Military and federal benefits can be confusing, even to financial planners. One of the surprising things I learned while working with military service members was how ill-prepared many of them are about the steps required to activate their military health benefits in retirement.
The majority of service members I worked with did not know that moving from Tricare, the uniform services health care program, to Tricare for Life, the military’s supplemental health insurance program, is not automatic. To be eligible for Tricare for Life, service members must first enroll in Medicare Part A and Part B. They were very happy to stumble upon this tidbit sooner rather than later and add it to their retirement-prep checklist.
Medicare 101
Let’s take a high-level step back.
We know that Medicare Part A covers hospital and Part B covers medical doctors. For both A and B, Medicare covers expenses for approved services from participating providers at 80%. To cover the other 20% of potential medical costs, Medicare enrollees (including our clients) typically pick up a Medigap /Medicare supplement plan as their secondary payor. Supplement plans are named after alphabetic letters such a C, F, G, N, etc. This is distinctly different than Medicare Part C, which is also known as Medicare Advantage
A Part C Medicare Advantage Plan replaces Medicare Parts A and B and transfers responsibility for a client’s medical coverage from the federal government to a private insurance company. Part D is the prescription drug plan through the federal government.
If you work with a service members entitled to Tricare For Life (TFL), Medicare is their primary payer in areas where Medicare is available (the United States and U.S. territories). TFL serves as wraparound coverage and become the second payor. It takes effect the first day your client’s Medicare Parts A and B coverage are in effect, as long as they’ve paid their premiums for Parts A and B.
TFL beneficiaries don’t need to purchase a Medigap, Medicare Advantage or Medicare Part D plan. Prescription drug coverage for TFL beneficiaries is covered under the Tricare Pharmacy Program.
TFL coverage doesn’t extend to family members who are not yet 65. If your client’s spouse is younger, he or she would remain eligible for other Tricare programs, such as Tricare Prime or Tricare Select, until they turn 65. Once they become eligible for Medicare Part A and Part B, they can then have access to Tricare For Life.
If the service member client is younger than 65 and already drawing Social Security, they’d be automatically enrolled in Medicare Parts A and B. But, if they not drawing Social Security and are turning 65, they will need to enroll in Parts A and B to activate Tricare For Life.
According to the Tricare Medicare brochure:
“If your birthday is on the first day of the month, you become eligible for Medicare on the first day of the month before you turn age 65. Sign up for Medicare between two and four months before the month you turn age 65.”
“If your birthday falls after the first day of the month, you become eligible for Medicare on the first day of the month you turn age 65. Sign up for Medicare between one and three months before the month you turn age 65.”
It’s also helpful to tell clients that they generally can sign up for Medicare up to three months before or three months after the month in which they turn 65. Those who miss this “initial enrollment period” will need to wait until the next general enrollment period, which is January through March. Coverage with general enrollment doesn’t become effective until July 1, unless there is an exception. So it’s important for clients to know when they should enroll.
A Case Study with an Important Lesson
Maria, a retired service member who was born on Jan. 1, 1959, turned 65 in January. She takes prescription medications. Based on her years of military service, Maria is entitled to Tricare For Life as her secondary coverage plan. TFL would cover her 20% out of pocket medical costs, including her prescription drugs.
Maria wasn’t drawing Social Security income when she turned 65 and didn’t elect Medicare Parts A or B coverage during her initial enrollment period (October to December 2023 and February to April 2024). Tricare contacted her repeatedly and subsequently dropped her coverage.
Maria must now wait until January 2025 to apply for Medicare Part B so she can re-engage with Tricare For Life. Consequently, her Medicare coverage will not be effective until July 1, 2025. This leaves her at risk for 100% of all out-of-pocket medical and prescription-drug costs because for the next 12 months she no longer has a Tricare medical plan or a prescription drug plan.
Maria will contact the Social Security Administration to see if she can qualify for a special enrollment exception that would enable her to activate Medicare Part B and therefore Tricare for Life before 7/1/2025.
A Big Thank-You
Not all advisors have clients who are retiring from the military and eligible for Tricare For Life. But the more we learn about how such coverage works, the better we can share this information with our clients and members of our community who served our country faithfully and bravely.
Michelle Petrowski, CFP, CDFA, is founder and planner at Being in Abundance, a Financial Planning and Wealth Management firm and Being Mindful in Divorce. She previously served on the board of directors for the Financial Planning Association on Long Island and in the Greater Phoenix area, the Maricopa Association of Family Mediators and the Alisa’s Angels Foundation in Arizona. She is an advocate for the financial literacy for women and has volunteered for Savvy Ladies in New York and Fresh Start Women’s Foundation since 2013. You can reach her at Michelle@BeinginAbundance.com.
