot be understated.
Trying to accommodate so many unique, individual circumstances while attempting to remain fair leads to incredibly complex systems.
Every added piece of legislation or altering of the rules to meet the needs of one group or level the playing field for another adds yet more layers for everyone to navigate through.
Of the 55 million people eligible for Medicare, only 2.1 million – or 3.6% – are federal retirees. Statistically, that’s barely even a ripple and puts federal retirees low down the priority list for support.
If any of you have braved the latest 120-page official Medicare guide, you’ll understand exactly what I mean – 120 pages of information that doesn’t even apply to your situation.
While I’m sure the explanation of why the system has grown so complex does little to end your frustration, the fact that by 2030 Medicare is projected to service 80 million people will hopefully tell you that it’s not going to get easier any time soon and that having a professional help you navigate through the system will not only save you a lot of time but potentially a lot of money too.
Which brings me to my next point of why navigating the system is so difficult, particularly for federal retirees – the lack of professional help.
Most financial advisors have little interest in discussing Medicare, insurance planning or social security for one simple reason – they won’t get paid for it. The business model that most financial advisors follow is to get paid directly from assets under management which means their only interest is in ‘managing the money’.
Secondly, hardly any advisors are focused on working with and understanding the complexities involved in advising federal employees – the result, mistakes that cost retirees a lot of money for the rest of their lives.
Thankfully, Beyond Financial Planning not only primarily focus on advising federal retirees and their families, but we also deliver a 360-degree service that supports every aspect of your financial planning.
The most frequently asked questions from federal retirees
It’s important to preface this section by saying that there is no one-size fits all solution.
- Why do I need to have Medicare if I’ve got Federal Retiree Health Insurance?
The simple answer is that you don’t (unless you’re enrolled in TRICARE, an FEHB plan for military personnel). You can elect not to use your Medicare coverage, either Part A or Part B, and stick with just your FEHB plan.
- Should I enroll in Medicare if I’ve already got an FEHB plan?
For most people, Medicare Part A is premium free – there are some cases where a premium is required but if you have worked for a total of 40 quarters (roughly 10 years) then you will likely qualify.
Part A pays for in-patient hospital care, hospice services and limited stays at skilled nursing facilities – if you qualify for free premiums, it’s extra coverage, that could be vital, without additional cost.
In most circumstances we usually recommend that federal retirees keep their FEHB plan and enroll in Medicare for one simple reason – the plans work better together!
Together they increase your coverage and keep potential costs as low as possible.
Broken down simply, Medicare Part B will pay for most of your bills and medical procedures as primary. FEHB picks up most of your remaining costs – deductibles, coinsurance, and prescription drug costs.
In many circumstances it’s a fantastic option for federal retirees and their families.
- When do I need to think about enrolling in Medicare – I’m still working so can I defer?
This is such an important question and one that I’ve seen many advisors get wrong and ultimately cost families a lot of money.
The initial filing deadline is 3 months after you turn 65.
You are eligible to defer only if –
- You and/or your spouse are still working, AND
- You are covered by a health insurance plan based on that current work.
You are not eligible to defer if you are covered by FEHB but are no longer a federal employee, regardless of your current employee status.
Here’s why this is so important – if you miss the filing deadline, your premium will increase by 10% for every year you missed – for life.
I’ve seen families facing 50% premium penalties simply because they followed bad advice and waited 5 years to enroll.
- Is there anything else that I need to know about Medicare?
Yes, it’s vital that you talk to a professional first.
Most retirees aren’t aware that the more they earn in retirement, the higher their premiums.
The Medicare Part B premium starts at almost $150 per month.
A couple making $200,000 from pensions and 401k withdrawals will be looking at premiums of $208 per person, per month – a 39% jump.
First, it’s important to sit down with a planning professional who can not only advise you on what’s the right choice for you and your family but also steer you away from any unwanted surprises.
- Once I’ve enrolled in Medicare that’s me set for retirement, right?
Only if you like giving away more of your money to the government than you need to! Every year there are steps that you can take to reduce your Medicare premiums or to increase your social security income.
Medicare and Social Security rules are constantly evolving and that’s where Beyond Financial Planning comes in. We take a comprehensive approach to financial planning where we take the time to understand your individual circumstances so that we can assist you in your planning. Start planning smart, and stop being the government’s personal piggy bank.
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