Medicare plan for feds explained

Friday - 4/29/2011, 10:41am EDT

Ed Zurndorfer, Registered Employee Benefit Consultant

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By Suzanne Kubota
Senior Internet Editor
FederalNewsRadio.com

A plan by House Budget Committee Chairman Paul Ryan of Wisconsin calls for a fundamental overhaul of Medicare for future retirees. Under Ryan's plan, anyone 54 years old or younger would be put into a voucher-like program. Instead of the government paying doctor and hospital bills, the federal government would subsidize purchases of private insurance policies.

For non-federal employees, said Ed Zurndorfer, a Registered Employee Benefit Consultant, "this could be a significant change in their retirement years."

But most federal employees have access to the Federal Employees Health Benefits Program (FEHBP). Zurndorfer told the Federal Drive, "they pay, on average, 28 percent of the total premiums and the federal government pays the remaining 72 percent."

In order to carry the insurance over into retirement, feds must:

  • Participate in the FEHBP all of the last five years preceding the retirement date.

That's it.

"If a federal employee retires and keeps the health insurance, when they turn 65, they're going to maintain that. They don't have to shop around for something that's going to be a substitute for Medicare," said Zurndorfer, "because under (Ryan's) plan, the government would provide some vouchers for people 65 and older to go out and get some health insurance."

At 65, the retiree is encouraged to sign up for Medicare. Currently, Medicare would be the primary payer of medical bills and FEHBP will pay "most if not all of what the medicare does not pay," said Zurndorfer.

"It's great if a federal retiree has Medicare because my rule of thumb is if you have Medicare Part A, the hospital insurance; Medicare Part B, the medical insurance, and your federal employees' health insurance plan, between those three plans you will not pay anything out of pocket. Everything will be paid for in full."

And then there's the issue of long term care, which should be seriously considered.

Still confused? Zurndorfer said health care should be considered as part of an overall retirement plan, so "individuals really have to sit down with their financial advisors and talk about this."