It's that time of year again! It's open enrollment for Medicare. Have you noticed all the commercials on television?
The decision isn't always easy. And can be very confusing for some. So, in this episode of the fiscal blueprint, we're going to talk about eight things to know when choosing a Medicare plan.
Disclaimer: Please do not take advice from me on this show. As a licensed Fiduciary I am only allowed to give advice to clients. So, unless you’re a client I can’t give you advice because I don’t know you. So, think of these as helpful hints and education only. And please before implementing any information or ideas you hear on this show always consult your legal adviser, your tax adviser, and your financial adviser…………. right? that’s just common sense.
practical planning segment:
Welcome to our practical planning segment and I am joined by our co-host Mr. Nicholas Craven a CERTIFIED FINANCIAL PLANNER®
So, nick today we are going to talk about choosing a Medicare plan now slight disclaimer here we are not Medicare planning specialists right.
Today is about general education and information on what to think about when choosing a Medicare plan. It is always wise to go to a Medicare planning specialist and/or do your own due diligence on medicare.gov website.
This topic can be confusing because of all the different options and open enrollment periods.
So basically, when Americans turn age 65, they have three basic options for health coverage.
Traditional Medicare Traditional Medicare plus supplemental insurance to cover the cost that Medicare does not or a Medicare Advantage plan which is a range of managed care plans
making this decision is not easy because there is a lot of fine print when it comes to the expenses and the coverage. Choosing the wrong plan depending on individual circumstances can be costly and depending on where you live it can be hard to undo an incorrect decision. Most states make it difficult to switch plans so it's crucial to pick wisely
so, let's give a little bit of background and basic information and then we're going to talk about the eight things that every person should know when selecting a Medicare plan.
(5:00) Enrollment Periods: There are three basic enrollment periods where you can join, switch, or drop a Medicare health plan or a Medicare Advantage plan commonly known as part C with or without drug coverage. By the way, this is all on www.medicare.gov website
The first is the initial enrollment period. This is when you first become eligible for Medicare. This is a seven-month period that starts three months before you turn age 65, includes the month you turn 65, and ends three months after you turn 65. The next is the open enrollment period. this is from October 15th to December 7th each year. You can join, switch, or drop a plan. Your coverage will begin on January 1st as long as the plan gets your request by December 7th. Next is the Medicare Advantage open enrollment period and this extends from January 1st to March 31st of each year. If you're enrolled in a Medicare Advantage plan, you can switch to a different Medicare Advantage plan or switch back to original Medicare once during this time.
What are some important things to know when choosing a Medicare plan? The Wall Street Journal recently released an article by Neil Templin on October 17th of 2021 this year and highlighted some interesting things regarding your choices when it comes to health care coverage at Medicare age.
(7:20) Number 1: Supplemental insurance is usually the best option for people who can afford it or who have health issues. remember supplemental insurance is traditional Medicare plus a supplemental plan. Rather than a Medicare Advantage plan which we'll get into later on.
So, in the Wall Street Journal article they give an example of this with an individual who turned 65 later this year. And this particular individual has rheumatoid arthritis and takes expensive drugs to combat it. To help him decide which coverage to choose this particular individual went to a Medicare consultant who ran numbers and calculated the difference based on his prescription drugs which option would be less expensive traditional Medicare with a supplemental plan or a Medicare Advantage plan. This is were fairly dramatic. With traditional Medicare plus a supplemental end drug plan he was facing $11,324 a year for premiums and his deductible. By contrast if he chose an advantage plan the consultant calculated his cost including the out-of-pocket spending for the medical care and drug purchases could run as high as $18,325 per year again his costs are very high because of the out-of-pocket prescription costs Medicare Advantage plans are financially risky for patients with health issues. Now if this individual did not have high prescription costs and potentially high health issues, he could possibly save about $3000 with an advantage plan but based on his circumstances and his prescription drug costs. He could end up paying higher costs. Another advantage to traditional Medicare with supplemental insurance is that this individual will be able to go to any doctor or hospital that accepts Medicare without referrals. The most popular supplemental plans R plans F or G. These plans have no copays however plan G does have a $203 annual deductible(11:30) Number 2: Having Medicare alone is risky. The article goes on to state that some 5.6 million Americans enroll in traditional Medicare but do not buy supplemental insurance. This is according to the Kaiser Family Foundation. They all pay monthly Medicare premium, Part B, but face no other cost except for drugs if they do not seek medical care.
The problem is if they get sick or injured and require long term stay in a hospital or even worse a skilled nursing facility, they are not protected like those that would have a supplemental coverage or a Medicare Advantage plan. Suppose you're in a bad car accident and had to spend months in a skilled nursing facility Medicare alone only covers the first 20 days.
(12:40) Number 3: Medicare Advantage plans are cheaper for seniors in good health. But there is a catch.
So, if you're not going to a doctor a lot and usually stay quote in network unquote, Medicare Advantage is less expensive than a Medicare plan with a supplement. Many of these advantage plans have no monthly premiums. These are the ones that you see advertised on television all the time. They can also include extra benefits like dental and vision and hearing. Some even offer gym memberships. But the catch is a big one, Medicare Advantage patients must use in network providers or face copays that are substantially higher than what people with Medicare supplemental insurance customarily pay period so for example the article goes on to state, what if you needed a top cancer hospital and it isn't in your plan, you might incur thousands of dollars of additional costs. Also switching may not be as easy as you think. You can't just consider your current health in this decision, starting an advantage plan and figuring you can just switch to a supplemental plan down the road if your health worsens could be risky depending on where you live. I mentioned earlier that in most states the companies that sell supplemental insurance have the right to charge you more or even deny you altogether during that enrollment period we talked about earlier(15:00) Number 4: not all advantage plans are created equal. Some advantage plans are set up as HMO's where you must stay within the network coverage as mentioned earlier. Others are set up as PPO’s which will generally pay portion of cost when you go out of network. PPO's give patients more freedom than HMO's.
(15:25) Number 5: Supplemental plans are better options for people who travel.
Medicare Advantage plans usually have a network of doctors in a certain state or portion of the state. If you are traveling, they will cover treatment for medical emergencies but not routine or chronic problems. There are no exceptions. Supplemental coverage, by contrast, can be used with any doctor or hospital that accepts Medicare in the United States. So, let's think about this one for a second. It seems like all the rage currently and we have many clients doing this that are buying an RV and traveling across the country for an entire year. If they had a Medicare Advantage plan there rolling the dice. Where if they had traditional Medicare with a supplemental plan and something happens, they could go to any doctor in the United States that accepts Medicare.
(16:50) Number 6: one thing to consider is that supplemental plans usually get more expensive as you get older. Most supplemental plans use attained age pricing, meaning the premium automatically goes up for each year you hold it. Something to consider.
(17:20) Number 7: it can be difficult switching to Medicare with supplemental insurance at a later date. We already talked about this briefly earlier, but during the first six months after you enroll in Medicare Part B which covers doctors and other outpatient services, you're guaranteed the right to buy a supplemental insurance period you won't be asked to answer health questions and you can't be rejected for pre-existing conditions.
However, if you try to switch after that time period the insurer can charge you more because of health-related issues or deny coverage altogether. A supplemental plan at that point might be impossible or even unaffordable.
(18:00) Number 8: If you are stuck into a Medicare Advantage plan and desperately need affordable health care coverage because of pre-existing conditions and high drug costs as mentioned earlier. Then you could consider moving outside of the Medicare Advantage plans service area. This could be as easy as moving to another county, several counties away, or even an entire state.
If you move, you have the right to get supplemental insurance in the new service area as if you were just entering the market. They could not deny you based on age, gender, or pre-existing conditions. You basically get a Medicare do over. But I really caution this, it's obviously not inexpensive to move areas and you have to move or else you're committing insurance fraud.
It's important to make sure you thoroughly understand all your options because if you choose the wrong plan for your personal circumstance, it may be difficult to change at a later date depending on your particular state of residence. A couple resources for you to check out on your own are the following
medicare.gov
medicarerights.org
The Medicare Rights Center is a national, nonprofit consumer service organization and have been around Since 1989. They help people w/ Medicare understand their rights and benefits and navigate the Medicare system.
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