Guide for Federal Retirees and Medicare Part B
Medicare Part B covers physician and outpatient services. Part B can include ambulance services and durable medical equipment as well as laboratory tests and x-rays.
While most seniors get Medicare Part A “premium free”, most seniors pay a monthly premium for Medicare Part B. Generally, Part B premiums are taken out of your monthly Social Security check or a retirement check.
To Take Part B or Not to Take Part B, that is the Question
If you don’t take Part B when you are first eligible there is a 10% penalty on the current year premium added for each year you delay enrollment. You will need to pay this penalty for as long as you have Medicare.
You won’t owe a late enrollment penalty if you qualify for a Special Enrollment Period (SEP). This allows you to enroll in Medicare Part B and enroll through an SEP if you have health coverage based on current employment (yours or a spouse’s).
It’s important to know that not all coverage qualifies you for an SEP. The following types of coverage won’t qualify you for creditable coverage based on current employment and wouldn’t exempt you from paying the Part B penalty if you delay enrollment:
- TRICARE and Medicare– (unless you, your spouse, or dependent child are an active-duty member.) If you’re Medicare-eligible, you must be enrolled in Part B to continue receiving TRICARE benefits.
- Veterans’ benefits
- Retiree benefits
If you have coverage through a current employer (yours or a spouse’s) you may decide that you don’t need extra coverage. There is no penalty for delaying Part B enrollment if you or your spouse have other coverage based on current employment.
You can sign up for Part B through an SEP anytime that you’re still covered by the group plan or in the eight months after your employment or group coverage ends.
If you’re an active duty service member, you may delay enrollment, keep TRICARE and sign up for Part B during an SEP without paying a late enrollment penalty.
If you are 65 or over and still employed by the federal government or are a 65-year-old retiree that has health care coverage through your new employer or you are covered under a working spouse exemption, you can delay applying for Part B without penalty and that makes sense for many.
You can delay taking Part B without penalty if you switch FEHB coverage to a federally employed spouse to keep the benefit premiums non-taxable and delay without penalty for the 65-year-old retiree’s Part B enrollment. Unfortunately, retiree’s FEHB premiums are considered taxable income unlike active federal employees.
Many retirees work at another job after they leave the federal service. Federal retirees can also delay taking Part B without penalty if they are covered under a working spouse exemption or if they are working for other employers that provide primary healthcare coverage where the FEHB becomes secondary.
You must evaluate your costs to see if accepting insurance from your new employer would reduce your costs. If you start your own business or work for another company that doesn’t provide primary health insurance, you will be assessed a penalty if you don’t take Medicare B at age 65.
Part B Premium Determination
Medicare Part B premiums are determined by your Modified Adjusted Gross Income (MAGI). The higher your income, the higher your Part B premium. For many beneficiaries, the government pays a large portion of the Part B premium, about 75 percent, and the beneficiary pays the remaining 25 percent.
If you’re a high-income beneficiary, you’ll pay a larger percentage of the total cost of Part B based on the income you report to the Internal Revenue Service (IRS). If you have a high income and are considering not enrolling in Part B because you think it will save you money, this isn’t the case.
When you postpone enrolling in Part B, you’ll be subject to a late enrollment penalty that will increase your Part B premium the entire time you have Medicare Part B.
If you’re unsure about whether you should enroll into Medicare Part B, talking to your benefits coordinator at the place where you work can help you determine the best decision for you.