Federal Retirees Face 3 Medicare Options in 2027 — Here’s Which Costs Least After Premiums and Surcharges

Federal retirees could spend thousands of dollars more on health insurance in 2027 depending on how they combine Medicare with their federal health benefits.

With Federal Benefits Open Season running Nov. 9 through Dec. 14, retirees have an opportunity to reconsider their coverage and potentially reduce their annual expenses.

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But the option with the lowest Medicare premiums isn't necessarily the one that saves the most money. Here's how three coverage strategies compare and what could make one more affordable than another.

2027 Cost Comparison

Consider a federal retiree enrolled in GEHA Standard, which charges $187.95 monthly for Self Only coverage in 2027.

Assuming the retiree qualifies for premium-free Medicare Part A and isn't subject to income-related surcharges, the annual premium comparison looks like this:

• Keep FEHB and Part A: $2,255.40 annually.

• Keep FEHB and add Part B: $4,769.40 annually, based on the Medicare trustees' projected $209.50 monthly Part B premium.

• Suspend FEHB for Medicare Advantage: $2,658 annually, combining the projected Part B premium with CMS's projected $12 average monthly Medicare Advantage premium.

The comparison shows that keeping FEHB with Part A has the lowest premiums in this example. 

But what happens when the retiree needs medical treatment?

When Part A Wins

Experts said avoiding the additional Part B premium could produce substantial savings for relatively healthy retirees who rarely visit doctors. “FEHB [plus] Part A only may be the least expensive option for healthy retirees who anticipate little usage and have a good FEHB plan,” said Evgenii Arsentev, a medical researcher. “They just need to be prepared to pay more when they get sick.”

When Part B Pays Off

For retirees managing chronic conditions, seeing specialists regularly or anticipating surgery, the additional Medicare premium may be worthwhile, Arsentev said.

Medicare and FEHB work together to reduce what retirees pay for medical care, according to the Office of Personnel Management.

“FEHB [plus] Part B is cheaper based on out of pocket risk, since the two together usually leave little to pay for doctors and hospitals,” Arsentev said.

Based on the Medicare trustees' projections, adding Part B would cost retirees another $2,514 annually in premiums.

Medicare Advantage Savings

Switching to Medicare Advantage could also lower your insurance costs because you would no longer pay FEHB premiums while your coverage is suspended.

The Centers for Medicare & Medicaid Services (CMS) projects that the average Medicare Advantage plan premium will be $12 a month in 2027. However, retirees must still pay their Medicare Part B premium and any applicable income-related surcharges.

Arsentev also recommends checking whether your doctors are in the plan's network, whether you'll need approval for certain treatments and what happens if you need medical care while traveling.

And don't give up your federal benefits without understanding how to get them back. The Office of Personnel Management allows eligible retirees who suspend FEHB for Medicare Advantage to return during a future Open Season or after certain qualifying events. Canceling FEHB, however, generally means you can't get it back.

How Income-Related Surcharges Change the Math

Higher-income retirees may face additional Medicare charges known as income-related monthly adjustment amounts, or IRMAA.

Under CMS's 2026 rates, someone earning between $109,000 and $137,000 could pay an extra $81.20 a month for Medicare Part B. That's nearly $975 more a year, and the amount could change in 2027.

David Kassir, managing director at Manna Wealth Management, said that Medicare generally uses tax returns from two years earlier to determine surcharges. He also explained that a large Roth conversion or another one-time income increase could therefore make Medicare more expensive later. IRMAA can also affect Part D costs.

Which Option Should You Choose?

Before switching coverage, think about how often you visit the doctor, what medications you take and whether you could afford a major medical expense.

“If you cannot afford the worst case scenario, then don't make your decision based solely on the premium cost,” Arsentev said.

This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.

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