drop Part B Medicare and use FEHB instead?

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4nwestsaylng
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drop Part B Medicare and use FEHB instead?

Post by 4nwestsaylng » Mon Jan 06, 2020 4:06 pm

My federal health insurance plan is currently secondary to Medicare Part B, which I signed up for last year. Now that I am receiving SS and my first RMD, I am already bumped up into the second tier of IRMAA rates on Part B, ie my rates have doubled from $144 single to $288 monthly. But now I am considering several years of Roth conversions up to the top of my 24% income bracket.

Problem is, the IRMAA brackets cleverly kick in at much lower levels than the top of the 24% income bracket, so if I do conversions, my monthly Part B will rise again, at least by another $144, perhaps two levels.

Add to this the fact that all Part B recipients not in the lowest bracket receive no "hold harmless" protection from rate increases in the premiums.

So I am reassessing whether, for Part B, I might be better to drop it and let the federal plan become my primary again. I would be responsible for the 20% copays, but fees are still restricted to Medicare rates. I do have an HSA with about $60K in it.

Wondering if any other federally retired BHs have looked at this if they find themselves in the higher IRMAA Part B brackets.

delamer
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Re: drop Part B Medicare and use FEHB instead?

Post by delamer » Mon Jan 06, 2020 4:15 pm

Yes, I decided not to take Part B in large part due to IRMAA concerns.

If you haven’t looked at the section on retirement options in the Consumer Checkbook’s report on FEHB, I highly recommend it: https://www.checkbook.org/newhig2/hig.cfm?

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dm200
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Re: drop Part B Medicare and use FEHB instead?

Post by dm200 » Mon Jan 06, 2020 6:44 pm

Not a federal employee or federal retiree.

A longtime friend is a federal retiree, who has a wife (dependent). Both are Medicare eligible.

He researches just about everything to the nth degree. He told me that, for his situation - with a dependent wife - they chose to NOT enroll in and pay Part B premiums. I don't know if IRMAA was an issue for him, but I believe he is in a higher income area.

He did tell me that one important factor in this analysis and decision was that he is married and his wife is covered by his federal retiree health insurance. I also believe they (especially the wife) have above average medical usage/expenses.

Topic Author
4nwestsaylng
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Re: drop Part B Medicare and use FEHB instead?

Post by 4nwestsaylng » Mon Jan 06, 2020 11:42 pm

dm200 wrote:
Mon Jan 06, 2020 6:44 pm
Not a federal employee or federal retiree.

A longtime friend is a federal retiree, who has a wife (dependent). Both are Medicare eligible.

He researches just about everything to the nth degree. He told me that, for his situation - with a dependent wife - they chose to NOT enroll in and pay Part B premiums. I don't know if IRMAA was an issue for him, but I believe he is in a higher income area.

He did tell me that one important factor in this analysis and decision was that he is married and his wife is covered by his federal retiree health insurance. I also believe they (especially the wife) have above average medical usage/expenses.
Interesting, because having Part B, with the federal as the secondary, would appear to give the most secure coverage, with no "out of pocket" (although clearly there is a lot of "out of pocket" monthly for the Part B, yet he still chose the Federal as primary and I guess is paying the deductibles and co-pays and still feels he is ahead of a monthly Part B premium of perhaps $500 or more depending on IRMAA bracket. Saving $500 a month equals a $6000 a year out of pocket, which would be 20% of a $120k annual medical bill for doctor/outpatient services.

For someone in good health, while there is no guarantee in future, it seems the Part B premiums in higher IRMAA brackets are perhaps not the best choice if you still have federal health retiree benefits that could be primary. Looks like your friend decided Part B not worth it.

Swansea
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Re: drop Part B Medicare and use FEHB instead?

Post by Swansea » Tue Jan 07, 2020 6:06 am

4nwestsaylng wrote:
Mon Jan 06, 2020 11:42 pm
dm200 wrote:
Mon Jan 06, 2020 6:44 pm
Not a federal employee or federal retiree.

A longtime friend is a federal retiree, who has a wife (dependent). Both are Medicare eligible.

He researches just about everything to the nth degree. He told me that, for his situation - with a dependent wife - they chose to NOT enroll in and pay Part B premiums. I don't know if IRMAA was an issue for him, but I believe he is in a higher income area.

He did tell me that one important factor in this analysis and decision was that he is married and his wife is covered by his federal retiree health insurance. I also believe they (especially the wife) have above average medical usage/expenses.
Interesting, because having Part B, with the federal as the secondary, would appear to give the most secure coverage, with no "out of pocket" (although clearly there is a lot of "out of pocket" monthly for the Part B, yet he still chose the Federal as primary and I guess is paying the deductibles and co-pays and still feels he is ahead of a monthly Part B premium of perhaps $500 or more depending on IRMAA bracket. Saving $500 a month equals a $6000 a year out of pocket, which would be 20% of a $120k annual medical bill for doctor/outpatient services.

For someone in good health, while there is no guarantee in future, it seems the Part B premiums in higher IRMAA brackets are perhaps not the best choice if you still have federal health retiree benefits that could be primary. Looks like your friend decided Part B not worth it.
I agree. I took Part B for two years, tracked expenses for care, and my expenses were much less than the Part B payments (I was in an upper IRMAA tier). So I dropped Part B and saved money as I don't use the benefits extensively. I am protected by an max out-of-pocked amount of 5,000, and am prepared to cover that if necessary. Fortunately I am pretty healthy.

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4nwestsaylng
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Re: drop Part B Medicare and use FEHB instead?

Post by 4nwestsaylng » Sun Jan 12, 2020 12:50 am

I reviewed the fehb coverage for a FEHB plan "standard option" which I currently have as secondary to Part B. If I drop Part B, the FEHB still pays for copays and deductibles on any Medicare Part A (hospital expenses), and pays 80% of the allowable Medicare fee for Part B, and has a maximum "out of pocket" annual expense of $6500. So currently, with my IRMAA bracket, I am paying about $290 a month for Part B, which is $3480 for a year,every year. But of course the IRMAA rates are going to rise every year, and similarly the out of pocket maximum can rise every year also. But the Medicare premium for a year, let's say it is half the FEHB plan alone out of pocket annual of $6500, that Medicare premium is a guaranteed expense. So with Part B, a retired federal employee is paying essentially half of the out of pocket annual amount every year in Part B premiums, regardless of medical expenses, to have the assurance of not ever having to pay the total out of pocket with the FEHB only.

I guess the most peace of mind is to have Part B, but with the IRMAA brackets acting like a second income tax, and probably going to rise continually for those in the brackets (there is no inflation indexing, and there is no "hold harmless" protection for fee increases if you are in an IRMAA bracket, Part B is probably not a good value for federal retirees unless they enter retirement already with chronic medical problems that will result in many doctor visits.

bsteiner
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Re: drop Part B Medicare and use FEHB instead?

Post by bsteiner » Sun Jan 12, 2020 9:16 am

For a high income person who doesn't want Medicare Part B due to the premiums. which FEHB plans have the most comprehensive coverage, the lowest deductibles and co-pays, and ideally a modest out-of-pocket cap?

retiredjg
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Re: drop Part B Medicare and use FEHB instead?

Post by retiredjg » Sun Jan 12, 2020 10:05 am

I have chosen to pay for two insurance "policies" - Medicare Part B and the lower cost BCBS option - rather than paying out of pocket. So far (4 years), it means I pay $0 for medical care. I do have co-pays for Rx's.

So far, I've been on the "losing end" meaning I've probably paid more for the insurance than I've saved in medical costs. That could change in an instant and we all know that some medical costs are very high. Rather that run that risk, I choose to pay for the second insurance policy and know pretty much exactly what my costs will be.

I'm not high income. I am only insuring one person. I find it easy to stay under IRMAA (now that I know it exists :oops: ).
This is a good choice for me. I doubt that I'll ever drop either one.

Yooper16
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Re: drop Part B Medicare and use FEHB instead?

Post by Yooper16 » Sun Jan 12, 2020 10:18 am

We are not subjected to IRMAA, one advantage to modest income :happy , but we did seriously consider not going with Part B. Even as a modest income household it was borderline on going with Part B. There are some FEHB policies that come with reduced premiums and an HRA from 900-1200 per person, but with higher copays, deductible and MOP. GEHA and Aetna Direct are a couple I can recall.

Our previous FEHB policy, Rural Carriers, encouraged retirees to take Part B as a way to help hold down premiums but it was not required to do so. It even stated that in the "brochure".

We switched to Aetna Direct, with the reimbursement account and no copay, deductible etc. Aetna Direct states that it is designed to work with Part B. Aetna Direct even indicated that it was not an appropriate policy, for most, unless you took Part B.

Between the reimbursement account and the lower premium it reduces our combined Part B and FEHB premium by appox $2800 per year. For us the $2800 difference was enough to decide that Part B was still worth going worth.

I recently read, probably on a mail carrier newsletter, that OPM and/or higher powers are considering requiring Part B at 65 for retirees as a way to hold done future FEHB premiums. I will see if I can find the article. This could change your math.

Topic Author
4nwestsaylng
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Re: drop Part B Medicare and use FEHB instead?

Post by 4nwestsaylng » Sun Jan 12, 2020 2:56 pm

Yooper16 wrote:
Sun Jan 12, 2020 10:18 am
We are not subjected to IRMAA, one advantage to modest income :happy , but we did seriously consider not going with Part B. Even as a modest income household it was borderline on going with Part B. There are some FEHB policies that come with reduced premiums and an HRA from 900-1200 per person, but with higher copays, deductible and MOP. GEHA and Aetna Direct are a couple I can recall.

Our previous FEHB policy, Rural Carriers, encouraged retirees to take Part B as a way to help hold down premiums but it was not required to do so. It even stated that in the "brochure".

We switched to Aetna Direct, with the reimbursement account and no copay, deductible etc. Aetna Direct states that it is designed to work with Part B. Aetna Direct even indicated that it was not an appropriate policy, for most, unless you took Part B.

Between the reimbursement account and the lower premium it reduces our combined Part B and FEHB premium by appox $2800 per year. For us the $2800 difference was enough to decide that Part B was still worth going worth.

I recently read, probably on a mail carrier newsletter, that OPM and/or higher powers are considering requiring Part B at 65 for retirees as a way to hold done future FEHB premiums. I will see if I can find the article. This could change your math.
The income level for IRMAA brackets to kick in is actually pretty "modest" if you are single. You pay a surcharge in 2020 if single income is over $86k, whereas for joint filers, the income threshold is > 172k. When you add Social Security to RMDs, and any federal annuity, and a bit of interest/dividend income, it is not that hard to go over the 86k MAGI threshold.

I do note that for 2020, there is now a cost of living adjustment for incomes,theoretically reducing the chance that you will progress into higher IRMAA levels as inflation progresses, so that is good.

Interesting that you note that some of the FEHB plans would prefer that retirees take Part B to "keep premiums down", which means that as a retiree, you are probably getting a good deal generally by not having Part B, since the FEHB has to pay the 80% of allowable on doctor charges and other outpatient charges,whereas if you have Part B, the FEHB only pays the copay and deductible.

I will have to compare Aetna Direct with my GEHA policy. I have been very happy with GEHA, but they do not offer a reimbursement for Part B. It may be that if one is not taking Part B you are better with some FEHB policies than others. If I drop Part B, I will stay with GEHA.

Since married couples filing jointly are allowed up to $176k income to stay within the standard Part B charge, I can see that for them, taking Part B is probably the best course. But for singles, with the threshold at $86k, it may be worth considering just keeping FEHB, since the annual Part B premium can easily be as much as half the maximum out of pocket required by the FEHB alone, and that is every year. Also if a retiree had a high deductible health plan and Health Savings Account while a federal employee, that could be the safety net to meet the out of pocket if necessary.

It is not actually correct that with Part B, one has "0 medical expenses". You actually have the amount of the monthly premium, so if you are in an IRMAA that results in a monthly Part B of $230, you have $2760 of medical premium expense annually,but of course no copays or deductibles.

Also, if you are concerned that federal income tax rates may rise in future, and want to do some Roth conversions, they will definitely push you into higher IRMAA brackets. For example, if you are in the 24% marginal tax bracket, and have room left over to convert $50k into a Roth, you will find that this may bump you up a couple of IRMAA brackets, essentially raising your tax cost to 26%.

By not having Part B, you can do conversions and only face the income tax cost of the conversion. This may be an important factor for those considering converting most of their TSP or other 401k to Roth over the next ten years, to reduce the RMD or leave more of their estate in tax free Roth accounts.

Clearly there is no single answer re: Part B. It depends upon all of these factors. I have not decided yet, but will likely drop Part B if I decide to do Roth conversions for a few years, to have more of my funds in the tax free category, and also reduce the RMD.

jerryk68
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Re: drop Part B Medicare and use FEHB instead?

Post by jerryk68 » Sun Jan 12, 2020 5:03 pm

My wife and I have BC/BS Basic ($386.99 per month) and Medicare Part B ($144.60 each per month or $1735.20 each per year ). BC/BS Basic reimburses $800 per each Part B user so the total cost of part B is $935.20 or $77.93 per month each. We pay no co-pays, coinsurance or deductibles. BC/BS Basic requires that I use their list of doctors and facilities but 99.9% in my area accepts BC/BS. It also offers Part B participants mail order prescriptions which is an additional savings. Medicare can not be used overseas but BC/BS Basic can which for us is an added feature since we travel overseas once a year.
Last edited by jerryk68 on Mon Jan 13, 2020 7:17 am, edited 1 time in total.

chalet
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Re: drop Part B Medicare and use FEHB instead?

Post by chalet » Sun Jan 12, 2020 5:21 pm

the plans that give cashback are intriguing. Some look at it as a lowered deductible. I like to think of it as a reduced premium.
jerryk68 wrote:
Sun Jan 12, 2020 5:03 pm
BC/BS Basic requires that I use their list of doctors and facilities
Is that still true after you are on medicare?

ChrisC
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Re: drop Part B Medicare and use FEHB instead?

Post by ChrisC » Mon Jan 13, 2020 9:20 am

bsteiner wrote:
Sun Jan 12, 2020 9:16 am
For a high income person who doesn't want Medicare Part B due to the premiums. which FEHB plans have the most comprehensive coverage, the lowest deductibles and co-pays, and ideally a modest out-of-pocket cap?
The Consumer Checkbook link referenced earlier would probably provide you with the best guidance on this. OPM also has a comparison tool for evaluating different plans. The answer is dependent on personal circumstances. As for me, I opted to forego Medicare Part B, while my wife enrolled in Medicare Part B two years before I became eligible for Part B enrollment. I retired with FEHB coverage, which at the time, was with a GEHA-HDHP: when wife went on Medicare Parts A and B in 2016 and thus we could not make any HSA contributions on her behalf, I opted in 2017 to go with GEHA-Standard, which works exceptionally well with her Medicare Part B and gives me comprehensive coverage, at a decent premium payment, low deductible and insurance co-pay. GEHA-standard also has modest dental check-up, vision and hearing aid coverage. It also has decent PPO network coverage and is not network restricted in medical providers. We are at IRMAA tier III so my wife's Part B premium is $376 per month for 2020. I could not see us paying that premium twice for the extra coverage Part B might provide aside from GEHA-standard, and I could not see us paying "high option" FEHB plans for the extra coverage it would provide me and the excessive, wasted coverage it would provide my wife.

We opted to provide Part B coverage for my wife because (1) there's always a remote possibility that we could get divorced and FEHB would no longer be available to her; (2) FEHB coverage for spouses or annuitant survivors could always be changed; (3) we thought my wife would likely need the most comprehensive coverage as we age. As it turned on, this past year I was afflicted with more medical ailments than my wife -- and FEHB standing alone was sufficient to meet all my needs; deductibles and co-insurance payments for me under GEHA-standard was still considerably lower than the premium I would have incurred under Part B.

We're still thinking about Medicare Part B coverage for us; my wife thinks we should drop Part B for her and occasionally I think I ought to go on Part B myself -- I just received an enrollment form from Medicare inviting me to enroll in Part B. I can tell you that if we didn't have IRMAA considerations, the issue is less complicated, especially if you have major medical ailments. My BIL (a retired Fed) has MS with expensive drug infusions, and his Medicare Part B coverage and BCBS-Basic covers all these infusions. My wife and I manage his medical and personal finance issues, as he is in assisted living and likely to need skilled nursing care in the immediate future, and FEHB coverage along with Medicare coverage is a godsend to us -- we seldom have any out-of-pocket medical expenses for him (except for some durable medical equipment, occasionally) and no medical insurance paperwork to file. And BCBS will provide him with a $900 payment this year for his Medicare coverage.

Yooper16
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Re: drop Part B Medicare and use FEHB instead?

Post by Yooper16 » Mon Jan 13, 2020 11:18 am

4nwestsaylng wrote:
Sun Jan 12, 2020 2:56 pm
Yooper16 wrote:
Sun Jan 12, 2020 10:18 am
We are not subjected to IRMAA, one advantage to modest income :happy , but we did seriously consider not going with Part B. Even as a modest income household it was borderline on going with Part B. There are some FEHB policies that come with reduced premiums and an HRA from 900-1200 per person, but with higher copays, deductible and MOP. GEHA and Aetna Direct are a couple I can recall.

Our previous FEHB policy, Rural Carriers, encouraged retirees to take Part B as a way to help hold down premiums but it was not required to do so. It even stated that in the "brochure".

We switched to Aetna Direct, with the reimbursement account and no copay, deductible etc. Aetna Direct states that it is designed to work with Part B. Aetna Direct even indicated that it was not an appropriate policy, for most, unless you took Part B.

Between the reimbursement account and the lower premium it reduces our combined Part B and FEHB premium by appox $2800 per year. For us the $2800 difference was enough to decide that Part B was still worth going worth.

I recently read, probably on a mail carrier newsletter, that OPM and/or higher powers are considering requiring Part B at 65 for retirees as a way to hold done future FEHB premiums. I will see if I can find the article. This could change your math.
The income level for IRMAA brackets to kick in is actually pretty "modest" if you are single. You pay a surcharge in 2020 if single income is over $86k, whereas for joint filers, the income threshold is > 172k. When you add Social Security to RMDs, and any federal annuity, and a bit of interest/dividend income, it is not that hard to go over the 86k MAGI threshold.

I do note that for 2020, there is now a cost of living adjustment for incomes,theoretically reducing the chance that you will progress into higher IRMAA levels as inflation progresses, so that is good.

Interesting that you note that some of the FEHB plans would prefer that retirees take Part B to "keep premiums down", which means that as a retiree, you are probably getting a good deal generally by not having Part B, since the FEHB has to pay the 80% of allowable on doctor charges and other outpatient charges,whereas if you have Part B, the FEHB only pays the copay and deductible.

I will have to compare Aetna Direct with my GEHA policy. I have been very happy with GEHA, but they do not offer a reimbursement for Part B. It may be that if one is not taking Part B you are better with some FEHB policies than others. If I drop Part B, I will stay with GEHA.

Since married couples filing jointly are allowed up to $176k income to stay within the standard Part B charge, I can see that for them, taking Part B is probably the best course. But for singles, with the threshold at $86k, it may be worth considering just keeping FEHB, since the annual Part B premium can easily be as much as half the maximum out of pocket required by the FEHB alone, and that is every year. Also if a retiree had a high deductible health plan and Health Savings Account while a federal employee, that could be the safety net to meet the out of pocket if necessary.

It is not actually correct that with Part B, one has "0 medical expenses". You actually have the amount of the monthly premium, so if you are in an IRMAA that results in a monthly Part B of $230, you have $2760 of medical premium expense annually,but of course no copays or deductibles.

Also, if you are concerned that federal income tax rates may rise in future, and want to do some Roth conversions, they will definitely push you into higher IRMAA brackets. For example, if you are in the 24% marginal tax bracket, and have room left over to convert $50k into a Roth, you will find that this may bump you up a couple of IRMAA brackets, essentially raising your tax cost to 26%.

By not having Part B, you can do conversions and only face the income tax cost of the conversion. This may be an important factor for those considering converting most of their TSP or other 401k to Roth over the next ten years, to reduce the RMD or leave more of their estate in tax free Roth accounts.

Clearly there is no single answer re: Part B. It depends upon all of these factors. I have not decided yet, but will likely drop Part B if I decide to do Roth conversions for a few years, to have more of my funds in the tax free category, and also reduce the RMD.
Totally agree with you.

Even with the Fed CSRS pension, a small private pension, and 1 SS we were still able to convert 30K or so to Roth and stay just a hair in the 12% bracket. Even the conversion to Roth, may/may not be beneficial in our lower bracket while married but probably beneficial when 1 spouse dies.

Being retired, we shouldn't have to waste precious time and remaining brain cells on such matters. Prefer spending that time hiking, biking and kayaking. :beer <<< that too.

When it comes to things like health, auto, home, liability insurance, we assume that if we buy it we probably won't need it. That's a good thing. But, if we don't purchase it that's when we wish we had.

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