Nearing 65 and considering Medicare options? Maybe it's time to talk to MA.

What feds need to know about Medicare Advantage plans.

No, I don't mean your dear mother; in this case, I mean Medicare Advantage. Or to be more specific, the Medicare Advantage plans that are currently available within the Federal Employees Health Benefits Program.

In our experience, these plans might be the most misunderstood and under-utilized plans in the Federal Employee Health system.

Let's begin with some basics.

If you are a federal employee or retiree approaching age 65 (For ease of comparison, let us assume that you are covered by the Federal Employee Retirement System FERS. Forgive us, CSRS folks, we are not deliberately ignoring you.), one of the decisions you will face is Medicare enrollment.

What is Medicare? Per Medicare.gov Medicare is:

The federal health insurance program for:

People who are 65 or older
Certain younger people with disabilities
People with End-Stage Renal Disease (permanent kidney failure requiring dialysis or a transplant, sometimes called ESRD)

Non-postal Federal Employees are not required to enroll in Medicare (however, many experts encourage them to do so).

Medicare is made up of three parts. Again per Medicare.gov:

Medicare Part A (Hospital Insurance)

Part A covers inpatient hospital stays, care in a skilled nursing facility, hospice care, and some home health care.

Medicare Part B (Medical Insurance)

Part B covers certain doctors' services, outpatient care, medical supplies, and preventive services.

Medicare Part D (prescription drug coverage)

Helps cover the cost of prescription drugs (including many recommended shots or vaccines).

The program is further divided into Original Medicare and Medicare Advantage. Let's see what Medicare.gov offers here, beginning with the original Medicare:

Original Medicare includes Medicare Part A (Hospital Insurance) and Medicare Part B (Medical Insurance). You pay for services as you get them. When you get services, you'll pay a deductible at the start of each year, and you usually pay 20% of the cost of the Medicare-approved service, which is called coinsurance. If you want drug coverage, you can add a separate drug plan (Part D).

Original Medicare pays for much, but not all, of the cost for covered health care services and supplies. A Medicare Supplement Insurance policy can help pay some of the remaining health care costs, like copayments, coinsurance, and deductibles. Some Medigap policies also cover services that Original Medicare doesn't cover, like emergency medical care when you travel outside of the United States.

And let's round out our baseline definitions with Medicare Advantage. Here, Medicare.gov shares:

Medicare Advantage is a Medicare-approved plan from a private company that offers an alternative to Original Medicare for your health and drug coverage. These "bundled" plans include Part A, Part B, and usually Part D. Plans may offer some extra benefits that Original Medicare doesn't cover — like vision, hearing, and dental services. Medicare Advantage Plans have yearly contracts with Medicare and must follow Medicare's coverage rules. The plan must notify you about any changes before the start of the next enrollment year. Each Medicare Advantage Plan can charge different out-of-pocket costs. They can also have different rules for how you get services.

Additionally, Medicare Advantage plans can feature zero cost for covered services and provisions, and starting in 2025, there will be a maximum out-of-pocket expense for prescription drugs of $2500.00.

So now we have a working foundation for the parts of Medicare for the purposes of this discussion. Let's return to enrollment at age 65. While enrollment in Medicare is not required for non-postal employees, the consensus strongly favors enrolling in Medicare Part A at 65. This is due primarily to the fact that an additional premium is not required. The devil creeps into the details when the discussion turns to Medicare Part B. Part B does require an additional premium, which for 2024 can range from $174.70 per month to $594.00 based upon taxable income. (We won't dive into these income bands for now).

So, here's a common question, "My federal insurance has been fine for the last 30 years; why do I need Medicare now?" This is a valid query and one that will be discussed and debated. For this article, we will bypass the debate as we are focusing on the aspect of Medicare Advantage for feds.

So, here's a question. Did you know that you have Medicare Advantage Plans within the options offered to you within FEHB? There are indeed. In fact, for 2024, there are 40 different plans available within a total FEHB offering of 180. 22% is not an insignificant percentage.

Now, since we have established that having Medicare will involve an additional charge, it is interesting to note that presently, 10% of the Medicare Advantage plans within FEHB offer some reimbursement for Medicare B premiums. For 2024, these reimbursements can range from $100 to $250 per month.

Additionally, in 2024, some plans offer additional features like gym memberships, credits for over-the-counter drugs, and even meal delivery after hospital stays.

We want to be clear: we are neither advocating for nor discouraging enrollment in Medicare Part B.

Further, we are not attempting to entice you to switch to a Medicare Advantage plan within your FEHB.

We are, however, trying to equip you with the basics for understanding your choices to make an informed decision.

So why consider Medicare Advantage within FEHB? The main reason is cost. For some federal employees and annuitants, the combination of zero out-of-pocket expense combined with a Medicare Part B reimbursement will provide monthly savings. Naturally, the savings will vary based on your current FEHB choice relative to the Medicare Advantage plan you select. However, you may find that savings in excess of $1000 per year are possible.

If you are looking for a good guide for evaluating your options, you may want to consider using the Consumer Checkbook Guide to Federal Health Plans. Our good friend Kevin Moss has built a GREAT resource for the feds; check it out.

So how do Medicare Advantage Plans work, and how are the ones within FEHB different from the ones we see on TV being repped by aging stars?

Actually, quite a lot, so let's dive in.

We all know it's fall when we begin to see commercials featuring aging stars from the gridiron, sit-coms, and even Sci-Fi pitching Medicare Advantage plans. Much less well known among Feds are the Medicare Advantage plans available within FEHB.

It is important to understand the differences between commercially available plans and the ones within FEHB.

A common observation and even complaint about commercial Medicare Advantage plans are limitations or restrictions upon available providers. So, you could be faced with a smaller network of physicians. This typically represents a reduction from the available physicians within original Medicare.

Civilian feds who actively shop plans during open season are most likely well acquainted with the need to verify their physician's participation in the plans under consideration. The same process would apply to evaluating Medicare Advantage plans within FEHB; go to the provider directory online for the plan and confirm your physicians are included. If you already know physicians to whom you might be referred, you'll want to confirm their participation as well.

Another consideration that is fairly common is that a potential enrollee for Medicare Advantage may have a younger spouse and possibly children who have been covered by their previous FEHB plan. This represents a major difference between commercial and FEHB plans. Commercial plans typically offer no provision for a spouse below 65 or dependents. Fortunately, that is not the case with Medicare Advantage plans within FEHB. Due diligence is important here. Be sure to verify the benefits and review and confirm the network of providers that the Non-Medicare spouse and dependents would have. And don't forget to confirm what any and all out-of-pocket limits would be for your dependents.

Prescription drug coverage is always a big topic of conversation, and here we have some good news on the FEHB Medicare Advantage plan front. Technically speaking, since the FEHB plans are part of a group, they fall under regulations for Employer Group Waiver Plans. Within FEHB, this means that drug coverage under Medicare Advantage plans can be enhanced, and benefits common to FEHB plans are offered within Medicare Advantage. An example here would be drugs for weight loss. FEHB Medicare Advantage plans can provide this coverage where Commercial Medicare Advantage plans would not.

The last kicker now is when the FEHB Medicare Advantage plan offers reimbursement for Medicare Part B premiums. As I mentioned earlier in the article, these reimbursements can range from $100 to $250 in 2024. The base premium for original Medicare is $174.70 for couples with joint income of up to $206,000. Remember this would always be based upon income two years previous, e.g. 2022 income for 2024 premiums. (More on IRMAA in a future article). This added to the cost picture, may present a powerful incentive to select a Medicare Advantage plan within FEHB.

So, every Medicare age employee should enroll in an FEHB-provided Medicare Advantage plan, right?

MMM, not so fast. Like most things, the devil is in the details.

What happens if your combined household income is greater than $206,000? Your 2024 Medicare Part B premium would jump to $244.60 (for 2022 income up to $258,000). If your 2022 income was above $258,00, your 2024 Medicare Part B premium would come in at $349.40. Now, evaluation of the Medicare Advantage plans becomes a thinking person's exercise, and you may very well find that the potential savings have evaporated.

Another thing you should consider would be provider availability. Be sure to verify that your provider accepts BOTH Medicare AND the Medicare Advantage plan.

Are you a big traveler in retirement? Do you travel or even reside overseas? Medicare Advantage plans may not cover you beyond emergency care. That would be an unwelcome surprise.

To wrap up, is a Medicare Advantage plan right for you?

We can offer the unqualified answer of …. it depends.

All kidding aside, the potential savings make considering a Medicare Advantage plan a worthwhile exercise. One of the most powerful features of your FEHB plan is the ability to make changes EVERY open season. This means that trying out a plan only "locks you in" for a single year.

Admittedly, adding the variable for original Medicare enrollment does contribute to the complexity of your evaluation, but it is still not a “for life" decision. We consider this to be a massive edge for a federal retiree.

Check out our webinars for federal employees!

So, we wrap up as we opened, eligible for Medicare? Might be wise to talk to MA.

Want to take a deeper dive into FEHB and Medicare? Check out our monthly webinars, and feel free to visit the rest of our website for even more information.

Benjamin Derge, ChFEBC℠

Ben, a Chartered Federal Employee Benefits Consultant℠-designated financial planner with an English degree, combines his love of writing with his knowledge of federal employee benefits in service of our clients as a content strategist here at STWS. He posts new content every week on the Benefits Ben blog. Ben specializes in helping federal employees, retirees, and their families optimize their benefits. His expertise encompasses digital marketing, benefits assistance, annuity management, investment management, and ensuring clients receive superior service and reliable advice.

The information has been obtained from sources considered reliable but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Serving Those Who Serve writers and not necessarily those of RJFS or Raymond James. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Investing involves risk and you may incur a profit or loss regardless of strategy suggested. Every investor’s situation is unique and you should consider your investment goals, risk tolerance, and time horizon before making any investment or financial decision. Prior to making an investment decision, please consult with your financial advisor about your individual situation. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional. **