FEHB and Medicare: How They Work Together in Retirement

Who pays first: FEHB or Medicare?

FEHB and Medicare can be held at the same time, and Medicare's coordination-of-benefits rules decide which one pays a claim first. Your employment status is what determines the order.

While you are an active federal employee (or covered as the spouse of one) age 65 or older, your FEHB plan pays first and Medicare pays second. Once you retire and become an annuitant, Medicare generally becomes the primary payer and your FEHB plan pays second, often covering some of the Medicare deductibles and coinsurance for services both programs cover.

When Medicare is primary, it usually sends claim information to your FEHB plan automatically, so you typically don't file twice. Even with both, the two plans together can pay no more than 100% of the allowed charges, and you may still owe a balance for amounts neither plan covers.

Should you take Medicare Part A?

Most federal employees and retirees qualify for premium-free Part A at 65 because they paid Medicare taxes for at least 40 quarters of work. OPM advises that when Part A costs you nothing, enrolling generally makes sense — it can reduce your out-of-pocket costs and help hold down FEHB premiums overall.

If you have fewer than 40 quarters, Part A carries a premium: $311 per month with 30–39 quarters, or $565 per month with under 30 quarters in 2026. In that case the decision is less clear-cut and worth weighing carefully against what FEHB already provides.

• Part A inpatient deductible: $1,736 per benefit period (2026)
• Hospital days 61–90: $434 per day; lifetime reserve days: $868 per day
• Skilled nursing facility days 21–100: $217 per day

The Part B decision — the costly one

Everyone pays a monthly premium for Part B, so this is where federal retirees face the real trade-off: pay an extra premium on top of your FEHB premium, or skip Part B and rely on FEHB alone. Your FEHB premium does not go down if you enroll in Part B.

The standard 2026 Part B premium is $202.90 per month, with a $283 annual deductible and 20% coinsurance for most services after the deductible. Higher earners pay an income-related surcharge (IRMAA): in 2026 it begins above a modified adjusted gross income of $109,000 (single) or $218,000 (joint), based on 2024 income, pushing the total Part B premium to between $284.10 and $689.90 per month.

Many retirees still add Part B because some FEHB plans waive or reduce cost-sharing (like deductibles and copays) when Medicare is primary, and a growing number offer a partial Part B premium reimbursement. These benefits vary by plan and year, so check your plan's brochure rather than assuming — no benefit is universal across FEHB plans.

Avoiding late-enrollment penalties

Because your active-employee FEHB coverage is primary, you can delay Part B past 65 without penalty while still working. When you retire, you get an 8-month Special Enrollment Period to add Part B, and signing up during it avoids the late penalty.

Ask your employing office to complete form CMS-L564 (Request for Employment Information) to document that you had qualifying coverage. If you miss the window, the Part B late penalty is 10% for each full 12-month period you could have had it, added permanently to your premium.

Prescription drugs: FEHB and Part D

FEHB prescription drug coverage is considered 'creditable' — it pays, on average, at least as much as standard Medicare Part D. That means you generally do not need a separate Part D plan, and as long as you keep FEHB you won't owe a Part D late-enrollment penalty if you enroll later.

Some FEHB carriers now integrate a Medicare Part D plan (an EGWP) for Medicare-eligible members, which can lower drug costs and add benefits like the $2,100 annual out-of-pocket cap that applies to Part D in 2026. Whether your plan offers this, and whether it's automatic or opt-in, varies by carrier — review your plan materials before enrolling in a standalone Part D plan, since doing so could disenroll you from FEHB drug coverage.

Keeping, suspending, or dropping FEHB

As an annuitant you can suspend (not cancel) FEHB to enroll in a Medicare Advantage plan or certain other coverage. Suspending preserves your right to return to FEHB during a future Open Season or qualifying life event; cancelling FEHB as an annuitant is usually permanent and forfeits that right.

Postal Service retirees are now covered under the separate Postal Service Health Benefits (PSHB) Program rather than FEHB, and many Medicare-eligible postal annuitants are required to enroll in Part B to keep PSHB coverage, with some exceptions. If you're a postal retiree, confirm the Part B requirement that applies to your situation.