Federal employees become eligible to enroll in Medicare when they become age 65. This is because an employee during his or her working lifetime has paid the Medicare payroll tax (the Hospital Insurance Tax or HIT) for a minimum of ten years. When any individual enrolls in Medicare at age 65, the individual is enrolling in Medicare Part A (the Medicare Hospital Insurance). Being eligible for Medicare Part A allows the individual to enroll in the other parts of Medicare, including: (1) Medicare Part B – Medical Insurance; (2) Medicare Part C – Medicare Advantage; and (3) Medicare Part D – Prescription Drug Program.
This column discusses the “Original Medicare” (Medicare Part A and Medicare B) which most federal retirees enroll in. The discussion will hopefully help federal employees and retirees have a better understanding as to how Original Medicare works. Most importantly, federal retirees who enroll in Original Medicare do not have to shop around for a private Medicare Supplement or Medigap health insurance plan.
Original Medicare does not pay all of Medicare beneficiary’s hospital and doctor bills. On average, Original Medicare pays on average 60 to 80 percent of what hospitals and doctors charge. Medicare beneficiaries therefore have to enroll in a supplemental insurance plan that will pay for most of what Original Medicare does not pay. The Federal Employee Health Benefits (FEHB) program offers fee-for-service (FFS) and preferred provider organization (PPO) that are considered Medicare Supplemental plans. Federal retirees should note that the federal government pays on average 72 to 75 percent of a retiree’s FEHB program health plan premiums.
The following are questions and answers associated with enrollment in Original Medicare:
| Question | Answer |
| Can a federal retiree enrolled in Original Medicare get his or her health care from any doctor, other health care providers, laboratory or hospital? | In most cases, yes. A federal retiree can go to any Medicare-enrolled doctor, other health care providers, hospital or other facilities that accept Medicare patients anywhere in the US. Federal retirees should visit https://www.Medicare.gov/care-compare in order to find and compare doctors, hospitals and facilities in their geographic area. |
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Does Medicare Part B cover prescription drugs? |
Medicare Part B does not cover most prescription drugs. There are some exceptions such as immunosuppressive drugs or drugs for pain and symptom management for hospice care. Medicare Part B may also cover some infused and injected drugs given in a doctor’s office and insulin used with a traditional pump. Federal retirees enrolled in a FEHB health plan also have access to prescription drug coverage. Federal retirees enrolled in Original Medicare can add Medicare drug coverage (Part D) by joining a separate Medicare drug plan. |
| Does a federal retiree need to choose a primary care doctor? | No |
| Does a federal retiree have to get a referral to use a specialist? | In most cases, no. |
| Does a federal retiree enrolled in an Original Medicare plan need to purchase a private Medicare Supplemental or Medigap policy? | Federal employees enrolled in an FEHB program health plan or, if a military retiree, enrolled in TriCare-for-Life, do not have to purchase a private Medicare Supplemental or Medigap plan. |
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What Does a Federal Retiree Enrolled in Original Medicare Pay for Health Care?
A federal retiree’s out-of-pocket costs while enrolled in Original Medicare depend on:
- Monthly premium for Medicare Part B which changes from year to year.
- Whether the retiree’s doctors, health care providers or suppliers “accept assignment” (see below).
- The type of health care the federal retiree needs and how often the retiree needs it, and
- Assuming that the retiree’s FEHB program health plan (or TriCare-for Life) coordinates with Medicare (most do), the retiree’s out-of-pocket costs, including deductibles, copayments and co-insurance, will be minimal.
How Does an Original Medicare Beneficiary Know What Medicare Paid?
An Original Medicare beneficiary will get a “Medicare Summary Notice’ (MSN) that lists all the services billed to Medicare. The MSN is not a bill. It shows what Medicare paid and what the beneficiary may owe the provider of medical services. It is important for the beneficiary to review the MSN to make sure the beneficiary got all the services, supplies, or equipment listed. If the beneficiary disagrees with Medicare’s decision not to cover a particular service, the MSN will tell the beneficiary how to appeal.
Getting MSNs Electronically
It is important for Original Medicare beneficiaries to get their Medicare Summary Notices electronically. To do so, they should visit: www.Medicare.gov to log in and create a secure Medicare account. In setting up a Medicare account, a beneficiary will be sent an email each month when they are available in the beneficiary’s account.
What is “Assignment”?
Assignment means that an Original Medicare beneficiary’s doctor, provider, or supplier agree, or is required by law, to accept the Medicare-approved amount as full payment for covered services. Most doctors, providers and suppliers accept “assignment.” However, it is important for an Original Medicare beneficiary to check that doctors and providers of health care accept “assignment” from Medicare.
If a doctor, provider of health care services or supplier accepts assignment from Medicare, then:
- The Original Medicare beneficiary’s out-of-pocket costs may be less.
- The doctor, provider of medical services or supplier agree to charge only the Medicare deductible and coinsurance amount. The medical facility normally waits for Medicare to pay its share before billing the FEHB program health plan, or TriCare-for-Life, to pay its share, and
- After the FEHB health plan (or TriCare-for-Life) pays its share, the doctor, provider of medical services or supplier cannot bill the Original Medicare beneficiary for any balance due. This is called “balance billing” and is illegal under Medicare rules.
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Ed Zurndorfer, EA, ATA, CFP®, CLU®, ChFC®, CEBS®, ChFEBC℠: Federal Employee Benefits Expert
A former career Federal employee, Ed has published a staggering 1,200+ separate articles on Federal Benefits and Retirement!
Just “Google” his name, and you are likely to find a plethora of sites that contain his writings. Drawn to its mission to reach, teach
and serve Feds, Serving Those Who Serve is the only financial planning practice with which Ed has chosen to affiliate in over
20 years teaching. In addition to conducting Federal Benefits seminars for Serving Those Who Serve, you can find Ed’s
writings here on our blog in the FedZone, and on Fed-Soup, MyFederalRetirement, FederalNews Radio and NITP.
He is a member of the Maryland Society of Accountants, the National Association of Enrolled Agents, the International Society of Certified Employee Benefits Specialists, the Financial Planning Association, the National Association of Health Underwriters,
and the Society of Financial Service Professionals. Since 1999, Ed has taught many thousands of Federal employees about
their benefits, in person and at Federal agencies all over the country. Ed is a true national treasure.
Edward A. Zurndorfer is a CERTIFIED FINANCIAL PLANNER™ professional, Chartered Life Underwriter, Chartered Financial Consultant, Chartered Federal Employee Benefits Consultant, Certified Employees Benefits Specialist and IRS Enrolled Agent in Silver Spring, MD. Tax planning, Federal employee benefits, retirement and insurance consulting services offered through EZ Accounting and Financial Services, and EZ Federal Benefits Seminars, located at 833 Bromley Street - Suite A, Silver Spring, MD 20902-3019 and telephone number 301-681-1652. Raymond James is not affiliated with and does not endorse the opinions or services of Edward A. Zurndorfer or EZ Accounting and Financial Services. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. 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.