Q. If I were to pay premiums for both a FEHB health plan and Medicare Part B, how would the two work together?

A. Medicare pays first (or is primary) for most services for Medicare-eligible retirees enrolled in fee-for-service plans, such as Blue Cross and the Foreign Service Benefit Plan. The FEHB plan picks up the difference, or in some cases, pays for the services not covered by Medicare. As a result, Medicare and the FEHB plan combine to provide nearly complete coverage for all expenses, except for prescription drugs.

Fee-for-service plans waive most of their deductibles, coinsurance, and co-payments for Part B enrollees. As a result, FEHBP fee-for-service plan enrollees with Parts A and B find that they have little or no out-of-pocket expenses. Every fee-for-service FEHB brochure provides an explanation of the relationship between its plan and Part B entitled Coordinating Benefits with Other Coverage.

Because health maintenance organizations (HMOs) provide a full range of services to enrollees (whether or not enrolled in Part B) and impose small co-payments, HMO enrollees may find that there is little need for Part B coverage.  However, HMO enrollees may wish to purchase Part B for added security — in case they need health care when outside their HMO service area within the United States, wish to see a physician who is not in the network or live in an area that has only one FEHB plan, for example.

Q. How much does Medicare B cost?

A. Starting in January 2007, Part B premiums will be based on taxable income.  The premium for enrollees with taxable income of $80,000 or below (single) and $160,000 for members of a couple (married, filing jointly) — all but about 4 percent of enrollees — will be $93.50 a month. For higher-income beneficiaries, the monthly premium will go as high as $162.10 per month. Income figures will be based on an enrollee's 2005 adjusted gross income. The Part B annual deductible will be $131.

Q. How can I decide whether it makes sense for me to have both FEHB and Medicare B coverage?  

 A. Retirees should run the numbers. I generally suggest that retirees look at their recent out-of-pocket health expenses over the past year or two and then calculate what they would be if they added Medicare B premiums, assuming that their FEHB plans would waive most of their deductibles, coinsurance, and co-payments. Of course one cannot anticipate future costs, so this is a rough estimate.

Q. Are there other considerations?

A. Yes. Because of the almost complete coverage of a combination of FEHB and Medicare, it may make sense to go from high option to  standard option FEHB coverage in order to reduce FEHB premiums. Although the high option usually does not cover enough additional services to warrant paying the higher premium, this may not be case with respect to prescriptions service, choices and cost.

Another consideration is that if one does not enroll in Part B at age 65, he or she will be subject to a 10% penalty for each year after turning 65 upon enrolling in Part B.

Foreign Service annuitants cannot arrange for automatic deductions for Medicare B premiums from their annuities. The department recommends that retirees arrange for automatic bank payments in order to insure against suspension of Part B coverage because of late payments.

This column is based in part on the NARFE article Medicare and Federal Health Benefits, which can be found on the AFSA Website at http://www.afsa.org/retiree/. For more information, go to http://www.opm.gov/insure/health/medicare/index.asp.