Key Takeaways

• Declining Medicare when you are eligible can result in higher out-of-pocket costs and loss of important PSHB plan benefits, especially for those retired or nearing retirement.

• If you’re required to enroll in Medicare Part B for continued PSHB coverage and you don’t, you may lose major portions of your benefits or face penalties if you enroll later.

The Medicare Requirement Built into PSHB in 2025

Starting in 2025, the Postal Service Health Benefits (PSHB) Program has specific coordination requirements with Medicare for eligible annuitants and family members. This is not an optional suggestion—it’s a structural feature of the program.

If you are a Medicare-eligible annuitant or a covered family member under PSHB, you are required to enroll in Medicare Part B unless you fall under certain exceptions. These include:

• Retired on or before January 1, 2025.

• Active USPS employee aged 64 or older as of January 1, 2025.

• Living abroad.

• Receiving care from the VA or Indian Health Services exclusively.

Failing to enroll in Medicare Part B when required can result in a serious disruption to your PSHB coverage. That disruption isn’t minor—it could include losing prescription drug coverage or being denied cost-sharing benefits your PSHB plan offers when Medicare is in place.

What Your PSHB Plan Expects Medicare to Cover

Every PSHB plan is built with Medicare coordination in mind. This means your plan assumes Medicare is covering:

• Inpatient hospital services (Medicare Part A)

• Outpatient and doctor visits (Medicare Part B)

With Medicare in place, your PSHB plan often becomes a secondary payer, helping with deductibles, coinsurance, and copayments. Without Medicare Part B, your PSHB plan may stop covering what it assumes Medicare should have paid. In effect, you become fully liable for those costs.

Without Part B:

• You may face full PSHB deductibles with no reduction.

• Copayments may increase.

• Your provider network may be more limited.

• You might be denied certain services your plan only covers if Medicare is active.

The Late Enrollment Penalty Doesn’t Expire

If you delay enrolling in Medicare Part B beyond your Initial Enrollment Period (IEP), which begins 3 months before your 65th birthday and ends 3 months after, you may face a lifetime late enrollment penalty.

This penalty increases your Part B premium by 10% for every 12-month period you were eligible but didn’t enroll. For example, delaying by three years results in a 30% higher premium—for life.

That’s not just a small financial inconvenience. Over time, this could mean thousands of dollars in additional costs during retirement—money that could otherwise have been used for living expenses or medical needs.

Prescription Drug Coverage Could Be Affected Too

In 2025, all PSHB plans that cover Medicare-eligible members provide prescription benefits through a Medicare Part D Employer Group Waiver Plan (EGWP). This plan is tightly integrated with your PSHB coverage.

If you decline Medicare Part B, you may also become ineligible for your PSHB’s prescription drug coverage. In other words, by refusing Part B, you are not just losing secondary coverage—you could lose access to your medication benefits entirely.

Additionally:

• You won’t benefit from the new $2,000 out-of-pocket drug cost cap introduced under Part D in 2025.

• You’ll forgo eligibility for spreading your out-of-pocket prescription drug costs over 12 months under the Medicare Prescription Payment Plan.

• Some high-cost medications may become unaffordable without the EGWP protections.

The PSHB Doesn’t Replace Medicare—It Coordinates With It

It’s a common misunderstanding to assume that PSHB coverage makes Medicare optional. In reality, PSHB was designed to complement Medicare for retirees.

The new PSHB program was built with the expectation that once you’re eligible for Medicare, both parts work together. Medicare pays first, and PSHB pays second. This integration lowers your total cost burden, especially for chronic conditions or hospitalizations.

Here’s how coordination typically works:

• Medicare Part A pays for hospital stays.

• Medicare Part B pays for doctor visits, tests, and outpatient care.

• PSHB picks up costs Medicare doesn’t fully cover—such as deductibles and coinsurance.

If you decline Medicare, your PSHB plan won’t shift to full primary payer mode. It may pay less—or deny coverage—because it assumes Medicare should’ve paid first.

What Happens at Open Season If You Decline Medicare

During the November–December Open Season, you may be tempted to keep your PSHB plan without changing anything—even if you’re eligible for Medicare. But by 2025, that’s not a risk-free decision.

Here’s why:

• Your plan may verify your Medicare status and apply benefit changes accordingly.

• If you haven’t enrolled in Medicare Part B as required, your plan may refuse to cover major services.

• Your drug coverage under the Medicare-integrated EGWP might be suspended or terminated.

• You may have fewer plan options in future Open Seasons due to coverage restrictions.

Every Open Season going forward may require you to reaffirm your Medicare status. Not doing so can jeopardize your coverage stability.

Medicare Enrollment Exceptions Don’t Apply to Everyone

There are specific and limited exceptions where declining Medicare Part B won’t affect your PSHB plan. It’s important to verify whether these exceptions apply to you.

You’re exempt from mandatory Medicare Part B enrollment under PSHB if:

• You retired before January 1, 2025.

• You are not Medicare-eligible.

• You’re covered under VA or Indian Health Service.

• You’re living outside the U.S. permanently.

However, if you’re newly retiring in 2025 or later, these exceptions likely don’t apply. Declining Medicare while assuming your PSHB plan will fully compensate could leave you exposed to unexpected costs and coverage gaps.

Financial Impact of Declining Medicare

Choosing not to enroll in Medicare when eligible can have long-term cost consequences:

• You may pay higher out-of-pocket costs for services Medicare would have covered.

• You forfeit the financial protection of Medicare cost-sharing coordination.

• You could be liable for services denied by PSHB due to lack of Medicare enrollment.

• Your premiums for Medicare Part B may be permanently higher if you enroll late.

Even if you’re healthy now, unexpected medical needs can arise. Without Medicare backing up your PSHB plan, your financial exposure grows significantly over time.

If You Change Your Mind Later, It May Be Too Late

Let’s say you decline Medicare now and later decide you want to enroll. You’ll likely have to wait for the General Enrollment Period (January 1–March 31), with coverage starting in July of that year. That delay could leave you without proper coverage for months.

Also:

• If your PSHB plan dropped prescription drug benefits due to no Medicare Part B, they may not be reinstated automatically.

• Late penalties will apply permanently.

• Medical costs incurred during the gap period may not be reimbursed.

This isn’t a decision you can undo easily. The structure of PSHB makes coordination with Medicare an essential part of your long-term benefits plan.

Making a Confident Decision With All the Facts

Before you finalize your choice, review your personal situation:

• Are you turning 65 soon or already eligible for Medicare?

• Does your PSHB plan require Medicare enrollment for certain benefits?

• Have you confirmed whether any exceptions apply to you?

Consult your plan’s brochure, the OPM website, and talk to a licensed agent listed on this website. You need to know exactly what you’re giving up before declining Medicare.

Medicare and PSHB Work Best Together—Not Separately

If you’re eligible for Medicare, especially Part B, and you rely on the PSHB for your retirement healthcare, the two are designed to operate in sync. Declining Medicare isn’t just skipping a backup—it can disrupt your entire coverage structure.

Don’t assume your plan will adapt to your decision. Most plans are built on the assumption that Medicare is active once you qualify. By refusing Medicare, you’re forcing your plan into an unsupported mode—one that may come with higher costs, fewer services, and more risk.

If you’re uncertain about how Medicare and PSHB work together, or whether an exception applies to you, get in touch with a licensed agent listed on this website for personalized guidance.​​​​​​​