Q: What kinds of coverage are provided by Medicare Parts A, B and D?  
 
A: Medicare Part A, which is hospital insurance, helps pay for inpatient hospital care, skilled nursing facility care and home health and hospice care.  Medicare Part B, which is medical insurance, helps pay for doctors' services, outpatient hospital services and diagnostic tests.  The new Medicare D provides prescription drug benefits.

Q: Who may be covered by Medicare Parts A and B?

A: Medicare Part A is provided at no cost to all federal employees actively employed on and after January 1, 1983, those eligible for Social Security benefits or who paid Medicare taxes for ten years while employed by the federal government and those whose spouses are eligible for Part A.  Those who do not qualify may buy Part A.  Part B is available to anyone 65 and older who is either a U.S. citizen, or a lawfully admitted alien, who has resided in the U.S. for five years.  

Q: What are the premiums for Medicare Parts A and B? 

A: Part A is free for most people.  The 2007 monthly premium for Part A, if one is not eligible for free coverage, is $410 (or $226 if one has 30 to 39 quarters of Medicare-covered employment).  The 2007 premium for Part B, which everyone must pay, is $93.50 a month.  Starting this year, Medicare B premiums will be means tested: approximately four percent of Medicare Part B enrollees with high incomes (incomes in excess of $80,000 for individuals or $160,000 for couples) will pay a higher premium.

Medicare B premiums can be deducted from Social Security payments, but they cannot be deducted from Foreign Service annuity payments.  Medicare sends a bill every quarter to enrollees without automatic deductions.  The bill must be paid promptly to avoid cancellation of coverage.

Q: Do I have to apply for Medicare coverage?

A: If you are already getting Social Security benefits at age 65, you do not have to apply. Rather, Medicare will automatically enroll you in both Parts A and B and send you a Medicare card about three months before your 65th birthday.  If you don’t want Part B, follow the instructions on the card.  If you are not getting Social Security benefits three months before turning 65, apply for Medicare at any Social Security Administration Office.  This marks the beginning of a seven-month initial enrollment period.  If one waits 12 or more months to enroll, the premiums will go up (10 percent for every 12-month delay).   

Q: Should I enroll in both FEHB and Medicare B?

A: The Federal Employee Health Benefits Program is regarded as the gold standard in health insurance, so the question retirees generally ask is whether it makes sense to also enroll in Medicare B.  The answer to this is an individual one, based on health and financial considerations.
            When a federal retiree enrolls in FEHB and Medicare B, Medicare B becomes the primary provider.  It pays for most services for retirees in fee-for-service plans, such as Blue Cross or American Foreign Service Protective Plans.  The FEHBP fee-for-service plan then pays a portion or all of the services not covered by Medicare, waiving most of its deductibles, coinsurance and co-payments with the exception of prescription drugs. This results in nearly complete coverage for all out-of-pocket expenses.  Medicare pays the provider charges first and then sends the claim electronically to the FEHB health plan, reducing paperwork and the burden on enrollees.
            In deciding whether to have both FEHB and Part B, you can run the numbers. Look at the health services you generally require and calculate the amount of out-of-pocket expenses you ordinarily incur for these services during a year.  Then balance this against the amount you would pay in Part B premiums for a year.  In 2007, this would be $1,123 for most enrollees.  If you spend approximately this amount or more, then purchasing Part B could make sense.  Of course, you cannot anticipate what your health needs will be in the future, so this is an unknown.  Also, because means testing will be phased in, you should continue to review any decision to see if it continues to makes economic sense.  On the other hand, be aware that a 10-percent penalty applies for enrolling in Part B for each year after you reach the age of 65. 
            Retirees in FEHBP health maintenance organizations may not need Part B coverage since HMOs provide a full range of services and the co-payments are usually low.  However, there may be other considerations; for example, retirees may need coverage when traveling outside the HMO service area or require an out-of-network specialist.
            Finally, since FEHB enrollees have prescription drug coverage that is as good as or better than Medicare Part D, they need not sign up for Part D.