Key Takeaways

• Medicare Part A may be premium-free for most PSHB-eligible retirees, but it is not cost-free. You are responsible for deductibles, coinsurance, and potential limits on coverage that could result in high out-of-pocket expenses.

• Combining PSHB with Medicare Part A can help reduce your exposure to unexpected hospital bills, but only if you understand how the two programs coordinate benefits and what gaps remain.

Why Medicare Part A Isn’t Truly Free

You might assume that since you paid into Medicare during your working years, your hospital coverage in retirement should come without any strings attached. However, Medicare Part A still includes several out-of-pocket costs, even if you qualify for premium-free coverage.

If you are a Postal Service retiree or annuitant eligible for the PSHB program, understanding these hidden costs is essential for protecting your retirement finances.

Who Pays a Premium for Part A?

For most people who worked at least 40 quarters (10 years), Medicare Part A has no monthly premium. That includes the majority of Postal Service retirees. But if you or your spouse didn’t meet this threshold, you could be charged a monthly premium:

• In 2025, individuals with fewer than 30 quarters of Medicare-covered work pay $518 per month.

• Those with 30–39 quarters pay $284 per month.

Most PSHB-eligible annuitants will avoid this cost, but it’s still worth verifying your eligibility by reviewing your Social Security earnings record.

The Part A Deductible and Its Limitations

Even if you don’t pay a premium, you will still be responsible for the Medicare Part A deductible. In 2025, that deductible is $1,676 per benefit period.

Unlike an annual deductible that resets once a year, Medicare Part A’s benefit period resets after 60 days of not receiving inpatient hospital or skilled nursing care. That means you could face multiple $1,676 deductibles in a single year if you have multiple hospital stays separated by at least 60 days.

Daily Coinsurance After a Hospital Stay

Medicare Part A covers hospital stays in full for the first 60 days after the deductible is met. Beyond that, you begin to pay daily coinsurance:

• Days 61–90: $419 per day

• Days 91–150: $838 per day (lifetime reserve days)

• After 150 days: You pay all costs

If your hospitalization extends past 60 days, these costs can quickly add up. You only get 60 lifetime reserve days in your entire lifetime under Medicare. Once those are used, Medicare offers no further help for extended stays.

Skilled Nursing Facility (SNF) Limitations

Medicare Part A covers care in a skilled nursing facility, but only under strict conditions:

• You must have a qualifying hospital stay of at least three consecutive days (not counting discharge day).

• The SNF care must begin within 30 days of leaving the hospital.

• It must be medically necessary and provided in a Medicare-approved facility.

Even then, your coverage only lasts a limited time:

• Days 1–20: Fully covered

• Days 21–100: $209.50 per day (you pay)

• After 100 days: You pay all costs

Many retirees assume that skilled nursing is covered longer or more fully than it actually is. Without additional protection through PSHB or other insurance, those uncovered days can become costly.

What Part A Does Not Cover

Medicare Part A is limited to hospital-related services. It does not cover:

• Outpatient care or physician visits

• Most prescription drugs

• Custodial or long-term care in nursing homes

• Personal convenience items (TV, phone)

• Private nursing

This means Part A, by itself, is far from comprehensive. If you rely solely on Medicare, you are exposed to many potential medical costs not included in its scope.

Where PSHB Helps Fill the Gaps

As a Postal Service annuitant or retiree, you have access to PSHB plans that work alongside Medicare. When you enroll in both Medicare and PSHB, your PSHB plan often becomes secondary coverage, filling in some of the cost-sharing gaps that Medicare leaves behind.

PSHB plans typically:

• Waive or reduce deductibles when Medicare is primary

• Cover hospital coinsurance and some post-hospital skilled nursing costs

• Provide additional coverage for prescription drugs and outpatient care

However, these benefits depend on you being enrolled in both Medicare Part A and Part B. Without Part B, your PSHB plan may offer limited coordination and cost protection.

Understanding the Coordination Process

When you have both PSHB and Medicare:

• Medicare pays first (primary)

• PSHB pays second (secondary)

This two-layer system reduces your out-of-pocket exposure. For example:

• Medicare pays for 80% of a covered hospital service

• PSHB may cover the remaining 20%, depending on the plan

But if you only have one or the other, you may be left responsible for coinsurance, deductibles, or even denied claims.

Coverage Timing and Enrollment Matters

To make this coordination work smoothly, timing is everything. Here are key enrollment windows you should be aware of:

• Initial Enrollment Period (IEP): Starts 3 months before you turn 65, includes your birthday month, and ends 3 months after. This is your first opportunity to enroll in Medicare Parts A and B without penalty.

• General Enrollment Period (GEP): Runs January 1 to March 31 each year, with coverage starting July 1. If you miss your IEP, you may have to wait for this period and pay a penalty.

• PSHB Open Season: Takes place annually from November to December. This is when you can select or change your PSHB plan for the following year.

Your best option is to enroll in Medicare during your IEP and select a PSHB plan during Open Season that pairs well with Medicare. Delaying enrollment could leave you with uncovered services or late penalties.

The Cost of Not Pairing PSHB with Medicare

If you’re eligible for Medicare and choose not to enroll in Part A or Part B, your PSHB plan may:

• Increase your deductibles and copayments

• Deny coverage for services Medicare would have paid first

• Require you to pay the full Medicare-eligible amount out-of-pocket

Some PSHB plans even require Medicare Part B enrollment as a condition for certain benefits. In 2025, many plans offer lower cost-sharing or even premium reimbursements only to those who enroll in both Parts A and B.

How the $2,000 Drug Cap Affects You

In 2025, the Medicare Part D prescription drug benefit includes a $2,000 annual out-of-pocket cap. If you are enrolled in both Medicare and PSHB, your PSHB plan may automatically include a Medicare Part D plan or EGWP (Employer Group Waiver Plan).

This new cap helps limit your spending on prescription drugs, especially for those who take high-cost medications. If you decline Medicare drug coverage, however, you may miss out on these savings.

Don’t Forget About Lifetime Reserve Days

Medicare gives you 60 lifetime reserve days for extended hospital stays beyond 90 days. These can only be used once and do not renew annually.

If you exhaust these days, Medicare pays nothing beyond day 150 of a hospital stay. This is a major reason why having a PSHB plan that covers extended inpatient costs is critical.

Are You Ready for the Out-of-Pocket Reality?

Here’s a recap of what you may pay under Medicare Part A alone in 2025:

• $1,676 deductible per benefit period

• $419 per day for hospital days 61–90

• $838 per day for hospital days 91–150

• 100% of costs beyond day 150

• $209.50 per day for skilled nursing days 21–100

These expenses can add up rapidly during a serious illness or accident. Unless you coordinate PSHB and Medicare properly, these costs fall on you.

Choosing the Right PSHB Plan for Medicare Integration

When evaluating PSHB options during Open Season, pay close attention to how each plan integrates with Medicare:

• Does it offer reduced cost-sharing for Medicare-enrolled members?

• Are deductibles waived for hospital services?

• Is there reimbursement for Part B premiums?

• Does it include Medicare drug coverage?

The answers to these questions can significantly impact your financial exposure in retirement.

What to Do if You Missed Enrollment

If you delayed enrolling in Medicare and now wish to coordinate it with PSHB, take the following steps:

• Apply during the General Enrollment Period (January 1 to March 31)

• Sign up for a PSHB plan during Open Season that works well with Medicare

• Contact a licensed agent listed on this website to evaluate whether you qualify for a Special Enrollment Period (SEP)

Taking timely action can minimize penalties and reduce your long-term costs.

Medicare and PSHB Work Best When Aligned

Medicare Part A is not a complete solution by itself. While premium-free for most, it carries significant hidden costs that can become burdensome if not managed properly. Pairing it with a well-coordinated PSHB plan offers the strongest financial protection.

Take the time to review your options, compare benefits, and understand how Medicare and PSHB can complement each other. If you’re unsure how to proceed, get in touch with a licensed agent listed on this website for personalized advice.