Seniors often enter retirement (a) thinking Medicare is free, and (b) not at ALL clear how the details work – rules, restrictions, limitations, costs.
But it’s most certainly not free: your portion of costs could be unlimited and bankrupt you. And, like other healthcare matters in the US, “how it works” gets complicated fast!
How can seniors (and their loved ones, like you) make sense of it all?
This week, I talk with Danielle Kunkle Roberts, a nationally-recognized expert on Medicare insurance, about how to evaluate, navigate, calculate, and decide on the best configuration of Medicare coverage for you and your family. If health insurance “peace of mind” is important to you in your elder years, this is an action-packed episode you do not want to miss.
What you’ll learn:
- Medicare eligibility requirements
- Options for expats who haven’t paid into Medicare taxes
- What exactly Medicare covers, how each “part” works, and premium costs
- How to determine which doctors, hospitals, clinics, and pharmacies will accept your Medicare coverage
- How the premium surcharge (IRMAA) works if your income exceeds certain thresholds
- All-in costs you can expect to pay for Medicare coverage
- How the “initial enrollment period” works, including how the penalty works
- How Medicare Advantage works + when it’s a better choice than original Medicare (tradeoffs, considerations, cost differences, network differences)
- How Medigap works and tradeoffs and considerations
- How expat retirees should plan for Medicare, given it generally doesn’t cover them overseas
What other questions do you have about Medicare? If you’re looking into Medicare for yourself or a loved one, are you leaning toward original Medicare or Advantage? Why? Let me know by leaving a comment right now.
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Links mentioned in this episode:
- Boomer Benefits website
- Boomer Benefits Book: 10 Costly Medicare Mistakes You Can’t Afford to Make
- Boomer Benefits private Facebook group
- Boomer Benefits YouTube video: Will Medicare Cover My Procedure?
- Medicare.gov: What Medicare Covers
- Medicare.gov: Find & compare doctors
- Medicare.gov: Medicare plan finder tool
- CPT codes & ICD 10 codes: How medical billing & insurance claims work (HYW020)
- HYW private Facebook community
Read this episode as a post:
Andrew Chen 01:22
My guest today is Danielle Kunkle Roberts.
Danielle is a founder of Boomer Benefits, a national insurance agency specializing in Medicare-related insurance products.
Danielle is a nationally-recognized expert on Medicare insurance. She is a Medicare Supplement Accredited Advisor and the past president of the Fort Worth chapter of the National Association of Health Underwriters.
She is also a member of the Forbes Finance Council and has been featured in Business Insider, Yahoo Finance, Market Watch, and CNBC, among other publications.
And she is the author of an upcoming book called 10 Costly Medicare Mistakes You Can’t Afford to Make.
Danielle, thanks so much for joining us today to share insights and tips all about Medicare!
Danielle Kunkle Roberts 02:00
My pleasure, Andrew. Thanks for having me.
Andrew Chen 02:02
I’d love to start just by getting a little bit better sense of your background. How did you get into becoming an expert on Medicare, Medicare enrolment consulting, and Medicare insurance?
Danielle Kunkle Roberts 02:11
I had an insurance license. Way back in 2005, I used to work with people doing group health insurance and individual health insurance plans, and we noticed that people would always be asking about their parents.
They would get their own insurance squared away and then they would come back to us and be like, “My mom is turning 65 and I can’t make heads or tails of this stuff. It’s crazy. What do we do about this?”
A few times, we said, “We don’t work with those products,” and we’d try to find people to refer them to.
But after the question came up enough times, we’re like, “We should probably look into this. Let’s see why this stuff is so confusing.”
Sure enough, it’s just a beast of a national health insurance program with four parts and 10 supplements and literally thousands of different drug plan and advantage plan options across the United States.
So we could see that there was a good opportunity here to become an expert at something and take all of that confusing insurance language, boil it down into real terms that people could understand, and then help this wave of baby boomers that was getting ready to come through Medicare, 10,000 people a day aging in, who are going to need help with understanding all of those things.
And it slowly just took over our business. For many years, we have just solely focused on the Medicare population.
We help them learn Medicare, get all the basics down, understand what their federal government benefits bring them, and then help them make supplemental choices for coverage that fills in the gaps.
We’ve helped over 50,000 people now over the course of that 15 years with making their Medicare decisions. And that brings us to where we are today where I know a little more than the average person on the street about Medicare.
Andrew Chen 03:46
Most folks understand at a high level, Medicare is the subsidized, very affordable, and universal health insurance program in the U.S. that covers healthcare for seniors, or in some cases, disabled persons.
Largely funded from Medicare taxes that are deducted from wages. And this federal subsidy covers 75-99% of actual costs.
But if you could give us a high level overview, what are the key eligibility requirements for Medicare?
Danielle Kunkle Roberts 04:12
One of the things that’s important to know is that your Medicare eligibility is not the same as your Social Security eligibility.
You achieve your full Social Security benefits when you reach retirement age which is based on your birthday. And for most people, it’s around 66 and a half to 67.
Medicare, you are eligible for at 65. So whether you start your Social Security early at 62 or you delay it until 70, regardless, you’re eligible for Medicare in the United States when you turn 65.
And as long as you have worked at least 10 years and had FICA taxes taken out during those years, your Part A hospital benefits will be provided to you at no monthly premium. You don’t pay a premium for those.
But your Parts B and D, you will pay premiums for. So although you’re eligible for Medicare at age 65, there’s parts that you have to sign up for and decisions that you need to make.
I should also mention that there’s a certain group of people that can qualify under age 65.
If you qualify for Social Security disability and you’re 40, you’ll be eligible for Medicare two years into your disability income benefits being paid out to you.
And then there’s certain health conditions as well that can qualify you for Medicare early.
But the main group, of course, the way it was built in 1965 when Medicare was launched, was for people to age into Medicare, which today that age-in is at 65.
Andrew Chen 05:36
One of the members in our private Facebook group (we have a private Facebook group for the Hack Your Wealth website) was recently asking about what options that they have if they live their entire adult lives abroad, outside the U.S. working for non-U.S. companies where they haven’t necessarily been paying into Medicare taxes.
In that situation, do they have any options when it comes to being eligible for Medicare, or are they pretty much out of luck?
Danielle Kunkle Roberts 06:03
If they’re back here living in the United States, they can still sign up for Medicare. They’ll have to pay for Part A.
Although about 99% of all people will qualify for Part A being free, if you have worked less than 40 quarters, you can buy into Part A.
If you have partial credits, which a lot of people do over 30 quarters but not quite 40, you’re going to spend somewhere around $250 for Part A.
If you have less than 30 credits, you’re really not going to have even a partial pro-rated premium, it’s going to cost you close to $500 a month for that.
Now, you may be married to someone, though, that does have the work credits. If you are married to someone who does have that work history, you can get your Part A for a zero premium through your spouse, provided a couple of things are met.
Your spouse has to be at least age 62 and eligible to receive Social Security, and you have to have been married for at least a year.
Andrew Chen 07:00
Broadly, what does Medicare actually cover in terms of inpatient, outpatient, and drug coverage?
Danielle Kunkle Roberts 07:08
We’re very lucky to have the drug coverage today. We didn’t have that prior to 2006.
For over 40 years, people had no drug coverage on Medicare, which was scary. You could have your inpatient drugs covered, but no outpatient.
Today we’re very lucky to have Part D, which is an optional program to get coverage for prescriptions.
But the two original parts, which are your Part A inpatient hospital and Part B outpatient medical, have been around since 1965. We refer to them together as original Medicare or traditional Medicare.
And they cover pretty much anything that is medically necessary. Diagnosis and treatment of a variety of health conditions and illnesses, pretty much anything that a doctor would order that it’s obviously important for you to have medical treatment for is going to be covered by Medicare.
Now, there is a little bit of a caveat in that in the sense that, in the 1960s when Medicare was created, preventive healthcare was not the same as it is today. Also, ancillary healthcare was not the same.
Today we’re used to getting our dental, vision, and hearing insurance through our employers. But back in the ‘60s, that was not common for that to be included in employer coverage.
So today still, Medicare does not cover routine dental, vision, and hearing.
Now, they’ll cover if you have glaucoma or cataracts or some other disease of the eye as anything else. What they’re not going to do is cover for you to go get a new pair of prescription lenses each year.
They’re not going to cover your routine dental visits.
You need to have your own hearing tests. If you need hearing aids, you’re going to pay for those yourself. Original Medicare isn’t going to cover that.
Medicare also has a few things like it doesn’t cover routine foot care, unless you have a health condition that requires it, like diabetic neuropathy.
And of course, it’s not going to cover things like cosmetic. You can’t go and have Medicare take care of your Botox for you. It’s not going to cover fillers or facelifts.
We ladies probably wish that we could get that done, but it doesn’t cover those things.
And one last thing that is really important to know that it doesn’t cover is long term care.
Medicare will cover short term care when you go into a skilled nursing facility after a hospital stay and you’re on the mend and the goal is to get you back to able to care for yourself.
It doesn’t pay for the rent that you pay monthly to live in an assisted living or a nursing home when you’re at a later stage in life and you’re not going to be returning to caring for yourself on your own.
So it’s really important. All the folks that listen to your podcast and are hacking their future wealth benefits, they need to know that long term care is something they need to save up for separately.
Or they can purchase insurance, which is what I help my parents do to pay for a future long term care need if that ever arises.
Andrew Chen 09:58
Is there somewhere where folks can see definitively what is considered medically necessary?
Because there are some things that are clear bright lines. Like you mentioned, cosmetic surgery on the one hand, an actual emergency surgery on the other.
But there might be a gray area where is it medically necessary or does it drastically improve quality of life, but it’s not going to kill you right away?
I’m just curious if there is somewhere where folks can actually see or determine with certainty what is considered medically necessary.
Danielle Kunkle Roberts 10:31
There’s a couple of resources that you can consult.
And then always the best resource is to ask the physician that’s ordering the treatment: “You’ve suggested that I have this surgery. Is this something that Medicare has covered for other patients for you in the past?”
If your physician gives you an advanced beneficiary notice that tells you: “If Medicare doesn’t cover this, you still owe it,” that’s always a sign of, we better make sure that this is going to be covered.
Medicare has, on its website, there is a Medicare coverage page where you can actually type in the item, medical supply, or healthcare service that you’re about to get, and it will bring up all the pages on Medicare’s website where you can read about what is covered.
For example, if you were to go to that page on Medicare’s website (and I can provide the link for your listeners, if you like), you can type in “colonoscopy” and you’d be able to bring up a screening colonoscopy and see that it’s covered once every 10 years or once every two years if you’re considered high risk.
That’s a great tool to go to.
Medicare also now has an app for your smartphone. It’s called the What’s Covered app.
Let’s say that you’re at your doctor’s appointment and he’s suggesting something. You could literally go right onto the app on your phone and search to find out a little bit more information about what’s required.
Pretty much anything medically necessary will be required to be covered by Medicare, but a lot of things do require a doctor’s order or some sort of prior authorization.
For example, you can’t just go to a skilled nursing facility and check in. You have to have had a qualifying three-day hospital stay first before Medicare would cover that.
Same thing with physical therapy. There’s going to be a doctor’s order that needs to happen, and then there’s going to be documentation about why that thing is medically necessary.
There might be something where you decide that it’s covered, but it’s not like you can just waltz off yourself and go and get that coverage. You need to be working with a Medicare provider.
Anything that’s ordered by a doctor that’s not a part of Medicare is also going to be something that may not be covered. You might have to file your own claim for it, or Medicare may not cover it at all.
So those are a few resources.
We have a YouTube video called “Will Medicare Cover My Procedure?” In that video, I go over a lot more detail about determining if something is medically necessary or not.
Andrew Chen 12:49
That’s really helpful.
Please send me the YouTube video link. I’ll link to that in the show notes, for sure.
Danielle Kunkle Roberts 12:55
Andrew Chen 12:56
Are there any network restrictions in terms of doctors, hospitals, clinics, pharmacies that you can go to? How does a Medicare recipient determine which providers will accept their Medicare insurance?
Danielle Kunkle Roberts 13:08
A lot of the physicians in the United States do accept Medicare. If you have been treating with them prior to 65, they’ll usually transition right on over to Medicare with you when you turn 65 and get onto Medicare’s coverage.
A lot of clinics out there have a balance of patients, so they may get full on Medicare patients, meaning Medicare pays less than what “under 65” insurance companies pay. So most doctors’ offices like to have a mix of Medicare patients and also “under 65” patients.
The only time you’re going to run into a real problem with finding a Medicare provider might be when you move to a new town. And it’s not that the doctors don’t accept Medicare. It’s that they have practices that are already full.
You can go to Medicare’s website and they have a directory there where you can search for Medicare doctors.
The good news is about 93% of all physicians, according to the Kaiser Family Foundation, currently do accept Medicare. So most of the time, you’re going to run into these physicians accepting it.
The question you need to say is “Do you accept original Medicare?” If the doctor says yes, then you’re good to go treating with them.
There are some doctors that are considered non-participating providers. What that means is they will bill Medicare, but they reserve the right to “balance bill” you up to 15% beyond that.
So the question then that you’re asking is “Do you accept Medicare?” The doctor says yes.
“Do you accept Medicare’s assigned rates?” If he says yes, that’s great.
If the doctor says no, that’s one of those physicians that could do the balance billing. And there are solutions for that.
For example, you can enroll in a Medicare Supplement Plan G. That is going to take care of any of those excess charges so you don’t have to bother answering that question.
The other thing people need to know, and I’m sure we’ll get into this, but once you’re on Medicare and you’re making a decision between a traditional Medigap plan or a Medicare Advantage Plan, the Advantage plans have networks.
Those networks are much smaller and more local than original Medicare, which is going to cover you at over a million providers across the U.S.
So if you decide to go that route, you’re going to have a little bit of extra homework you need to do upfront in determining if the doctors that you see participate in the plans that you’re looking at.
Andrew Chen 15:23
You mentioned that some doctors may bill you the balance, so it’s important to ask if you don’t have Part G. Is that just up to physician discretion, or is there regulation around who can do that?
Danielle Kunkle Roberts 15:40
There is some regulation around the fact that they can’t just bill you anything they want and it can only be up to 15% more.
Most doctors don’t do that because it’s extra work for their billing department. It’s easier just to accept Medicare’s assigned rates and let it go.
But this is a stepping stone to where if you’ve got a doctor who literally would just stop taking Medicare patients because he can’t make ends meet, he could decide to be non-participating, do the balance bill, bill a little bit more, and that may keep him involved in the program. That’s why it exists that way.
So it’s always just a good question to ask if you have original Medicare and you don’t specifically have a Medicare Supplement Plan G which covers the excess charges.
Plan F also covers excess charges, although that plan is no longer available to new beneficiaries. It’s only some existing beneficiaries that have been on it. Then you don’t have to worry about it.
But let’s say you went with a Medigap Plan N, which is one of the newer Medigap plans. They can bill you the excess charges there.
Although that Medigap plan has lower premiums and the more full coverage you would get with an F or a G, there’s that chance there that you could have the balance billing.
So then you’re just deciding, “Do I want to go through the work of asking each of these doctors this question?”
Sometimes it can result in a little balance bill that comes in the mail for $3 or $10. But if it was a more expensive procedure, it might result in a bill that’s $60 or $70.
If that’s going to be something that would worry you or irritate you when that bill comes in, it’s sometimes a good idea to go ahead and enroll in a supplement that’s going to take care of that for you.
If you go the other route with the Medicare Advantage Plans and the networks, that question doesn’t come into play because those plans have their own rules about what they pay their providers.
In that situation, you wouldn’t need to ask that question. It would more be about are they in the network for that particular plan?
Andrew Chen 17:29
Traditional Medicare comes in Part A and B, and now there’s Part D. Each of which has separate premiums.
Can you help us understand what each of these three parts really are and how they work, including the premiums or premium ranges associated with each, for, say, a senior who is just trying to get oriented to Medicare?
Danielle Kunkle Roberts 17:55
It’s really good and so important for them to know too. One of the things that I cover in the book is so many people enter Medicare and they have no idea that it costs anything.
If you have literally been saving for retirement your whole life and you didn’t know that you needed to have $300,000 set aside for healthcare and retirement, this could be a rude awakening. So knowing what they cost is important.
We covered earlier that Part A, for most people who have worked in the U.S., is going to be a zero premium. And then Parts B and D have premiums.
For Medicare Part B which is your outpatient coverage, around 94-95% of all Medicare beneficiaries will pay the standard base premium, which in 2020 is $144.60 per month. That is what most people will pay.
However, if you happen to be one of those people who is in a higher income bracket, then 5-6% of the population pays a higher Part B premium based on that income.
There is a Medicare costs page on the Boomer Benefits website where you can see a chart. You can look up your income. You’ll see exactly what your premium is going to be.
These change a little bit each year. Medicare typically raises the cost of Part B a little bit each year, and some of those thresholds may change.
But if you’re just ballparking “What do I think I’m going to spend on Medicare in a few years?” you could plug in $144 roughly for Part B as what you would spend if you were getting in today.
And then Medicare Part D, which is optional but is recommended if you have prescriptions that you’re going to need to take, the average Part D plan in the United States is around $32 a month.
There are plans cheaper than that and plans much more expensive than that. But if we were taking an average of everyone across the U.S., that’s a ballpark.
If we add those two figures together, you’re at around $175-180 a month that you’re going to spend on your basic Medicare. And then in addition, you’re going to need either a supplement or an Advantage plan to help fill in the gaps.
So Medicare does not cover 100% of your healthcare costs. And really, this shouldn’t be too surprising because if you think about the insurance you have now, the same situation applies.
You have a monthly premium that you pay for the coverage, either through your employer (you might pay 20% and they deduct that from your payroll checks) or if you have an Affordable Care Act individual health plan, you’re paying a premium to that insurance company for your healthcare coverage.
But when you go in to use the coverage, you still have things like a doctor copay or a deductible in the hospital. And Medicare has those same things.
If you go into the hospital, you’ll be covered for the first 60 days in the hospital, and the only thing you’ll pay is the deductible, which currently in 2020 is around $1400. I think it’s $1408.
One night in the hospital, you can totally expect to pay that, unless you have a Medigap plan that’s going to cover that for you.
That’s what you would spend, but that’s going to get you 60 days in the hospital where they’re covering doctors and nurses that check on you, your medications that are administered to you, all of that care that you’re receiving. So it’s pretty good.
Now, if you’re unlucky enough to stay in the hospital past 60 days, you’ll start paying a daily copay that gets bigger with time, and then your benefits run out at 150 days. After that, you would pay all costs.
Now, I can tell you as an agent who has done this for 15 years, we almost never see someone that exhausts that whole 150 days. It’s very rare.
But it does happen, so purchasing a Medigap plan will get you another 365 days covered in the hospital, which is usually more than enough anyone will need for a lifetime.
Andrew Chen 21:29
Is that a lifetime limit or an annual reset?
Danielle Kunkle Roberts 21:35
Let’s say you go into the hospital on April 1st. That’s going to kick off what’s called a benefit period under Part A.
That benefit period typically runs for 90 days, but it doesn’t close until you leave the hospital or skilled nursing facility and you’ve been out for a full 60 days.
Let’s say you are in the hospital 90 days and you get to Day 91. Those last 60 days from Day 91 to 150 are lifetime reserve days. You only get them once.
If you use 10 of them on that one hospital stay, then in the future, you only have 50 days left. Most people don’t exhaust those.
The good news is when you leave the hospital and you’ve been out for 60 days, when you go back in, the whole thing resets and you’re on a new benefit period.
But that’s only the first 90 days. You have those lifetime reserve days that can only be used one time during a lifetime, either all at once or sprinkled out.
But because the benefit period closes and resets, there’s not a lot of people who have very long consecutive-day hospital stays. So we don’t see people running into that too much.
And then, of course, a Medigap plan will give you all those extra days to where you’re really not worrying about it too much.
More people are concerned about getting to Day 60 and then they’re paying a daily hospital copay around $350 a day, and that continues to get bigger with time.
So we want to have plans in place that are going to cover those things so that you’re not trying to get well but you’re in the hospital worrying about what kind of bills are going to be in your mailbox when you get home.
So there’s your Part A, what you would spend on the inpatient side.
Let’s say you are in the hospital for 10 days and then you’re better, but you still have some wound care going on. The doctor says you can leave the hospital, but you’re ready to go to a skilled nursing facility before you would go home.
That’s okay. He can transfer you there.
Medicare will cover the first 20 days in that skilled nursing facility at no cost to you. But on Day 21, you start paying $176 a day. On Day 100, you run out.
So these costs can be pretty big if you actually do hit them. And then there’s a limit to how long those costs will go.
If people don’t know that going in and then they don’t get better and they devolve into needing long term care, there’s going to be a point there where that benefit runs out and now you’re into paying for your own cost of an assisted living or nursing home. Those are things that we need to plan for.
These numbers are scary, right? They’re big numbers and they freak people out. But we don’t see people running into them quite as much.
It’s more on the Part B side, your outpatient care, where you’re going to incur more of the cost that actually happen on a day-to-day basis.
You go to the doctor. Medicare Part B is going to cover 80% after an annual deductible. A deductible is only $198.
My deductible on my health plan is $6000, so I would love a $198 deductible.
That’s on the Part B side. The first $200 out of pocket, you’re going to spend.
After that, Medicare covers 80%, which is good. You pay the other 20%.
That’s not a big deal on a doctor visit, but it is a big deal if you’re having a CAT scan or dialysis or chemotherapy.
And the bad thing is that 20% goes on forever. There’s no out-of-pocket limit. There’s no cap to protect you.
So we want to have a solution for covering that other 20%. That’s where workers like us come in with plans where you can cover these deductibles and co-insurance percentages that I’m telling you about.
But to get back to your original question, knowing going in that Medicare isn’t free and it doesn’t cover 100% of your costs, just knowing those two things before you get to age 65 puts you ahead of 90% of the other people out there.
We see them come in at age 65 every day, not knowing any of this. Knowing it when you’re younger, when you still have time to save and plan and have compound interest to pay for those future things is really important.
Andrew Chen 25:54
Is there anything you would comment on Part D?
Danielle Kunkle Roberts 25:56
Yeah. Part D is fabulous from an insurance agent perspective because I remember what it was like in 2005 when I would have a client that needed $10,000 a year of diabetes medicine and I had to tell them they were going to pay for it all out of pocket. It was horrible.
So we’re really happy to have Part D.
That said, Part D is a confusing animal. It has four different stages, including a deductible upfront that Medicare sets every year, which currently is around $435 a year.
So you can imagine if you’re used to just going in and paying a $10 copay on your group health insurance plan and now you’ve got to cover the first $400 in drugs out of pocket each year and you’re on a fixed income.
This is not something that seniors are crazy about. So you need to know that going in.
It’s not perfect. There are some things like deductibles.
We hear about the coverage gap, which is a time in the year where if your drug spending goes too far, you pay a little more for the drugs than you might have paid before.
But overall, the best thing about Part D is even if you enroll in the cheapest plan in your state, which is $10 or $15 a month, all of the plans have catastrophic coverage that kicks in to protect you when your limit under spending hits a certain amount.
Currently, if your out-of-pocket spending between what you’ve paid and what the insurance company discounts are reach $6350, then you’re done spending for the year at that level and now you only pay no more than 5% of the cost of your drugs for the rest of the year.
That’s good and bad. It’s good because it’s going to greatly reduce what you’re spending, but it’s bad because you didn’t get there until you spent $6000 plus. These are things that people don’t really like about Part D.
When you’re coming off of employer coverage and you’re getting ready to go on Part D drug coverage, you’re going to want to research ahead of time. Work with an agent. Give him a list of your medications.
Have them run an analysis and give you a ballpark estimate for “The plan that’s probably going to be best for you costs this much, and here’s the copays you would pay on your specific medications at different parts throughout the year.”
This will help you know, “Do I have enough money set aside that I can go ahead and retire now and this will work for me?”
Or “My drugs are going to be really expensive once I get on Medicare. I need to work a few more years and put some money aside and be prepared for that.”
Or maybe you save money in a health savings account and you rack up those dollars over the years so that you have that available for your drug copays when you get ready to retire.
All of those are good planning strategies to be ready for Part D, which is better than what we used to have but certainly not perfect.
Andrew Chen 28:37
It sounds like Part D is pretty complicated. Is there an equivalent Medicare website estimator where folks can get a sense of what their cost sharing liability might be for Part D?
Danielle Kunkle Roberts 28:50
Yeah. Even though you can’t buy Part D directly from Medicare (you buy it through insurance companies), Medicare does have a plan finder tool on its website.
If you are already 65, you can actually create your own portal. It’s called mymedicare.gov.
You can go in and enter your medications and save them so that you can update them each year. Right in that portal, you can run a list of all the drug plans available in your county and exactly what they cost, and you can rank them by your total annual cost.
That includes everything: your premium, your deductible, your copays, everything you spend.
It will tell you which plan is going to cost you the least amount of money over the course of a year, all the way down to the plan that would be the worst one for you. And then you can choose.
But if you’re not 65 yet and you don’t have a mymedicare.gov portal, you can go to just the regular medicare.gov and use the Find a Drug Plan feature. It’s called the Plan Finder tool.
That one doesn’t allow you to save the medications because it’s open to the public, but you could at least do a preliminary search.
Maybe you find, “There’s a plan in my area which is around $30 a month. That looks pretty good.”
“I’m going to work with my financial planner and write down $30 a month. That’s what I’m going to ballpark that I’m going to spend on my drug plan someday.”
“And here’s what my copays are, so I know I need x dollars set aside to pay my prescription copays.”
Andrew Chen 30:15
Got it. I’ll definitely link to those in the show notes too. A lot of good resources here.
If I’m synthesizing correctly, it sounds like the philosophy behind the way you just described how Medicare’s Part A and B are structured is it’s meant to cover you when you’re sick, but when it starts to look more like long-term care, then that’s when it sunsets and you need to find some other insurance arrangement.
Is that an accurate high level assessment?
Danielle Kunkle Roberts 30:42
Sort of. It’s important to understand that even after you live in an assisted living or nursing home, Medicare is still going to pay for all of your medically necessary medical care.
Doctor visits, hospital stays, all those things are still going to be covered. Surgeries.
What it doesn’t cover is the monthly rent for you to live in an assisted living or nursing home.
On the low end, those facilities cost $3000 a month. I had a girlfriend that was paying over $8000 for her parents in a facility.
That’s the part that it doesn’t pay for. You no longer have a mortgage on your home because you’re not living in a home anymore, but you’re living in a center where you’re paying.
So you’re either going to private pay that and be exhausting the savings that you’ve made over a lifetime, or if you do exhaust all of that, you can apply for Medicaid, which is government assistance for health items for people with low incomes. That will help you to get into a facility that has a semi-private room, so you’d be sharing that with another person.
Obviously, it’s better if you have the funds available to make your own choices, but that is something that would be the option. If you ran out of all the money and you just had no way to pay for it, then Medicaid will stick in to pay for those things.
But even when you live in an assisted living or nursing home, Medicare is still going to pay for doctor visits and any other medically necessary care.
Andrew Chen 32:05
Thanks for clarifying that.
When it comes to Part B and D, you alluded to this a little bit earlier, but it sounds like if your income exceeds a certain threshold, you start having to contribute more. I think this is what you were referring to as the income-related monthly adjustment amount, the IRMAA.
Danielle Kunkle Roberts 32:22
Andrew Chen 32:23
Could you describe a little bit about how that works, when the thresholds kick in, etc.? And how much additional liability are we talking about?
Danielle Kunkle Roberts 32:32
In 2020, the thresholds are $87,000 for an individual filer and $174,000 for a married filer.
It’s important to know that everyone pays their own Medicare Part B premium.
Let’s say you and your spouse were underneath the $174,000. You will each pay $144.60 out of your own personal Social Security check.
They’d take it right out of your Social Security check, if you’re on Social Security by that point, to pay for it. So that’s $144.60 times two.
But if you’re married and you’re over that limit, or if you’re single and you’re over $87,000, then there’s five levels above that.
I think the first level, your premium bumps up to around $202. If you get all the way up to the highest level, then it is almost $500 a month each, if you’re married. They’re still going to base it on your married income, but you each pay your own premium.
So you could see that if you were in that high income bracket, you would pay substantially more for Part B. And they would also tack money onto your Medicare Part D drug plan premiums as well.
That can increase your drug plan premium. I think in the highest level, you pay an extra $72 a month for your Part D drug plan.
These are all factors that you need to know ahead of time.
And something else is that they’re going to base that on your income from two years ago because the IRS is getting those records over to Social Security, and the time that that takes, you’ll have delayed tax filings and things like that. So they’re always looking two years back.
If you have retired since then and you were making more than the threshold but now you make less, Social Security does have a reconsideration form that you can file with them.
They will look at the evidence you present of your retirement and they can adjust that down for you, so that you’re not always waiting for that next tax year to catch up. You can appeal that if you have retired and your income is now lower.
Andrew Chen 34:41
One of the key takeaways I’ve been hearing is that really it is possible that your all-in cost when you factor in premium, deductible, copay, it could actually be unlimited if you’re in an unfortunate set of circumstances.
After you factor in all costs, what do you typically see the range that someone can expect to pay monthly for Medicare coverage that includes all three parts?
On a spectrum, say low and high, say on the low end you’re assuming you’re healthy and retired. You’re not earning any income anymore, so you’re not paying any IRMAA. And you have low-ish deductibles and copays.
And by contrast, on the high end, assuming you’re in poor health and you’re also earning a high income. You’re paying the maximum IRMAA along with high deductibles and copays.
What do you typically see? Just so we can get a mental image of the typical person. Even though it can be unlimited, but the typical person, what is that range that you typically see for the all-in cost?
Danielle Kunkle Roberts 35:51
We know that approximately 95% of people pay that lower Part B premium, around $144. And they can add a Part D drug plan for as low as $10 or $15 a month. And in a lot of the Midwest states and in Texas, you could add a Plan G Medicare Supplement for roughly $100.
I usually give people a ballpark of roughly $250-300 per person. For really full coverage, that’s going to have a $198 deductible, and then everything else is covered except for your prescription copays.
That’s a pretty good ballpark for a lot of people in the average states. But there are some states where the cost of healthcare is higher.
If you live in New York or in Florida, in Connecticut, there are some states where you might pay $200 a month for that same Medicare supplement. In that scenario, you might decide to go with a Medicare Advantage plan.
The Advantage plans in some areas have what’s called a zero premium because you’re agreeing to get all your care through a network. They’re going to try to attract you to that plan by offering the plan for as low as possible. Some of them will charge nothing for the plan.
In that scenario, you’re just paying for Part B. You’ve enrolled in an Advantage plan with a zero premium.
If it includes a Part D drug plan, which there can be a built-in Part D drug plan in an Advantage plan, you might be only spending the $144.60 out of pocket and you’ve got all the pieces there that you need.
And you won’t really know where you’re going to fall within there until you start looking at the options, finding out which plans your doctors participate in, and deciding which route to go.
Now, if you were on the other end of that spectrum, let’s say you’re at the highest end and you’re going to spend $490 for your Part B premium, and you live in Florida with a $200 a month Medigap plan.
You don’t want to do the Advantage plan because you have a lot of health conditions and you want the fullest coverage that you can buy. You might be spending $700-750 a month for the coverage that you want, depending on where you live and what that income looked like.
You can see, just knowing that, that these are numbers you really need to crunch well ahead of the day that you enter Medicare so that you can be prepared.
Andrew Chen 38:05
Okay, helpful. What is the initial enrolment period, and how does the enrolment process work?
Danielle Kunkle Roberts 38:13
If you’re already taking Social Security, let’s say you signed up at 62, they are going to assume that because you are taking Social Security, you’re no longer working.
They will also assume that you don’t have access to group health coverage and they will just sign you up for Medicare Part A and Part B at 65. Your card will show up in the mailbox a month or two before you turn 65.
But if you have not yet taken Social Security, which is the case for more and more people today because they’re delaying those benefits until their full retirement age or 70 to get a bigger Social Security benefit, then you need to initiate your own enrollment.
There is a seven-month initial enrollment window for Medicare that starts three months before the month of your 65th birthday, goes through that month, and goes for three months after.
As long as you apply in the three months before, your Medicare benefits will always start on the 1st of the month in which you turn 65. Even if your birthday was on the 31st, your benefits will still start on the 1st.
Now, if you happen to be a person whose birthday falls on the 1st of the month, they’re going to treat you like you turned 65 the month before.
Let’s say your birthday is June 1st. Your Medicare could start May 1st.
It’s a weird little thing. It’s something similar with Social Security like that too.
But for the most part, you want to just think of that seven-month window with your 65th birthday being right smack in the middle. That’s when you need to initiate an enrollment to avoid a penalty.
If you don’t enroll in Medicare during that time and you don’t have other creditable coverage (you can’t say you delayed Medicare because you have a large employer health coverage), then you would be subject to a late penalty which can be 10% for every 12-month period when you could have been enrolled in Part B that you weren’t.
If you just didn’t know any better and you didn’t have other coverage and you were healthy at age 65, and now you’re 72 and you decide that you’re going to go and get some coverage, you could pay a 70% higher premium for Part B for the rest of your life because you missed that initial enrolment period and you didn’t have other creditable coverage.
This is the kind of thing that people miss all day long because they just don’t know any better. And those penalties are with you forever. So it’s super important to know this stuff ahead of time.
Andrew Chen 40:29
So that penalty is, when you said 10% per month, your premium amount will increase by 10% cumulatively? Month 2 now is 20%, and Month 3 now is 30%, and that persists for the rest of your life?
Danielle Kunkle Roberts 40:44
It’s 10% for every 12 months that you missed.
Andrew Chen 40:49
Danielle Kunkle Roberts 40:50
Let’s say you just missed by one year. You’re going to pay a 10% higher premium every month for the rest of your life. If you missed it for two years, it will be a 20% higher premium.
But those premiums for Medicare do go up every year and you’re paying a percentage of that higher premium each year. So that penalty will grow with time.
Andrew Chen 41:11
I see. As a policy matter, it sounds like the reason that penalty exists is they don’t want you to be careless and get sicker when you could have had care. Is that the way to think about it?
Danielle Kunkle Roberts 41:25
Yeah, I think so. They want there to be some punitive damage that you also incur because they need healthier, younger people paying into the system to keep the trust funds going for everyone that’s involved.
And they need a way to make you pay attention.
By putting a penalty out there, they know the word is going to spread and people will be more likely to go and research that ahead of time, so that they can get enrolled and not be in a situation where they don’t have any coverage, now they’re relying on county assistance, or they have medical bills that never get paid back. That’s what they’re trying to avoid.
Andrew Chen 42:01
Some retirees choose to opt out of traditional Medicare A and B, and instead, they enrolled in Part C, which is what you talked about earlier in Medicare Advantage.
What is Medicare Advantage in a little bit more detail? And how does it work?
Danielle Kunkle Roberts 42:25
Medicare Advantage was designed as an alternative to Medicare and Medigap because not everyone can afford a Medigap plan.
There were always people that would have just original Medicare, which is fine, until you get sick and now you’ve got to pay 20% of chemotherapy and you’re very quickly filing bankruptcy for medical.
And we could see that there needed to be another solution for people who would just risk it on original Medicare because they couldn’t afford a Medigap plan.
With Medicare Advantage, you are agreeing to get your Medicare Part A and B benefits through a private insurance company’s plan. Most of the time, these plans have networks. It will be either an HMO or a PPO.
So a Medicare Advantage Plan looks very similar to group health insurance that you’ve had in the past.
If it’s an HMO, you’re typically picking a primary care doctor. You need to see that doctor first to get a referral before you can see a specialist.
Because it’s an insurance company, there’s going to be more prior authorizations that you have to get done with an Advantage company than you would with original Medicare.
If you go the PPO route, those plans are a little more flexible. You can go out-of-network, if you need to, but you’re going to just pay more to do that. Whereas with an HMO, there’s no out-of-network coverage, unless you have an emergency with most HMO plans.
And then there are some hybrids, like an HMO POS, which is somewhere in the middle. But for the most part, those two networks are the most common.
So you’re deciding between a couple of things.
If you stick with original Medicare, you have freedom of access to see any provider anywhere in the nation that accepts Medicare.
If you travel a lot or you’re a snowbird, you’ve got houses in two locations, you can see a doctor in Kansas. You can see a doctor in Arizona. These are all good things.
And original Medicare, being the federal government, tends to rubber stamp a lot of claims, and there are not as many prior authorizations and things that you would see with an Advantage company.
But with original Medicare, you’re going to need to really pick up a Medigap plan, which is costly.
Let’s say you’re a really healthy person. You rarely go to the doctor. You rarely travel.
And you have a plan right here from a Part C company offering a Medicare Advantage Plan in your area. Your doctor is in the network.
It has a built-in Part D drug plan. That’s a bonus. Now you don’t have to pay for a separate Part D plan.
You might look at that and say, “I’ve been on HMO plans all my life. I’m okay with this. I don’t mind getting a referral.”
“Now I don’t have to pay a premium for a Medigap plan. This HMO plan has a lower premium or a zero premium.”
It can be very attractive to a lot of people.
Advantage plans can also include things that Medicare doesn’t, like gym memberships, dental, vision, and hearing coverage.
Most of the time, those things are very limited. It’s important for your listeners to know that Medicare Advantage Plans change their benefits every year, so you need to know going in.
Don’t join a plan just because you like a gym membership because they could drop that next year. You want to have a plan that’s going to cover you for the really important things.
How is it going to cover on cancer if something happens to you? What if you were in a terrible accident? You want to buy a plan that your doctors are in the network for.
All of those things need to be considered first.
If you have a couple of plans to choose from, one has a gym membership and one doesn’t, then that might be where you make those decisions.
But those are some of the things that people are attracted to Advantage plans over.
What’s really important for you to know about is when you first become eligible for Medicare and you enroll during your initial enrollment period, your Part B effective date gives you a one-time six-month window to buy any Medigap plan you want with no health questions asked.
After that, in most states, to get a Medigap plan, you’re going to have to answer health questions and they can turn you down for coverage.
Let’s say you’re pretty healthy. You go ahead and then you say, “I’m going to go for this cheaper coverage, the Medicare Advantage.”
And now, three or four years down the road, you get sick and the oncologist that you want to see is not in the network. So you transition back to original Medicare during the annual election period and you say, “I’m just going to go buy a Medigap plan.”
They’re going to turn you down because you have cancer and they don’t want to take that on.
If you go the Medicare Advantage route, you have to know going in that, later on, you can easily get back to original Medicare, but you may or may not be able to get a Medigap plan in the future.
So this is a big decision you’re making upfront. And you need to really think it through when you’re deciding between original Medicare and Medigap and then Medicare Advantage Plan, because it could be a situation where you start with one kind of coverage and you can’t get back to the other kind of coverage later.
I will say, a thing about Advantage plans that is really great is they don’t have health questions starting in 2021. Even in 2020, they have one health question, which is, “Do you have end-stage renal disease?”
As long as you’re not waiting on a kidney transplant or getting dialysis, anyone can qualify for an Advantage plan. You could sign up during the next annual election period and get on a plan.
That’s a really good thing about them. They’re easy to qualify for.
It’s more difficult to qualify for a Medigap plan. If you want to go that route, it’s good to get that during that one-time six-month window which only comes when you first sign up for Part B and then it’s gone forever in most states.
Andrew Chen 47:43
Wow. So you have to make that Medigap choice during that six-month window regardless of if you go with original Medicare or Advantage, otherwise you lose it forever?
Danielle Kunkle Roberts 47:56
Yeah. You can only get a Medigap plan if you have original Medicare.
So you’re deciding right then when you turn 65, “Am I going to go original Medicare and Medigap, or Advantage?”
Sometimes people will start with the Medigap plan. And they know that if it gets too expensive over the years or they feel like they’re wasting their money, it’s easy to change to an Advantage plan because that has little to no health questions. It’s more difficult to go the other direction.
Statistically, right now, about 34% of all new Medicare enrollees choose an Advantage plan. You can imagine why. Getting a plan with a zero premium is very attractive.
If you can find a plan in your area that your doctors are in the network for, that’s great. It’s really important to make sure your doctors accept the plan.
Also, if it has a built-in Part D drug plan, does it have your drugs on the formulary? You don’t want to enroll in a plan that doesn’t cover your $400 diabetes Lantus pen or whatever drug that you have that’s really expensive. So you’ve got to do some homework to make sure those things fit.
That said, here at our agency, probably 85-90% of our clients choose Medigap. And that’s because we educate people about what Advantage plans are all about and the things they need to know.
A lot of times, they’ll go the Medigap route. But I would say 10-15% of our clients do choose Medicare Advantage right out of the gate.
If they’re good with that choice, if they know the good and the bad, the pros and the cons of that, and they know that going in, then those plans can work out really well for them.
My best tip on Advantage plans is have some rainy day money set aside, because with Medicare Advantage Plans, there are some things where you’re going to pay 20%.
A lot of times, durable medical equipment, you pay 20%. A lot of times, chemotherapy, you pay 20%.
Although Medicare Advantage Plans have a cap on them to protect you from spending beyond a certain limit, that resets every year.
You could have an illness toward the end of the year that causes you to hit your out-of-pocket maximum and then everything resets in January. You hit it again. You might spend $10,000 in a six-month period.
If you don’t have money set aside for that, you’re going to quickly be very unhappy with your Advantage plan. If you know all that going in, you have that money set aside for a rainy day, then it’s not a big deal.
Or you might be a person that would take the money you would have spent on a Medigap plan and put that into an account every month, saving up for the rainy day. That’s also a great strategy.
Both choices are good. You just really need to dig into the details and be sure that you choose one that best fits your budget, your needs, and your lifestyle not just right now, but which one is going to fit you down the line when you might have an illness. You need to think about all of those things.
Andrew Chen 50:36
The initial enrolment period that we talked about earlier where there’s a penalty if you are delayed beyond that initial enrolment period, does that also apply to Part D for prescription drugs as well, or only B?
Danielle Kunkle Roberts 50:57
It does. You can sign up for a Part D drug plan during that initial enrolment period. As long as you sign up then, there’s not a penalty for Part D.
If you don’t sign up then and you don’t have other creditable coverage either through an employer or VA benefits or something, and later you decide to get Part D, you pay a penalty there too.
The Part D penalty is 1% per month cumulative for every month that you could have been enrolled and you were not.
If you waited a year, and then during the annual election period you decided to enroll in Part D, when you finally get your plan, they’re going to tack on a 12% extra premium and you pay that forever: 12% per month every month for as long as you have Part D.
But if you waited five years, that would be a 60% premium.
Even if you don’t take medications, it’s always a good idea to enroll in at least the most inexpensive plan in your state and the one with the lowest premium so it doesn’t cost a lot out-of-pocket, both for avoiding the penalty but also because you can only enroll in drug plans at certain times of the year.
If you don’t enroll in your initial enrollment period and then in February you get sick and you need a $700 a month medication, you don’t want to have to pay that out of pocket all year until you can use the annual election period to get back into another drug plan.
This is important today more than ever because there’s oral chemotherapy medications which cost thousands of dollars a month, and some of those are outpatient meds that would fall under Part D.
So that’s my tip there. Enroll right out of the gate, unless you have other coverage.
Even if you don’t take meds, enroll in a very inexpensive plan in your state because all of them have parameters. They have to include six classes of very important medications, like anti-seizure, antidepressant, anti-cancer.
And all drug plans cover at least two medications in every therapeutic class. Even if you get a new health condition in the middle of the year, there’s going to be something on that formulary that your doctor could choose to treat you with.
And then during the annual election period, you can switch to a different plan if you want to. But at least you’re covered and you’re not accumulating the penalty.
Andrew Chen 53:06
So during each enrolment period annually, you can ratchet up if you need it. But it sounds like to be on the safe side, just buy the cheapest one even if you don’t anticipate needing it right away.
Danielle Kunkle Roberts 53:16
Andrew Chen 53:17
Got it. The reason I ask this is because you mentioned that if you’re on Advantage, you can always go back into traditional Medicare.
We’ll come back to Medigap in a moment. I know that’s a one-time thing.
But if you did switch back over to original Medicare plus Part D from Advantage, there would be no penalty in that case because you had creditable coverage?
Danielle Kunkle Roberts 53:40
Andrew Chen 53:42
Is that also assuming that the Advantage plan had a built-in Part D equivalent?
Danielle Kunkle Roberts 53:47
Yeah. Let’s say you enroll in Medicare Advantage right out of the gate, and then down the road, you returned to original Medicare and a standalone Part D drug plan.
Because you maintained Part D that whole time since you turned 65, there’s not going to be any penalty. You can always return to original Medicare without a penalty during a valid election period.
So then they’re looking at were there any months where you didn’t have creditable drug coverage? If your Advantage plan included Part D, which 90% of Advantage plans do, then you would just leave that to go to original Medicare and pick up a standalone Part D.
Andrew Chen 54:20
Just as you would advise seniors to pick a cheap Part D plan just to be covered so they don’t accrue that penalty, if they start with Advantage, would you advise the same?
Find one of those 90% that has a D equivalent rather than one of the 10% that doesn’t, for the same reason?
Danielle Kunkle Roberts 54:40
The only time that I would recommend an Advantage plan that doesn’t have a built-in Part D drug plan would be if you have another means of getting drugs.
If you have Indian tribal benefits for medications, if you’re a veteran and you get your drugs through the VA, then you could skip the Part D.
That being said, my dad is a veteran. He’s a Vietnam era war veteran and he has VA coverage.
I got him a Part D plan anyway because the VA coverage doesn’t cover all medications. It covers a lot of generic medications, and I didn’t want my dad to ever have to choose a medication that wasn’t the best medication for him because he didn’t have that coverage.
To me, spending $30 a month to have the option of filling through a Part D drug plan or the VA was great. But there are many veterans out there that do the Medicare Advantage with no built-in Part D and they just get their drugs through the VA. That’s certainly an option.
And the good thing for veterans is that VA coverage is creditable. If they change their mind down the line, they can just wait until the next annual election period and pick up a Part D drug plan and there won’t be a penalty.
Andrew Chen 55:48
For Advantage plans, I understand that one of the tradeoffs you’re making is generally a smaller network.
At what level of broadness do they tend to operate at? Is it at a city level, regional, state? They sound like they’re not national.
How should somebody who’s thinking about Advantage think about how broad the network is?
Danielle Kunkle Roberts 56:15
They can be as big as regional, which is usually the whole state. And those regional plans exist on a statewide level so that people in rural areas also have an option for an advantage plan.
But what you need to think about is where do you get your healthcare now?
I live in Tarrant County. There’s tons of Advantage plans here.
Some of them, the network is only Tarrant County, or maybe it’s Tarrant and Dallas County.
Some of them are 5-10 counties in the Greater Dallas-Fort Worth area. That one is going to probably have more doctors.
The cool thing about your mymedicare.gov portal or even the free Plan Finder you can use on the generic Medicare website is when you run the list of Advantage plans in there, you can click through and see how many doctors are in the network.
If you decided to go the Advantage route and you talk to your doctor and he says “I’m in these five Advantage plans. Any of these will work for me,” go and look up all the benefits for those, and then look to see the size of the network.
If you have two plans that are the same price and the benefits are similar between the two of them and you’re trying to decide, you could say, “This one has 500 doctors. This one has 5000 doctors.”
I’m going to go with the one that has the bigger network in that scenario.
You’re right that they aren’t national, so if you move out of the plan’s service area, you would have a window called a special election period to switch to a Medicare Advantage Plan in the new area that you move into.
Andrew Chen 57:44
Got it. That was actually my follow-up question.
Beyond everything that we’ve already discussed, are there any other tradeoffs or considerations, whether it’s cost differences, network coverage or anything else that folks should consider when deciding between an advantage plan versus original Medicare?
Danielle Kunkle Roberts 58:07
I think we’ve hit the high points.
One thing I would always tell you, just from our own experience, is having had all the people that we’ve helped over the years, I have found that everyone loves their Medicare Advantage Plan until they get sick.
I go back to that rainy day analogy. If you have a Medicare Advantage Plan, and on that plan you’re going to pay 20% for chemotherapy, and that plan has a $4000 out-of-pocket maximum, the most you’re going to spend on all of your medical treatment that year that will be Part A and B would be $4000.
But your drugs are separate. You could spend quite a bit more than that.
A lot of times, people undergoing cancer treatment will have medications as well. So that could be a big chunk of change.
But you could be on Medicare for 10 or 15 years before you get cancer. Maybe that Medicare Advantage Plan would have been perfect for you that whole time.
Just think about it logically. Someday we’re going to have some sort of major illness or life event.
It could be a heart attack. It could be cancer. It could be something else.
Have the rainy day funds. Put the money away.
I’m 46 and I put money into a health savings account every month so that I max it out month in and month out. I hope that by the time I’m 65, I’ve got $50,000 in that thing. That’s going to take me a long time to spend down that money.
That’s a perfect scenario for someone that’s thinking about an Advantage plan but they want to know that in a year, or maybe they’ll have more spending on that Advantage plan, are they going to be in good shape for that?
So if you apply that rainy day mentality, those are the people that we see end up happy with their Advantage plans long term because it doesn’t surprise them.
The ones that decide they don’t like their Advantage plans are the ones that have forgotten or never knew in the first place about that risk for some more spending on a year of bad health. And that usually happens when they’re overwhelmed and confused by all their choices.
They don’t work with an agent. They go online and sign up for a plan. They didn’t even realize the plan has a network or they didn’t know about the out-of-pocket maximum.
That only happens if you don’t do your research ahead of time.
Andrew Chen 1:00:15
I was wondering if you could also just comment a little bit more about Medigap and supplemental Medicare insurance. I know it’s more expensive and I know it’s meant to cover the overages that original Medicare doesn’t get to.
But I was curious if you could talk a little bit more about how it works and what kind of costs are involved with Medigap and supplemental Medicare insurance.
Danielle Kunkle Roberts 1:00:42
Sure. With Medicare supplements, which are also called Medigap plans, same thing.
There are 10 standardized plans. Medicare standardized the plans so that it would be very easy for you to compare.
Those plans are A, B, C, D, F, G, K, L, M, N, and a high deductible version of G.
And you think, “Oh my gosh. We have Medicare Parts A, B, C, and D, and now you’re talking to me about Medigap plans A, B, C, and D. This is too confusing.”
The good news is, statistically, almost no one enrolls in Plan A, B, C, or D. By far and away, there have been three popular Medigap plans, and those have been Plan F, G, and N.
Now, if you’re new to Medicare, on or after January 1st of 2020, you can’t buy Plan F, so we don’t really need to go into too much detail on that.
But if you enroll in a Plan G, you literally have a $198 deductible and then nothing that you pay.
For any Medicare Part A and B covered service (surgeries, doctor visits, knee replacements, physical therapy, durable medical equipment), you’re going to pay nothing.
Andrew Chen 1:01:54
No deductible, no co-insurance, no copay?
Danielle Kunkle Roberts 1:01:58
No hospital deductible. Just the $198 outpatient deductible and then nothing else.
That’s what a Plan G buys you. If I could buy that plan, I would buy it in a heartbeat.
My parents, for sure, Medigap plans all the way. My mom is absolutely the kind of person that would make herself sick in the hospital worrying about what’s going to come in her mailbox, so I want her to have the plan where the costs on the backend are totally predictable and nothing.
Medigap plans work great for that. That’s why they cost more: because you have more flexibility.
You have more doctors to choose from. You have freedom of access. They’re guaranteed renewable.
Neither plan, Advantage or Medigap, they can’t drop you for getting sick. That’s a standard feature built into any of these coverages.
But those are the reasons why Medigap plans work well for people.
The thing that some people don’t like is, because Medigap plans were created in the ‘60s and standardized in the ‘90s, that was before Part D came into the scene, so they don’t include outpatient drugs. You have to add on that separate standalone Part D drug plan, which is an additional premium.
So you’re paying a premium for Parts B and your Medigap plan and now a Part D plan. And those things add up. So you’re weighing the cost and coverage factors there to determine that.
If someone comes to me at 65 and they have a history of cancer, I’m going to recommend a supplement Plan G all day long.
But what if we had someone that said, “I really like the idea of a supplement, but I’m pretty healthy. I don’t feel like I need to buy the most comprehensive coverage”?
Those are the people where a Plan N would work for them. It has a little less benefits, but then the premiums are lower.
With a Plan N, just like Plan G, you pay the $198 deductible, and then afterward, you don’t have anything else. But on Plan N, you do have up to a $200 doctor copay, up to a $50 ER copay, and excess charges.
If you happen to see a doctor and you forgot to ask, “Do you accept Medicare’s assignment rates?” and he’s a non-participating Medicare doctor, which means he can bill a 15% on Plan N, you’re going to cover those bills.
So your premiums are lower, but you’re going to do a little more work because you’re going to pay copays and you’re going to have to ask the doctors about whether they accept the assignment.
But that’s why there’s differences in the plans, so that you can choose whether you want a really full coverage plan or one with not a lot of coverage.
But frankly, even Medigap Plan A, it covers the most important thing. The most important thing is the 20% that Part B doesn’t cover.
Medicare covers 80%. Even a Medigap Plan A will cover the other 20%. And that’s the most important thing.
So then you’re looking at the other plans available in there to decide which one has the mix of benefits versus the premium that you pay to fit into your budget.
Andrew Chen 1:04:47
It sounds like the most common ones are G and N. What are the premiums for those?
Danielle Kunkle Roberts 1:04:53
Here in the Dallas-Fort Worth area, if you were a female turning 65, non-smoker, you could probably get a Plan G for around $100 a month, and a Plan N would be $70 or $80. So a little bit lesser in the premiums.
In some states, there’s not as big of a swing in that premium. You might look at the two and be like, “Why would I buy the N? The Plan G is only a little bit more.”
Just depending on where you are, you’re going to make that call once you get the quotes based on your ZIP code, your age, your gender, your tobacco usage. Some of them have household discounts. All those things depend on where the quotes will fall.
Andrew Chen 1:05:29
It sounds like the cost ranges that we talked about a while back, if you wanted to get a Medigap on top of that, then you’re looking at $100-ish additional in premium costs.
Danielle Kunkle Roberts 1:05:43
Yeah, at least.
Andrew Chen 1:05:45
And it depends on the ZIP.
Danielle Kunkle Roberts 1:05:46
Yep. It depends on the plan and the ZIP and gender and all of those things too.
Andrew Chen 1:05:50
How much higher can it get? What’s the high end for a Medigap supplement?
Danielle Kunkle Roberts 1:05:55
I think the most expensive Medigap plans are usually in Florida. Somebody might pay $220-250 for the same plan that in Texas would be $100.
For example, Florida is one of the states where you would want to actually consider the Medicare Advantage Plans a little more carefully because there’s so many Medicare beneficiaries in that state that the insurance companies all go in and just compete like crazy.
They have created Advantage plans there that are really rich. Lots of zero premium, low doctor copays, low out-of-pocket maximums. Lots of extra things, like the dental, vision, and hearing.
In that state, if you have a plan like that with really good Medicare Advantage benefits versus a Plan G is going to cost you $220, in that scenario, I might say, “Are you the kind of person that would take that $220 and put it in the bank account for a rainy day and know that you’re saving that up for your Advantage plan in the future?”
And if that person tells you, “Yes, I am that kind of person,” great. Let’s look and see if your doctor accepts Medicare Advantage.
In some states like that, you may have Advantage plans that are really rich, Florida being the main one. Some good ones in California as well and a couple of other states.
You can look at how the benefits go before you make that choice.
Andrew Chen 1:07:16
I see. It sounds like Parts B and D have standardized rate cards. But Medigap, it differs based on your condition and where you live.
Is that just because the cost of care differs? Does this correlate with that, or is that for other reasons?
Danielle Kunkle Roberts 1:07:31
It’s mostly the cost of care in those areas. And then sometimes the open enrolment rules can affect it.
For example, in New York, you have the cost of care. But also in New York, they are all year round in open enrollment for Medigap, which means everyone there can wait until they get sick and go switch their plan.
This means the insurance companies are covering a lot more costs than they otherwise would, so they jack their rates up. So you’re going to pay more for Medigap in that state.
And sometimes when you’re looking at that variance, with Medigap plan being a lot more expensive in a certain state, sometimes you look at the Advantage plans and maybe then it looks like a better buy, provided, of course, that your drugs are covered and your doctors are on the network.
Andrew Chen 1:08:10
How could they do that in New York if there’s only a one-time enrollment grace period?
Danielle Kunkle Roberts 1:08:16
The one-time enrollment is a federal rule, but the states can improve upon that if they want to.
There’s a few states (and I do have this information in the book and also on our Boomer Benefits website) that have different rules. New York is one of them.
For example, California has a rule called the “birthday rule.” If in California you have an existing Medigap plan, in the 60 days surrounding your birthday every year, you can switch that Medigap plan to a different Medigap plan of equal or lesser benefits with no health questions.
What’s good about that is if you get rate increases and then there’s another plan that’s $10 a month cheaper, you could switch to that plan without having to answer health questions. That’s just a rule that the state legislature in California has built in for that state.
What it doesn’t do is let you go from an Advantage plan to a Medigap plan. You’ve got to already be in the Medigap family. There’s a few states out there like that with a few rules, a handful of them.
But for most other people, Texas and a lot of other states, switching would require you to answer health questions and go through underwriting. A lot of those people could be healthy enough to change, but sometimes they aren’t.
Andrew Chen 1:09:30
So notwithstanding the federal grace period, that six-month window that you talked about for Medigap plan that applies to the federal level, once you’re in Medigap, it sounds like you can trade in and out between different Medigap plans but you may have to go through underwriting and may be denied for that reason. Is that correct?
Danielle Kunkle Roberts 1:09:48
Yeah, that’s right.
Here at our company, whenever our clients get a rate increase, we’re calling them at 12 months. Because with a Medigap plan, just like any other insurance (auto insurance, health insurance), you get annual rate increases.
We call our clients around 12 months and say, “You should have gotten a rate increase letter. How much was your increase?”
If their policy went up $5 a month, most people don’t want to even both with the paperwork to change. But then every few years, there will be a year where it went up 12%.
If we quote other Plan G’s in your area and we can move you to a plan that’s $20 a month less, if you can pass the underwriting questions, we’ll go through those with you on the phone and say, “You have a pretty good chance.”
“Let’s go ahead and submit. See what the underwriter says.”
The underwriter is going to see that you answered no to all the health questions. They’re going to look up your prescription history.
And they are “Big Brother.” They know everything that you’ve ever taken.
They can pull that information up and they’re going to see, “Is there anything here in the prescription history that doesn’t match what they’re telling me on the application?”
They’re looking for things that are chronic health conditions, stuff like that. But if there’s not an indicator of that and you look like a pretty good risk, they may offer you the coverage.
And just because you have a health condition doesn’t mean you can’t switch. Maybe you take a blood pressure medication or a thyroid medication. Those things, in and of themselves, a lot of the time are not a problem.
But some things combined could be an issue. If you have a diabetes medicine and a cholesterol medicine and a high blood pressure medicine, those three together can be a problem.
If you have a breathing medication that’s indicating that you might have a chronic breathing disorder, that might be a problem.
And then, of course, any type of chronic incurable disease (multiple sclerosis, Parkinson’s, rheumatoid arthritis), those are things that typically will cause a decline.
So that person, we’d be advising them to stick with the plan that they have. That might mean that they’re going to keep eating rate increases as the time goes by. But every year, they can decide whether they still want to do that or they have the option to look at an Advantage plan if they want to change.
Andrew Chen 1:11:46
Just wrapping up here, I wanted to just chat very briefly about retirees who retire abroad.
There’s more than half a million of them at least who are receiving Social Security abroad. There’s probably more who are actually retired abroad.
But Medicare doesn’t pay for care outside the U.S., except in some very limited situations. What are those situations?
Danielle Kunkle Roberts 1:12:07
It’s super limited. They’re not going to cover anything that happens to you while you’re living abroad.
If you’re on your way to Alaska through Canada and something happens to you and the Canadian hospital is closer than a U.S. hospital, they would cover that.
If you’re in a border situation and the closest care within 50 miles for an emergency is in Mexico instead of Texas, those kinds of situations. Very limited situations where Medicare will cover you.
But if you live abroad, the question becomes, when you turn 65, should you enroll in Medicare? Should you not? You’re not sure if you’re ever going to come back.
If you know for sure that you will come back to the U.S. at some point, then you should at least enroll in Medicare Parts A and B so that you don’t have the late penalty.
At least then Medicare is covering 80% of your costs, and when you return later on, you have the option for an Advantage plan. I would recommend at least that.
If you’re not sure if you’re going to ever come back, then maybe you don’t want to enroll in a Medigap plan. Just have the Part B.
Because if you say you’re not coming back but later you change your mind, if you only had Medicare Part A, which everyone that enrolls in Social Security has Part A, then all you have is hospital coverage. That doesn’t cover chemotherapy or outpatient surgery.
If you did come back to the U.S. needing that care, you would have to wait until the next general enrollment period to pick Part B up. That’s from January to March.
What if it’s April when you figure this out? You’ve got to wait all the way until the next year to enroll in Part B. The benefits for that don’t start until the following July.
Depending on when this happens, you would wait over a year to get that coverage and you’re going to be slammed with a 10% late penalty for every 12 months that you could have enrolled.
I typically tell people, “If it’s affordable for you, even if it’s a stretch, enrolling in at least Part B is a pretty good bet.”
And then sometimes what people will do is if they are pretty sure they’re going to return to the U.S., you could enroll in Part B and then a high deductible Plan G supplement.
Those are very inexpensive. I think my dad’s is $50 or $60 a month.
He pays the 20% out of pocket. He pays all of his own Medicare expenses up until a deductible of $2340. But if he hits that, then he’s done for the year and it functions just like a regular Plan G.
That’s a good option for people that are abroad. They might enroll in a plan like that that’s cheaper because they’re going to take on a little bit more risk.
But at least they have the coverage, so that if there’s a time where they’re coming back to the U.S. because they’re sick and they want care here, that’s an option that usually works well for people too.
Andrew Chen 1:14:53
So it sounds like if you know you want to enroll in Medicare even if you’re retired abroad, either because you know you’re returning or because if you get sick, you will return, is it fair to say a good strategy would be to do the enrollment, and then when you’re abroad, buy some local coverage that will cover you locally?
Danielle Kunkle Roberts 1:15:13
Andrew Chen 1:15:13
And then when you return to the U.S., you come back under the wing of Medicare?
Danielle Kunkle Roberts 1:15:18
Yeah. So if you have an unexpected illness, you can come back anytime and you’ve already got the Part B in place.
Andrew Chen 1:15:24
Perfect. Danielle, this was super insightful, very action-packed.
Where can listeners find out more about you, your work, your services, your upcoming book, etc.?
Danielle Kunkle Roberts 1:15:34
We’re pretty easy to find online. We are boomerbenefits.com. On all the social media, it’s Boomer Benefits.
We have a private Facebook group with over 8000 members called Medical Q&A with Boomer Benefits. It’s free to join the Facebook group. You never have to become a client of our agency.
But if you have general Medicare questions, come join us. I’m in there, and my staff is in there. We answer questions for people all the time.
And then the book will be available. It’s already available for pre-order on Kindle. The paperback will be available for pre-order at the end of next week.
We priced it at $10 to make it easy for people to learn about Medicare mistakes. And that’s pretty easy to find on Amazon.
So we would love to connect with you if you are in any of those places.
Andrew Chen 1:16:14
Perfect. Please send me a link to the book. I’ll link to that in the show notes, and folks can get access to it.
As well as the private Facebook group, if folks have questions that they want to post there. I’ll also link to that in the show notes.
Danielle Kunkle Roberts 1:16:25
Sure. I’d be happy to.
Andrew Chen 1:16:26
Thank you so much again for taking the time to chat with us. I really look forward to sharing this with our audience.
And best of luck with everything.
Danielle Kunkle Roberts 1:16:34
My pleasure. Thanks for having me.
Andrew Chen 1:16:36
Cheers. Take care.