Introducing Medicare (Read instead of Watch)
This is Andrew Bennett, I am the owner, operator, and chief bottle washer at InsuranceThatFits.com. Today’s Introducing Medicare Video is tailored for people who are turning 65 or just becoming eligible for Medicare. What we are going to do today is discuss all your options. We are going to discuss the premiums, the deductibles, and different things you should look for.
We’ll take deeper dives into some parts of Medicare on later presentations, but for today we are going to jump in. On this next slide we see this flow chart that you may have seen in some of the Medicare handbooks. Once you can understand this chart you can pretty much understand your options. You have two options. You can go to the right or the left.
Introducing Traditional Medicare
You can go to traditional Medicare, that’s Parts A & B, you can get a prescription plan (that’s part D), and you can get a supplement to fill in the gaps that traditional Medicare has. We are going to get into each one of those parts. Or you can go to the other side of the chart.
The other side of the chart is Medicare Advantage plans. Those plans are where insurance companies have contracts with CMS (The Center for Medicare and Medicaid Services) and they squish together, A, B, and generally Part D and create something that’s more like a traditional health plan.
All of that is what we are going to get into today. First off, we are going to look at Part A.
Part A – Hospital Insurance
Part A is labeled “Hospital Insurance,” but you can see it covers a few more things than that (slide shows: Hospital charges, skilled nursing facilities, nursing home care, home health services, and hospice). The important thing is you don’t pay for Part A once you get into Medicare.
If you think about a paycheck stub (you may have seen a paycheck stub 10 or 15 years ago, I think they’re probably all online now) there was a line item after Social Security and Income tax for Medicare. That was your “Part A” premium and it was paid while you were working, so now you don’t have to pay it anymore.
Part A Deductible
There is a deductible for Part A and that’s $1364 (this tutorial was made in 2019. The Part A deductible in 2021 is $1408) and yes as the chart shows that is per incidence it is NOT an annual deductible. So if you are hospitalized you are going to owe that $1408. If you are hospitalized with a very long hospital stay there might be some other charges, but for most hospital stays this is going to be what you pay.
Remember this deductible is per incident. If you are hospitalized and you get out and have to be re-hospitalized for the same thing, within 60 days, you don’t have to pay that deductible again. If it’s the 61st day or if it’s for a different reason you gotta pay that deductible again. There’s ways to get out of that and we are going to talk about those in a minute.
Part B – Medical Insurance
Moving on to Part B as you can see refers to your “Medical Insurance” and this is where most of your charges will be. This is to pay your physician, to pay for diagnostic tests, and to treat you. That’s going to cover things like; blood work, MRI’s, CT scans, X-rays, all the testing that they to do…endoscopies, colonoscopies, all that kind of thing falls under Part B.
Part B Deductible
There is an annual deductible for Part B and it’s only $185 (again that’s the 2019 number. For 2021 that deductible has increased to $203) and that’s not too bad at all. You think about people who have these high deductible plans where they have $5000 to $6000 deductibles…well you have a $203 deductible with Part B in traditional Medicare.
That $203 deductible is smokin’ good and after that it’s 80/20. 80/20 is no slouch, in fact that’s pretty darn good as well. There are some times however when the 80/20 isn’t quite 80/20 and we’ll get into those in a little bit. That’s when you get hit with excess charges and we’ll talk about that coming up soon.
Part D
The next thing to do is to get a Part D plan. Your Part D plan is your drug plan, your pharmaceutical benefit. A couple of things to keep in mind here…Your Part D plan cannot charge you more based on the drugs you are on. So if you enroll in a companies drug plan everyone in your area is paying the same premium. What you have got to do is to look at their formulary (the list of drugs covered) and figure out which company covers your drug best and at the pharmacy you want to go to.
Medicare.gov, Not as Accurate as it Could Be
That’s how I help people. I use a tool on Medicare.gov and I enter all your prescriptions, the milligrams (dosage), how often you take it, whether you prefer to fill it by mail or by your local pharmacy and it will bring up every drug plan in the state. Then we rank them in order based on premium and your out of pocket costs and the one at the top, 99 times out of a hundred, is the one that you should go with.
If it’s a plan I represent, then hey, that’s great we go an enroll you in that plan. Bada-Bing Bada Boom you’re done. If it’s not a plan I represent…well we’ve got their contact information right there, their 800 number you can call in and enroll and that insures you are in the best plan for you.
(update: the last two years the data on Medicare.gov has not been very accurate. Until they have it fixed I am having to enter your drug list into each individual companies online quoting tool. The companies I work with for Part D plans are; Humana, UnitedHealthcare, Silver Scripts/Aetna, and Well-Care.)
Part D Commissions
I’ll tell you about the commissions for agents on Part D plans come to about $5 a month (the 2021 number is $81 a year). It doesn’t matter what company, the commissions are set. I’d rather have you in the right plan than make $5 a month (or $6.75…the 2021 rate). So that’s how I help people find the drug plan that is best for them.
Medicare Supplements (aka Medi-gap)
After the Part D plan you need to find a supplement. I’ll have a separate, more complete, presentation on supplements, but they fill in the gaps, the Part A deductible, the 20%, or the excess charges. Medicare supplements come in and cover those charges, part of those charges, or they can simply give Medicare and out of pocket maximum. It depends on which one you choose and there is a bunch of them. Again, we will look at them more closely in another presentation. (For more on Medicare Supplements click here)
Now, let’s go back to the chart. That was all on the left side of the chart. Part A, B, the drug plan, and the Medicare Supplements vs the Medicare Advantage plans. I tell people the Advantage Plan is kind of like the value meal. You get a hamburger, a medium fries, and a medium coke. It is what it is.
Over on the traditional Medicare side of the chart you get to customize. You get to say I want the hamburger, but I want a large fry to go with that. Since I’m having the large fry I want a small coke so I don’t have too many calories. You get to pick an choose what you want. It’s kind of like ordering “a la carte.”
Medicare Advantage
Now, let’s look and see what an Advantage Plan is. Here on the Advantage plan your medical bills will be paid by the insurance company not by Medicare. With the Advantage plan there will be co-pays for most everything. You go to the doctor there’s a co-pay. You get blood work done it’s a co-pay. You go to the ER it’s a co-pay. Most of the time all these co-pays are very, very reasonable. But there are times when you have bigger health problems and you need to watch for the out of pocket maximums.
The nationwide average for out of pocket maximums is around $5500. The legal limit approaches $7000. There are some plans that have lower out of pocket maximums in the $3500 +/- range. It just depends on your plan and, in general, your premium.
When should you go with an Advantage plan and when should you go with a supplement? That’s one question everybody wants to know. Let me tell you the story of two retirements.
2 Case Studies on how retirement finances impact Medicare Choices
Client number one retired and had very little income, basically they were just living off of Social Security. Unfortunately, this client’s husband had passed, but he left behind a life insurance policy so she had several hundred thousand dollars sitting in the bank. This client couldn’t afford much monthly premium because her income was so low. If she had out of pocket expenses she did have the money in the bank to pull from. So for this client an Advantage plan with the lower monthly premium fit their budget better.
Client number two is in the opposite situation. They had Social Security, an annuity, and even a pension, but what they didn’t have was savings. This client could not afford unexpected out of pocket cost. This client stayed with traditional medicare and a supplement that covers most everything so they have very little out of pocket costs. They can afford that all the way through their retirement, because they had very reasonable income.
Analyze your Retirement Income and Savings
There are all sorts of different options, but those are some of the things to think of (your income and your savings in retirement). I tell people think of this as a financial decision, don’t make the decision based on your health. Even if you have good health now, let’s face it, all through the course of retirement that’s not always going to be the case.
Most of us will not be in the same shape at 85 that we are at 65. You need to keep that in mind. You have to be able to afford the insurance and the out-of-pocket costs long term. It’s a financial decision.
Can you switch back and forth from Advantage to Traditional?
Now, finally I want to touch on another issue because I get asked about it all the time. “What if I start out on the Advantage plan because it is less expensive? Then when I start needing more healthcare I can go back to traditional Medicare and get a supplement. Right? I can do guaranteed issue is, is when they cannot ask you health questions. Here when you are turning 65 you are guaranteed issue. I tell people you could be a one legged diabetic with a heart transplant and they can’t even ask the question. Four months down the road, they can and they will and they do not have to give you a supplement.
If you think you are going to start with Medicare Advantage and go back to traditional Medicare and get a supplement after you get sick…hmmm…maybe not. That being said, different companies ask different questions. One company might ask if you have ever had a heart attack whereas another company might ask if you have had a heart attack in the last two years.
Underwriting!
Those are very different questions, because if your heart attack was 25 months ago you get to answer “no!” The companies that allow more health conditions are (in general) going to have higher premiums. If you want a supplement and you want the best price possible then you want to do three things.
You want to look at which supplement you want. You want a competitive initial price and you want to look at that companies history of price increases. But you need to get what you want (and what you can afford) up front. This idea of moving back and forth…it is possible. It does happen. It becomes harder and harder as your health deteriorates.
In my next presentation I’ll talk about Medicare supplements in a deeper dive and Medicare Advantage plans in more detail. For now, this has been an overview of traditional Medicare for those people turning 65. If you’d like to call me at 865.712.5711. I hope to hear from you soon, thank you very much.