Which is better, a federal retiree plan or Medicare Part B?

Q. I'm about to retire at age 66 and will lose my employee health plan. I could sign up for Medicare Part B but I'm not sure I need it because my husband is a retired federal employee and we plan on maintaining his FEHB Blue Cross-Blue Shield coverage. On the other hand, our friends say that Part B helps with out-of -pocket expenses. Which is a better choice for us?

A. You are in a position that many retirees would kill for, but you still have decisions to make. While most retirees must take Part B once they or their spouse are no longer actively employed, such is not the case for federal retirees. You basically have three choices, all with pros and cons. (I'm assuming that in all three cases, you will sign up for Medicare Part A. It's free so there's no reason not to.)

Choice 1. Don't take Part B and continue coverage under the FEHB retiree plan. This will save you the cost of the Part B premium ($115.40 a month this year for most people but more for higher-income beneficiaries). If you go this route, your FEHB plan will basically function as a Medigap plan for your hospital (Part A) expenses. But for your doctor and drug expenses, you will be responsible for the usual deductibles, copayments and coinsurance of your FEHB plan. The downside of this route is that if you should change your mind later, your Part B premium will be 10 percent higher for every year you could have been in Part B, but weren't. For you and your husband, a year of Part B premiums adds up to $2,770, meaning that if you wait a year before signing up, your premiums will be $277 a year more than they would have been otherwise.

Choice 2. Take both Part B and your FEHB plan. This will be more expensive because you will be paying two sets of premiums, but your FEHB plan will now function as a Medigap plan for both your hospital and doctor bills, and cover your drugs as it always did. David Snell, director of retirement benefit services for the National Active and Retired Federal Employees Association, suggests that if you go this route, you might investigate switching to a cheaper FEHB plan to save some money.

Choice 3. Suspend your FEHB enrollment and sign up for a private Medicare Advantage plan that includes prescription drug coverage. If you are in relatively good health and don't take a lot of pricey prescription drugs, this might be the cheapest strategy. You'll have to sign up for Part B to go this route. If down the road you develop expensive health problems that make your plan's cost-sharing hard to afford, you can re-enroll in FEHB and go back to original Medicare, Snell said. Because you're already enrolled in Part B, you won't be facing that late enrollment penalty.

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—Nancy Metcalf