Medicare, Tricare For Life, Medigap insurance, and Congress

(Today’s post was inspired by reader Bridget, who also contributed a large portion of the book’s chapter on Reserves and National GuardThanks again, Bridget!)

Do military retirees need more medical insurance than Tricare? For the vast majority of us, the answer is “No”.

America’s healthcare system is confusing, and military healthcare can be nearly as confusing.  This post will concentrate on just three parts of the puzzle: Medicare, Tricare Prime, and Tricare For Life. (I’m trying to keep this post under 1000 1100 1200 words.) If you use additional healthcare (like a civilian employer’s insurance or VA benefits) then your situation is more complicated and this advice might not apply to you. Even if you’re using other benefits, though, consider whether the insurance discussed in this post could save you money after you retire from your bridge career.

Let’s back up for a few paragraphs and discuss how you might use health insurance. One comprehensive approach would be to use it to pay every last dollar of your medical bills. (Of course you’d be paying very expensive premiums for this coverage.) You want to see the doctor without worrying about expenses. You don’t want to wake up with a sniffle (that could turn into pneumonia) and worry about whether you should see the doctor today or wait to see if things get worse. Even more importantly, if you don’t have to pay for routine medical care from your own pocket then maybe you’d be more likely to use “preventive” care programs like annual flu shots. Preventive care costs money too, but it’s generally less expensive than the cure.

A frugal health-insurance approach would be a high-deductible “catastrophic coverage” plan. You pay (much) lower premiums for shouldering most of the costs of routine healthcare. Insurance only kicks in for serious injuries or expensive diseases. The theory is that you’d have to pay for most of your own healthcare so you’d take better care of yourself. (You’d pay for your own flu shots because you appreciate the economics of preventive care.) The reality is that too many people put off seeing the doctor (because they might have to pay for “routine” care) until a minor issue turns into a serious problem. What could have been a small preventive cost (at your expense) turns into a large expensive cure (with a huge insurance claim).

A hybrid insurance approach would be to cover only your expected expenses. You might have daily prescription medication (blood pressure, cholesterol) or age-related losses (reading glasses, hearing aids). You might also have treatments requiring continuing evaluation and care (arthritis, sleep apnea). You might even need assistive technology like orthopedic knee braces or wheelchair ramps. All of these issues can be covered (or excluded) through various types (and expenses) of medical insurance.

Active-duty servicemembers start out with one of the versions of Tricare. When they retire from active duty, Tricare coverage continues for an annual fee.  (After more than 15 years at the same price, this fee is rising.Regardless of their age of retirement, Tricare coverage ends when retirees reach Medicare eligibility (generally at age 65).

Reserve and National Guard servicemembers are insured by Tricare when on active duty or can purchase Tricare insurance when not on duty. At retirement they can purchase Tricare Retired Reserve insurance, although DoD does not subsidize the expense of this insurance. At age 60, Reserve/Guard retirees become eligible for retiree Tricare and continue under this system until Medicare eligibility (usually age 65 again).

Is Tricare enough for all military retirees who aren’t yet eligible for Medicare? I wish the answer was simple, but the best I can do is “It depends”. The vast majority of military retirees with Tricare will still have copayments for doctor’s visits and prescriptions, but a few visits (or prescriptions) a year will cost less than the premium expense of additional insurance. If you and your family are generally in good health then you won’t need more insurance.

A few retirees (or their family members) may have frequent doctor’s visits or several prescription payments. It may make sense to pay the premiums for supplemental insurance (like a MOAA-sponsored plan) when the premium is lower than the cost of the doctor & prescription copayments.

The decision has to be revisited when the military retiree is eligible for Medicare. The details of Medicare are far beyond this post (still under 1200 words!) but the basics are on page 31 of the “Medicare & You” handbook.  Medicare parts A & B cover most hospital & doctor expenses but beneficiaries still have copayments, deductibles, and prescription fees.

Medicare supplement insurance (also called a “Medigap” policy) picks up where Medicare ends. However, even Medigap policies generally don’t cover long-term care, vision or dental care, hearing aids, eyeglasses, and private-duty nursing. When military retirees begin receiving Medicare benefits, their Medigap coverage is Tricare For Life. One of the benefits included in TFL continues to be the Tricare Mail-Order Pharmacy, which covers a wide variety of medications for a smaller copayment.

With Medicare and TFL, does a military retiree need further Medigap insurance? Again the best I can recommend is “It depends”.

The vast majority of military retirees will minimize their expenses by staying with Medicare and TFL. They’ll still have copayments for doctor’s visits and prescriptions, but a few visits (or prescriptions) a year will cost less than the premium of a second layer of Medigap insurance.

What can you do if you continue a bridge career past age 65? You’ll probably stay with your employer’s insurance. Once you decide to go with Medicare, though, it also makes sense to begin TFL and the Tricare Mail Order Pharmacy.

Regardless of your insurance decision when you retire, keep an eye on your expenses and the cost of supplemental insurance. If you’re only seeing a doctor a few times a year, or only paying a few dollars a month for prescriptions, then you won’t need supplemental insurance. As you approach Medicare eligibility (and perhaps pick up a few more medical concerns), make sure that Medicare & TFL will cover all of your issues. This is especially critical for prescription medications and prescription equipment like orthopedic braces and sleep-apnea treatment systems. If you’re not sure then consult the Tricare ombudsman at a military treatment facility or talk with a Tricare contractor directly. Make sure you see Tricare’s policy in writing before you make a financial decision.

As Congress struggles with debt-reduction administration, the Administration is proposing annual fees for TFL. The first fee would start at $200 in 2013 and rise with the military pension COLA.  Regardless of your feelings about this proposal, it’s still far cheaper than other Medigap policies.

The following advice comes from a long-retired shipmate (call sign “Frito”) who’s made the Medicare and TFL choices: “Work the system, don’t wait for it to work! Tell your readers that it is THEIR responsibility to find out for themselves BEFOREHAND what’s ‘required’ and what they must do to work the system.”

What have you learned from your Medicare/TFL transition? Please post a comment!

Related articles:
Book review: The Complete Idiot’s Guide to Social Security and Medicare

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WHAT I DO: I help you reach financial independence. For free. I retired in 2002 after 20 years in the Navy's submarine force. I wrote "The Military Guide to Financial Independence and Retirement" to share the stories of over 50 other financially independent servicemembers, veterans, and families. All of my writing revenue is donated to military-friendly charities.

4 Comments
  1. I hope your recovery goes better, Richard.

    Yes, Tricare For Life is Medicare supplemental insurance for the copayments. However it also has limits and may not cover all of situations or prescriptions that are not covered by Medicare, so you’ll need to coordinate your billing with both groups. I recommend that you talk to a Tricare ombudsman at a military clinic, or ask your Tricare contractor to assign a case manager to you.

  2. I had a lengthy hospital stay following a transplant and used up all of my lifetime benefits for Medicare. I was re-admitted 30 days after discharge before Medicare resumed coverage. Does Tricare for Life as a medgap policy cover any portion of the hospital stay not covered by Medicare?

  3. I retired in 1975 and President Clinton signed and restored our full coverage of
    retirement benefits .for everyone prior to 1977, which eliminated the requirement
    for gap insurance…Am I correct?

    • Norm, if I understand your comment correctly, the Tricare For Life insurance program serves as your Medicare supplemental insurance.

      The Affordable Care Act explicitly says that Tricare serves as your essential coverage.

      Best of all, you do not pay a fee for TFL.

    Comment? Question? What's on your mind?