Real Question from a Federal Employee
Question 1695 from Swatti:
I have FEHB BC/BS Basic plan and have to decide on Medicare Part B.
I file taxes as married filing separately. My concern is IRMAA, my cost for Medicare Part B becomes quite high as my income most likely will be over $105,000.
And my max out-of-pocket is $7500 with the federal plan, so why should I get Medicare Part B?
I am healthy today.
Does the federal health plan cover less if I don’t get Medicare Part B?
Truly appreciate your help.
Turning 65 is a major milestone, especially for federal employees getting ready to retire. Reaching this age also means making an important decision about your healthcare.
If you already have FEHB coverage, do you also need Medicare Part B?
Many federal retirees have this same question, especially those who are healthy and have had strong FEHB coverage for many years. Here is an overview of how these programs work together and what to think about before deciding.
Your Medicare Enrollment Window
According to the Centers for Medicare & Medicaid Services (CMS), most individuals have a seven-month Initial Enrollment Period when they turn 65:
- Three months before the month you turn 65
- The month you turn 65
- Three months after
Enrolling during this window helps avoid potential coverage gaps and late enrollment penalties.
Breaking Down the Parts of Medicare
Medicare Part A (Hospital Insurance)
Medicare Part A generally covers inpatient hospital care, skilled nursing facility care, hospice, and some home health services.
Most federal retirees do not have to pay an extra premium for Part A because payroll taxes from their working years usually cover this benefit. CMS says that most people qualify for premium-free Part A based on their work history.
For many federal retirees, signing up for Part A at age 65 is a simple process.
Medicare Part B (Medical Insurance)
Medicare Part B covers outpatient services such as:
- Physician visits
- Preventive care
- Diagnostic testing
- Outpatient procedures
Unlike Part A, you have to pay a monthly premium for Part B. Also, CMS adds an Income-Related Monthly Adjustment Amount (IRMAA) for people with higher incomes, which raises the standard premium based on your modified adjusted gross income.
How FEHB and Medicare Coordinate
The U.S. Office of Personnel Management (OPM) says that Federal Employees Health Benefits (FEHB) coverage usually continues into retirement if you meet the eligibility requirements.
Once a retiree becomes Medicare-eligible:
- Medicare may become the primary payer
- FEHB may pay secondary
- Coverage coordination may vary depending on whether Part B is enrolled
FEHB plans remain comprehensive; however, coordination of benefits can change once Medicare eligibility begins. Reviewing your specific plan brochure is essential to help understand how claims would be handled with and without Part B.
The Late Enrollment Penalty for Part B
CMS says that if you delay signing up for Medicare Part B and do not qualify for a Special Enrollment Period, your premium may go up by 10% for every full 12 months you wait.
This increase:
- Is calculated annually
- Is added to the standard premium
- Generally applies for as long as Part B coverage is maintained
For example, delaying enrollment for five full years could result in a 50% higher premium compared to the base rate.
This rule is often an important part of deciding about Part B.
Considering IRMAA
For retirees whose income exceeds certain thresholds, CMS applies IRMAA adjustments that increase Part B (and Part D) premiums.
These thresholds are adjusted periodically. The impact of IRMAA depends on:
- Your modified adjusted gross income
- Filing status
- Tax year used for determination
For retirees with higher incomes, IRMAA can have a big effect on total Medicare costs. It is important to consider this when planning your retirement income.
What About Medicare Part D?
Medicare Part D covers prescription drugs.
Many FEHB plans, including popular choices like Blue Cross Blue Shield, offer prescription drug coverage that CMS considers creditable coverage.
CMS explains that maintaining creditable prescription coverage allows individuals to delay Medicare Part D enrollment without incurring a late enrollment penalty.
This difference is important:
- Part B may trigger a permanent penalty if delayed without qualifying coverage.
- Part D penalties are typically waived if you maintain creditable prescription coverage through FEHB.
Be sure to check each year that your plan still counts as creditable coverage, since plan details can change.
The “I’m Healthy” Question
A common sentiment among federal retirees is:
“I’m healthy today. My FEHB coverage has worked for decades. Why add another premium?”
Your current health is important, but decisions about Medicare are usually about long-term planning. Your medical needs can change, and how the programs work together can affect your out-of-pocket costs depending on what you choose.
Some retirees prioritize:
- Minimizing premiums today
- Maintaining flexibility
- Accepting potential out-of-pocket variability
Others prioritize:
- Reducing uncertainty
- Limiting potential exposure to larger medical expenses
- Locking in coverage to avoid future penalties
There is no single right answer. The best choice depends on your finances, health, and how much risk you are comfortable with.
Important Considerations Before Making a Decision
Choosing whether to enroll in Medicare Part B is not simply about today’s health status. It is a broader retirement planning decision that should consider:
- Current and projected income (including potential IRMAA impact)
- Available retirement assets
- Cash flow flexibility
- Risk tolerance
- How your specific FEHB plan coordinates with Medicare
- Long-term healthcare planning objectives
Since Medicare rules, IRMAA limits, and FEHB coordination can change, it is a good idea to check the latest guidance from CMS and OPM and carefully look at your own situation before deciding.
FEHB is known as a strong, comprehensive health insurance program for federal retirees. Medicare Part B gives you extra coverage, but it also means paying more.
The decision is not one-size-fits-all.
If you take time to learn how the programs work together, how penalties might apply, and how your income affects premiums, you can make a choice that fits your retirement plan.
ABOUT THE AUTHOR
Micah Shilanski, CFP®, is a distinguished financial planner known for his deep commitment to providing exceptional advisory services to his clients. As the founder of Plan Your Federal Retirement, Micah has dedicated his career to helping federal employees understand and optimize their benefits to help ensure a secure and prosperous retirement. His expertise is widely recognized in the industry, making him a sought-after speaker and educator on financial planning and retirement strategies.
Micah’s approach is client-centered, focusing on creating personalized strategies that address each individual’s unique needs. His work emphasizes the importance of comprehensive planning, incorporating aspects of tax strategy, investment management, and risk assessment to guide clients toward achieving their financial goals.Micah Shilanski (00:00)
Why do you need FEHB and Medicare Part B in retirement? Well, if you ever wonder the answer to that question, stay tuned for this FERS federal fact check. Hi, I’m Micah Shilanski and I get a lot of questions from federal employers just like you asking really important things like health insurance in retirement and Medicare in retirement. What do you do? So let me talk about advice that I give to a lot of my clients. Now, everyone’s gonna be a little different, everyone’s gonna be a little unique. So this is really gonna be, depends on your personal situation.
but I’m gonna give you couple of tidbits that you need to think about. And this all comes from a question from Swati. Swati writes in and says, you know, have FEHB, Blue Cross Blue Shield, basic plan, and I’ve decided on Medicare Part B. As I file my taxes, marry, file a separate, concern is IRMAA IRMAA is that price that says you make quote, too much money. You have to pay more for your Medicare. I don’t know about you, I’ve never seen too much money, but apparently the government has defined this for us. All right, so if you make too much money, his Part B premium is gonna go up.
It says, concern is my IRMAA. My cost for Medicare Part B becomes quite high as my income is most likely over $105,000. My max out of pocket is $75,000 with the federal plan. So why should I get Medicare Part B? I am healthy today. Does federal health plan cover less if I don’t get Medicare Part B? Truly appreciate your help. And that’s a fantastic question. And this is something we deal with all of our clients once they’re turning 65 years young. We have a Medicare conversation. And here’s about how it goes.
Mr. and Mrs. Client, as we reach 65, you have a seven month window to apply for Medicare. Three months before your 65th birthday, the month of your 65th birthday, and three months after your 65th birthday. I generally recommend applying the month of because it’s just the easiest to remember. Great news, it’s pretty simple. Now, when we go to apply, there’s a couple of things. One, about six months before you’re 65, you’re gonna know 65 birthday’s coming up because you’re gonna be inundated with mailers, with flyers, with all these things about supplemental policies, all this extra stuff you need.
99 % of that just throw in the trash. It doesn’t apply to you with your federal health insurance, right? So a lot of people like myself who don’t have federal health insurance, let’s just assume Medicare is there when I’m 65, right? So when I go to 65, I need Medicare A, B, C, I need supplements, I need Part D, I need all these things to make a comprehensive health insurance package. But you as a federal employee have FEHB, which is a great comprehensive plan, but we need to add a little to it. Number one, you’re required to sign up for Medicare Part
A as in alpha at 65 years young. Required is and you have to do it. Now, good news, it’s already paid for. You paid for it your entire working career. There’s generally not an extra premium going forward. Then there’s Medicare part B as in bravo, which I call quasi optional. You don’t have to get, but you probably have to get. Then there’s Medicare part D as in delta. Now, Medicare part D as in delta is the drug policy. Generally I tell clients they don’t need this. If your FEHB plan is covering your really good stay, you.
probably don’t need that Medicare part D is in Delta. But let’s jump back to that B and we’ll get to D in a second. Medicare part B is in Bravo. Why do I call this quasi optional? Well, the reality is, is that what I have seen with my clients over time, and I’m going to pick on Blue Cross Blue Shield because this one particular client, happened to him, is when he was 65 years young, I recommended he sign up for Medicare part A and part B. He goes, my God, I am paying for this Medicare part B. I’ve had my
federal health insurance for almost 40 years. It’s a fantastic policy. I don’t need to make any changes.” I said, well, I disagree. You should get Part B because there might be a gap in your coverage in the future. And he says, no, I’ll be fine. He goes in and gets shoulder surgery done on his left shoulder, comes out normal out of pocket costs, nothing big. He goes, see, Micah, my FEHB is fantastic. I was like, Dave, that’s great. I love that. Fast forward the clock five years later, he needs to get shoulder surgery done. He’s now getting his right shoulder done.
goes to the same doctor, he has the same health insurance while he’s checking out, they said, by the way, we’re gonna need a $15,000 deposit because your insurance won’t cover A, B, and C. He’s like, no, no, no, no, no, I got FEHB, this is the same coverage I had five years ago, I’ve already had this operation done, what do mean it doesn’t cover? They said, now that you’re under Medicare, now that you’re Medicare eligible, there’s been a change in coverage.
And because you don’t have Medicare Part B, you have to come out of pocket in order to get this procedure done. Now, that’s just his particular case. You can jump online. There’s a lot of these cases out there and you can see that. So he calls me up and is like, Michael, what do I do? And I said, well, let’s look at applying for Medicare Part B or economy out of pocket. If we apply for Medicare Part B, because we didn’t sign up on time, there’s a 10 % per year permanent penalty you have to pay.
Well, he waited five years, 10 times five is 50. It was a 50 % permanent penalty going forward. He has to pay for his Medicare part B insurance. So when I’m looking at clients, this is a cashflow question. You know what? If you got plenty of money, if your retirement’s in the bag, you got tons of extra money and you’re like, hey, if a catastrophic thing’s happened, I’m fine coming out of pocket 15, 20,000 bucks and just paying for it because I don’t want to deal with the hassle of Medicare. Well, then that’s the solution, right? You can absolutely do that.
If you’re not in that financial position, this is why insurance is there. And this is why I’m gonna recommend probably part B in your situation. Of course, everyone’s gonna be different, right? But I’m probably gonna suggest you take a heavy look at Medicare part B as in Bravo, and you get that in place. Now, to your point, Swati, some of these things that come up, know, IRMAA is a big thing. Depending on what your income is, and you don’t have that in your question, depending on what your income is and how much your IRMAA is, maybe it doesn’t make sense to get Medicare part B because you’re gonna pay that same, you know,
extra premium anyways, you might as well not have to deal with the Medicare hassle. You’re gonna have to weigh that out. So that’s B as in Bravo. Let’s talk about D as in Delta. D is the drug plan. Blue Cross has a couple years ago, they automatically enrolled everybody in Medicare part D. They didn’t tell anyone about it. That was a little, that was a no-no. I’m sure they put it in some publication somewhere that nobody saw, but it was a big shock to my clients January, February when they got noticed that they were in Medicare part D and they got a bigger shock when they had to start paying for it.
because Medicare Part D is only free if your income’s below a certain threshold. If it’s above that threshold, which is around 105,000 for individuals, it’s about 218,000 for married couples somewhere in that neighborhood, you have to start paying for Medicare Part D as in drugs. So then we had to go back and cancel that policy. This last year in 2025, Blue ⁓ Cross did come out and say they’re automatically enrolling everyone again, and Medicare Part D is in Delta. If you don’t want that, you have to unroll.
So what is Blue Cross saying? They’re saying, hey, if someone else can pay for this bill, I want them to pay for the bill and not me pay for the bill. And that’s every insurance company comes out and says, right? That’s why they’re trying to get this out there. Right now your FEHB coverage is a Medicare approved plan. So what does that mean? You don’t have to do Medicare part D as in Delta. Please note this is different than B as in Bravo, right? Medicare part B, B as in Bravo is different.
drug plan is also different. You don’t need Medicare Part D. If you don’t get it right now, you’re in a Medicare, if you’re an FEHB, your Medicare approved drug plan. What does that mean? That means in the future, if you want Medicare Part D, you can enroll in it and there’s going to be no penalty because the current prescription drug program you have with Blue Cross Blue Shield FEHB is a Medicare approved plan. So that’s fantastic. So in the future, you could go back and apply for that without any penalty.
So I look at my clients with Medicare Part D and say, well, is Blue Cross covering all your drugs and your prescription costs today? Fantastic. Well, then let’s not sign up for Medicare Part D as in drugs. ⁓ If they’re not, maybe we look at D as in drugs. Now, why is that different than B as in Bravo? Because the penalty is waived because you’re in a prescription approved plan. That’s the huge difference here in B as in Bravo and D as in Delta. They look very similar, but there’s a big nuance in there. The penalty can be waived if you’re in a Medicare.
approved drug plan with FEHB Blue Cross Blue Shield it is. So that’s a huge difference in those two options. So I know it’s a lot of information that’s out there. Really look at that. Look at your benefits. Look at the potential cost out of pocket. Make your own individual determination. What makes the most sense for you in your normal financial situation? If you need help looking at that, then pick up the phone, give us a call. We work with federal employees just like you preparing for their retirement. Till next time, happy planning.
The content in Planner Federal Retirement is for general informational purposes only and should not be considered individualized advice. Investing involves risk, including possible loss of principle, and past performance does not guarantee future results. Guests are not affiliated with CWM LLC Investment Advisory Services offered through CWM LLC and SEC Registered Investment Advisor. Planner Federal Retirement is not affiliated with the federal government.