I'm Stephanie Sammons, a CERTIFIED FINANCIAL PLANNER™ and the Founder of Sammons Wealth Management. I help successful women professionals who are in midlife plan for their ideal retirement. Learn more about planning, saving, and investing for your ideal retirement at Sammons Wealth Management.
The Ins and Outs of Medicare with Danielle Roberts

Show Notes for this Episode:

In this episode, I interview Danielle Roberts. Danielle is a Medicare expert and bestselling author of the book, 10 Costly Medicare Mistakes You Can’t Afford to Make.

Danielle is a wealth of knowledge when it comes to Medicare. Medicare is one of the most important benefits we are eligible for in retirement. It covers our primary healthcare from age 65 and beyond. However, Medicare is very complex. There are many ins and outs to understand when it is your time to either sign-up for or change your Medicare benefits plan.

In this episode, you will learn:

  • when to sign-up for Medicare (and why you can’t miss this deadline)
  • how to enroll in Medicare
  • decoding the Medicare alphabet soup
  • what are the costs of Medicare insurance (no, it’s not free)
  • do you need a Medicare supplement plan?
  • the difference between a Medicare Supplement (Medigap) and Medicare Advantage plan
  • the most comprehensive Medicare Supplement plan today
  • what you need to know about Medicare open enrollment
  • how earned income at age 65+ can impact your Medicare premiums
  • potential changes to Medicare in the future

More information about Danielle:

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Welcome to episode number 70 on the retirement money gal podcast. I'm so excited today to bring you an interview with my guest, Danielle Roberts, Danielle is a Medicare expert and she's the author of the best-selling book, 10 costly Medicare mistakes. Danielle is also the co-founder of boomer benefits.com, a licensed insurance agency that helps baby boomers understand not only basic Medicare benefits, but also Medicare supplement options. I tell you, Danielle is just a wealth of knowledge, and this episode is packed with information on the ins and outs of Medicare. Medicare is really complex, and if you are anywhere close to being eligible for Medicare, which is age 65, or you have parents or other relatives who are currently on Medicare, or also close to being eligible, you got to listen in on this episode, it is just full of valuable information. We also happen to be in the midst of Medicare open enrollment, which is a short time period where you're able to potentially change your Medicare supplement plan. So it's a very timely interview and a very happy to bring it to you. So enjoy this episode and take notes. Danielle, welcome. Hi, thanks for having me. I'm so excited to be here. Well, I am so excited that we were able to get connected and lo and behold, it turns out we're right up the street from each other kind of, yeah, you're in Fort worth. I'm in Dallas. We're what? Half an hour apart. Yeah, that's true.

It was just kind of a small world coincidence there.

Well, I'm so thrilled to have you on, because this is a topic that I have been wanting to cover on this podcast for a long time. And honestly, I have not really known where to turn when you Google Medicare and how to understand it and try to get education. There's a lot of information out there and some of it is, is probably solid and some of it is kind of salesy and spammy and it's, I can't imagine being a person who is getting ready to, to qualify for Medicare and where to really get the right information. And so you have become an expert on Medicare. You've written a fantastic book that I'm excited about called. It was actually a number one bestseller rider it's still is I think, and it's 10 costly Medicare mistakes you can't afford to make. What on earth got you interested in this, in this field, how did you kind of get started talking about Medicare, learning about Medicare and then writing a book about it?

Well, it's an interesting question, right? Cause I always like to say, nobody goes to high school and graduates or goes to college and graduates and says, I want to be an insurance agent someday. It's not one of those career paths like astronaut or something really fun, you know, unless you have someone in the business you may or may not enjoy insurance very much. My husband always mentioned that people's eyes glaze over when we talk about it too long. And I think a lot of people feel the same way about Medicare, right? It's really intimidating subject. And we don't know much about it. It's kind of vaguely hanging out there in the future until we get there someday, the way we found it was my brother and I started insurance agency back in 2005. And we originally worked with people on their group and individual health insurance, and that's confusing enough.

But then these people oftentimes would be families or business owners in their mid forties range. And we would get calls back from them in the future saying, Hey, you helped me with this insurance last year for my family. Do you know anything about Medicare? Because my parents are turning 65 and it's really confusing. Nobody can figure it out. And we got that question several times before I said, well, maybe I should go look and see, we can find a referral source or something for these people because I didn't realize it was so confusing. And then when I dove into it, I was just flabbergasted at the complexity of it. And couldn't believe that the federal government would leave something this complex for people to figure out on their own at age 65. And so we just dug in, we literally studied it from every possible angle.

We got contracted with insurance companies that sell the plans and we learned it just backwards and forwards. And so we ended up, uh, starting to service those types of policies in late 2005, which was right before Medicare rolled out 2006, uh, part D. So we had sort of a trial by fire at the last minute with that in our business, but it really helped us to learn everything that we needed to know. And slowly over the years, it's just sort of taken over our business because 10,000 people a day are aging into Medicare and the demand is great. And we also have people who are beginning to shop for these products online instead of the more old fashioned kitchen table sale that was around in the pre social media pre internet shopping for insurance age. And today we don't do any other type of insurance at all.

We don't work with under 65 group and individual health anymore. We just help people on Medicare, primarily people aging in a 64 and a half or so, help them learn the basics about Medicare so that then they can make good decisions about the type of supplemental insurance that will fit them. And that's where we come in to help, um, with enrollment into those policies. And I'm very happy to be in this industry. I love the baby boomers, the group of people aging into Medicare right now. And I love being able to take a really complicated product and system and break it down into pieces that are easier to navigate.

That's awesome. And really unbelievable. 10,000 people a day are coming into Medicare and there are 76 million baby boomers or such a that's a lot of people. Yeah. And I would say the majority of the audience on this podcast, they are women professionals, working women professionals in their forties, fifties, and sixties. And even if it's not time for them to start thinking about Medicare, it's, it's certainly for some of them on the younger side, it's certainly great for them to learn the basics because also you never know when you're going to be in a position to either help guide your parents on these decisions or aunts and uncles and other people in your life who may be closer to Medicare than you are. Okay.

Yeah. I so agree because this is one of those things where if you wait too late to learn about it, you can put yourself in a position where you feel a lot of stress because you're trying to absorb this national health insurance system, which if you think about it, your whole life, your employers have always chosen your insurance plans for you. And now you turn 65 and you're going on to, uh, essentially what is national healthcare? Medicare is a national healthcare system for people over 65 and it has four parts and 10 supplements and literally thousands of drug plan options and people aren't used to having to make those kinds of decisions. So there's a real learning curve there.

Okay. Well, good. Well, you're going to help us learn some of the basics and that's really where I would like to start is I know it's completely overwhelming and complex, but I think you could give us a pretty good overview of the basics of Medicare. What are some of the things we need to know? And I'll ask you some questions here. And then if you think of anything else that you think would be value added, just feel free to jump in.

Sure. If that sounds good.

All right. So in terms of the big picture overview and what we should know, the first thing I was thinking about is, is eligibility. And it's it's age 65, but is that, is that the only time you might become eligible for Medicare?

So most people become eligible at 65 and it's not based upon your social security eligibility. So we know you can get social security earlier, or you can delay for a bigger credits and a bigger check later, right? You definitely agent at 65, but in 1972, there was legislation that passed that also made Medicare available to people with certain disabilities. So if you qualify under age 65 for social security disability, after 24 months of that disability, you become eligible to enroll in Medicare. And Medicare is also something that you can roll in for certain health conditions like end stage renal disease or Lou Gehrig's disease. And so there are millions of people that are not 65 though that have qualified early for Medicare.

Interesting. Okay. And then what happens? It's it's my birthday. I just turned 65. Do I go sign up? Do I need to sign up before that? Yeah.

So the basics are you have a seven month window surrounding your 65th birthday. It starts three months before your 65th birthday month. It goes through that birthday month and then three months after. So that initial enrollment period is specific to you surrounding your 65th birthday. And if you are no longer still working, if you don't have employer coverage provided to you, then you will want to initiate your own enrollment into Medicare during that seven month window number one, so that you don't get penalties down the line for a late enrollment and number two, so that you have coverage for inpatient hospital and outpatient medical benefits. Because if you're no longer working, you likely may not have that coverage anymore. Or you could be paying a lot of money for Cobra. So when you turn 65, that's your time to sign up. And the only reason that you wouldn't sign up for Medicare in that situation would be if you are still working and you have employer coverage from a large employer, in that scenario, you can delay, uh, parts of Medicare, potentially parts B and D are the people or the parts that people will delay at that point.

And we can talk a little bit more about costs, but the thing is, if you have a group coverage that already provides you outpatient benefits and drug benefits, then you might want to delay parts of Medicare. Because one of the mistakes I cover in the book is that Medicare isn't free. And that becomes a surprise for many people who didn't know any better when they turn 65 and now they find out, Oh, wow, I'm going to have to pay for this. Well, if you're still working and you have the opportunity to stay with your employer insurance and that employer is covering most of the cost of that coverage for you, you may want to delay those parts, save that money in the meantime and give yourself some extra time to work towards saving up your retirement benefits for when you are ready to retire and you do have to pay for Medicare.

Great, great advice. And what about, you know, have you seen anyone leave their employer or retire at 64 65 and continue to stay on Cobra before applying for Medicare? Or is that not as common because Cobra can be more expensive.

Yeah. So if you, if you are working past age 65 for a large employer that has 20 or more employees, and then you retire, let's say you're 67. You do have the option to enroll in Cobra. If you want to, um, that's an option for you, but we know that Cobra is quite expensive. So we would compare what it would cost for you to stay on Cobra and maintain that. Versus if you would go on Medicare and leave the Cobra behind. The important thing to know though, is that Cobra itself is not considered a creditable coverage for Medicare. So if you do transition over and you just enroll in Cobra, Medicare will be primary and Cobra will be secondary. So you want to go ahead and get signed up for Medicare parts, a and B right away. And most of the time, once people learn that that they're going to have Medicare a and B, they're going to be paying for part B. And then they're also going to be paying for Cobra. A lot of times they just decide to transition to Medicare, but sometimes there's something like they're covering a spouse or a dependent that makes them want to continue the Cobra for the 18 months that they can. And certainly they would be allowed to do that if they wanted to.

Okay. That makes sense. And are you automatically enrolled or do you go somewhere, do you go online and apply or something like that once you're ready to, once you become eligible,

If you're already taking social security benefits prior to turning 65, then the federal government will assume that you're no longer working and they will just sign you up for both parts a and B your card will show up in the mailbox a few months before you turn 65. And so you don't have to initiate your own enrollment, but if you are delaying those social security benefits, as so many people do these days, then you do need to initiate your own enrollment to Medicare at 65. And, you know, it used to be back in the day where people would go down in person to the local social security office and sign up there and you could certainly still do that. But today more people go online to the social security website and just enroll there. And that was happening even before COVID. But now of course, with the COVID situation, there are some social security offices that are closed. And so your options are to go online and register at the website, which is what we advise, because it's really easy to do, or you can call and they can mail you a paper application if you prefer that route.

Okay. Great. All right. So let's switch gears here and talk about, I'm going to call it the alphabet soup of Medicare, because you're, you're talking about a, B D I don't remember if you said a C, but walk us through what those main primary letters mean when it comes to Medicare.

Okay. So if you think about Medicare was brought in to being back in the 1960s, 1965 is when that legislation came into play and back then they modeled Medicare after the old blue cross and blue shield style of plans, which was that you had one part that took care of hospital benefits. One part that took care of outpatient medical. So that's how Medicare was designed. And it's been that way ever since. So part a is your inpatient hospital coverage. It's going to cover a semi-private room where nurses and doctors come around to check on you. It's going to cover any drugs that are administered to you. As part of that hospital stay. It also covers skilled nursing facility. So if you're in an inpatient hospital and you are admitted to the hospital, you're in there for a few days, and then you're released, but you're not quite ready to go home yet.

And you need some follow-up care, wound, care, physical therapy, rehab kind of thing. Then it also covers part a covers your skilled nursing facility stay. And it covers hospice if someday, if, and when you would ever need that. So part a, we think of as our hospital benefits, and then part B is the outpatient coverage. And you and I think of outpatient coverage as doctor visits and lab work, and, uh, maybe getting a CT scan, um, preventative care, but part B also covers a lot of things that are more expensive. And then in some circumstances could happen in a hospital setting. So for example, outpatient surgery, chemotherapy, radiation, dialysis, oxygen, durable, medical equipment, diabetes supplies, pretty much everything. That's not part of an inpatient stay will fall under Medicare part B. And those two parts together are called original Medicare or traditional Medicare. They're the only two parts that you're going to sign up for at the social security office or railroad retirement board.

If you retired from the railroad, the other parts C and D are optional voluntary programs that came later. So part C is an option for you to get your Medicare part a and B benefits through a private insurance company that hosts a local network near where you live. So it might be a network like an HMO or PPO, and it spans a couple of counties where you live, or maybe even could be as big as statewide. Um, but it's just an option for you to get your benefits through a private insurance company, instead of original Medicare, that is one route you can go with your Medicare. The other optional part is part D. So if you stay original Medicare and you don't go through a private insurance company with a part C plan, you would need to add on some drug coverage. Because when Medicare was first created back in the sixties, we had no outpatient drug coverage for people on Medicare for over 40 years.

So we were very lucky that today we do have an option to purchase voluntary outpatient drug coverage. And you can think of that kind of like a pharmacy card where you take your part D card to Walgreens or CVS or Kroger, or wherever you shop for your prescriptions. And instead of paying full price for a medication, you're going to have a discounted rate. The insurance company is going to pay a portion and you pay a portion. And so not everyone needs all four parts. It's rare that you would be enrolled in all four. You might just need a and B and a Medicare supplement and a drug plan, or you might go the other route and get your a and B benefits through a part C Medicare advantage plan. And so you can see it is really quite confusing, how all those moving parts work together. And so if you have a listener, who's thinking, wow, that is crazy confusing. Um, you're certainly not alone. It takes a little bit of time to learn this stuff, to really understand how it all goes together.

Yeah, that's, that's really, it, it is confusing and overwhelming. And I didn't realize that the, the C was actually an optional route. And in other words, are you saying, if you, if you went with the S the letter C plan that you wouldn't need the traditional AB and then you wouldn't need the add on D because those are wrapped into a C plan. So

You would need to first enroll in parts a and B, and you'll still pay your premiums for part B. So you have to enroll in that first, but if you are, have a and B, then you're eligible to get your coverage through a private insurance company instead of original Medicare. And you could look and see which insurance companies operate these plans in your area. And then most of those plans have a part D drug benefit built in. So if you decided to enroll in a part C Medicare advantage plan, you could opt out of enrolling in a separate part D plan, because the part D drug benefit may already be built into your plan about 90% of part C plans have a built-in drug benefit. And that's one of the options that makes them attractive to people. So I always say, when you come into Medicare, you're going to go one of two routes.

You're either going to keep your benefits through the federal government. And you're going to add on a supplement and a drug plan to help cover the deductibles and copays that Medicare doesn't cover that otherwise you would have to pay, or you can enroll in a part C plan, and you can get those benefits through a private insurance company that's local to you. And the incentive of course, for that would be that you get to bundle the part D in, um, and, uh, Medicare advantage plans also have some ancillary things built in. You can get one that covers gym membership benefits, or you can get one that covers a little bit of dental and vision, which original Medicare doesn't. So people are going to be deciding which route they want to go. And it is a big decision because there are enrollment periods that come into play.

And sometimes once an enrollment period passes, you can't switch to the other type of coverage without having to go through health underwriting. So those are the two main routes that people go. And I think that the advantage plans, the reason that they were created was if you have part a and B, and you're already paying for part B, which in 2020 is $144 and 60 cents a month. For most people, some people pay more based on income, but if you have part a and B, you're already paying for part B, sometimes adding on a Medicare supplement, that's going to cover some of those deductibles and co-insurance that you would otherwise have to pay. It might be a stretch for some people, especially if they came in and they didn't have a lot of money put aside, um, for their benefits and retirement, maybe they didn't know that they needed to save for Medicare costs.

Medigap would be a stretch if they're living on just social security, they might want to opt for a Medicare part C advantage plan, because those typically have lower premiums because you are giving up your freedom of access to see every provider that takes Medicare. And instead, you're agreeing to go through a local network, an HMO or PPO plan where you might have to pick a primary care provider. You might have to get a referral to see a specialist. And so one route gives you higher premiums with kind of more predictable cost sharing on the backend. That's the original Medicare plus Medigap or the other route. The Medicare advantage plan has much lower premiums. Um, but you're going to pay some copays for services as you go along, and you're agreeing to use a network. So you're giving up a little bit of that freedom. And that's one of the big decisions that people face when they first come into Medicare and they're eligible, they've got to determine which parts to enroll in, and then which route they really feel comfortable going with for their benefits.

Okay. So I was going to ask you about, you know, the difference between Medicare Medigap and Medicare advantage. These are, uh, these are both supplemental plans, right? In a way. Um,

Yeah, so one of them pays after Medicare and is a traditional supplement. And then the other one pays instead of Medicare, which is your advantage plan. So although it's not technically a supplement, it is a way that you can control some of the costs that you would otherwise have with Medicare. Both of them provide that they're going to help you with reducing some of those costs. And it might be helpful if I kind of shared what some of those costs might be, if you just had a, and would that, would that be helpful? Do you think?

Yeah, that would be great because I was going to ask you with Medigap, um, it's higher premiums, but you can choose your doctor. You may not have to have a referral. That sort of thing have a little more control. That's exactly right. And then deductible, what do those look like? So if you want to talk about the range of costs, that would be great. Okay.

So sometimes it comes as a surprise to people that they have to pay a premium for Medicare and that they have cost sharing on the backend. And what I like to say is, if you think about the current insurance that you have now as a person under 65, you have coverage either through your employer or through an affordable care act plan on the private exchange. And in both of those cases, you have a monthly premium that you pay for the coverage. Now, if you have employer insurance, maybe the employer pays most of it. And you just have a small amount deducted from your paycheck as your share, but that's the premium that you're paying to an insurance company to provide you that insurance against a health risk, just like you pay a premium to Geico or progressive to insure against a car accident. You're going to pay a premium to an insurance company to provide health insurance.

Medicare works the same. You're going to pay one 44 60 a month for part B or more. If you're in a higher income bracket and then your current insurance also has cost sharing on the backend. So when you go to the doctor, it's not covered a hundred percent, you have a copay. If you have a hospital stay, there's a deductible to pay. And Medicare has those kinds of expenses as well. So you have a deductible for Medicare on both parts, a and B. So what that means is if you go in the hospital, that's when you would pay your part, a deductible, which in 2020 is around $1,400. And, you know, if you spend even one night in the hospital, Stephanie, you would easily hit that deductible and come out of pocket that amount. And then on the part, a side, that's all you'll really pay for your hospital coverage, unless you have a long hospital, stay in you're in there over 60 days.

If you have a cumulatively get to 61 days, then you start paying a pretty hefty daily hospital copay. It's around $350 on day 91. It goes up to $700 a day. And then on day one 50, your benefits run out. So of course we want to have some sort of supplemental insurance. That's going to pay that $1,400 deductible and pay those daily copays. If we are unlucky enough to stay in the hospital that long. So those are some of the costs that you would anticipate. If you had a hospital stay on the outpatient side, let's say your first doctor visited the year. You have an annual deductible of $198 on part B. So that first outpatient visit of the year, whether it's a doctor visit or a lab work, whatever outpatient procedure you have, first, you pay $198. And then after that Medicare covers 80%, but you pay the other 20%.

And the difference between Medicare's coverage and the coverage that you've had under 65 is that on Medicare, that 20% goes forever. There's no cap, there's no maximum out-of-pocket limit to protect you. Like you're used to from the coverage you've had before. And so the most important thing that we want to cover is that 20%, because it's not a big deal that $198 deductible, not fun, but it's generally not going to break the bank, but 20% of eight weeks of chemotherapy could be tens of thousands of dollars. And so that's why people buy supplement insurance supplement companies created these Medigap plans back in the sixties to fill in for those things, to pay some of those deductibles for you to pay that 20% co-insurance. And on some of the plans, you can even have some extras built in like foreign travel benefit. So a traditional Medicare supplement will, um, allow you to see any doctor you want anywhere in the nation.

Um, the freedom of access is there. You don't have to pick a primary care provider. You don't have to get a referral to see a specialist. If you live the RV lifestyle or you snowbird, you can use this anywhere in the U S while you travel. Um, it doesn't matter which insurance company you sign up for. And that's why that coverage, Medicare supplement coverage costs more because there's so much freedom of choice. And because the benefits are strong, it's going to cover those things that Medicare doesn't and on the backend leave you with very little that you have to pay out of pocket. Okay. Are you with me so far?

I am with you. And just to clarify that you're talking Medigap policies yes. With this traditional supplemental that that you're talking about. Great. Okay. That's what I thought I was with you. Okay.

Okay. So yeah, Medicare supplement and a Medigap plan is just two different terms for the same thing. Uh, so when we say Medigap, we mean Medicare supplement, and that's the first type of coverage. Now that coverage, like we said, does not include drug coverage. So you have the additional expense of purchasing a standalone part D drug card. Fortunately, there are some really inexpensive drug plans in America. I was looking at the 2021 rates for some of the carriers next year. And there are plans out there in most States that start around $7 a month. And so even if you didn't have a big budget, you could pick up some, um, drug coverage that's relatively inexpensive, and you would put those two together. So Medicare a and B would cover the basics. Your supplement then comes in to pick up some of those deductibles and copays that you would otherwise pay.

And then you have a part D drug plan to help reduce the cost of your prescriptions. And so you might spend, um, let's just say you were in the DFW area, female turning 65 non-smoker could probably get a pretty full coverage Medigap plan for around a hundred dollars a month. So you would have your part B expense, which is we set 144 60 for most people, a hundred dollars for the Medigap plan, and then the cost of a part D drug plan. So you're adding those three things together, but you're going to get coverage. That's really full. You have $198 part B deductible, and then everything else is covered on the supplement that provides the most coverage. So, you know, if I could purchase that kind of coverage for say $300 or less a month, I would love it because on my insurance, I've got a $3,000 deductible on it.

It's almost $600 a month. Um, you have to remember, yeah. You know, Medicare is picking up the bulk of those expenses. So that's why with Medigap, you get these really low deductibles and great coverage on the backend. I like those plans. They're very, um, they're very good for people that if you're the kind of person that would be in the hospital, worrying about which kind of bill bills you're going to get in the mailbox, when you come out, then a Medigap plan is really full coverage that you can count on. And you're not going to have a lot on the backend, but because that coverage costs more Medicare advantage plans were created, and this is a way that you can get those same benefits for a and B, but through a private insurance company. So, you know, you're gonna use a network of her riders.

You have to check to make sure your doctors are in the network. You want to check to make sure that your, your drugs are on the formula. That's kind of built into the plan. And then as you go with an advantage plan, it works more like group insurance. You've had in the past where you're going to have a co-pay at the doctor copay for prescriptions, a copay. If you go in the hospital and those plans, you can actually find them, um, in some urban areas like Dallas Fort worth, you can find advantage plans that have what are called a zero premium, meaning you don't pay anything at all for the plan itself, other than what you're already paying for part B. And so the advantage to the insurance company selling you, the plan is when you enroll in a Medicare advantage plan, and you agree to use that plans network, Medicare pays the Medicare advantage plan, a monthly stipend, it's quite hefty over a thousand dollars a month to take on your medical risk.

Because now if you get sick, Medicare is not paying the bills anymore. The Medicare advantage company is the one that pays the bills. So those advantage plans will offer you much lower premiums. Sometimes even like I mentioned, zero premium to attract you to the plan so that they can get paid by Medicare. And then it's their challenge of course, to deliver benefits to you as inexpensively as possible, using a network of providers that have contracted lower rates so that they can hopefully turn a profit between what they earn from Medicare and what they spend on your benefits.

I see. Okay. What about, what about deductibles on looking at either of those options? Just in general, what are we talking? It typically, you took the example of, of a healthy non-smoking female in the Dallas area, a hundred dollars monthly premium, in addition to what you pay for part a yes. With Medicare. So what kind of deductible today would that look like?

So that plan would be what we call plan G. And one good thing about Medicare supplements is Medicare standardize them, um, years ago, back in 1990. And there's 10 plans that you can choose and you can buy the one that's the most coverage that people can get into today is the plan G. And on that one, the only thing that you pay is the part B deductible, which is $198 then of everything else. The rest of the year, all the covered medical services for a and B Medicare pays 80%. Your plan G pays the other 20% and you have nothing out of pocket. So that deductible is set by Medicare, the part B deductible, and that changes a little bit from year to year. Um, last year it was $185 this year. It went up to one 98. It'll probably be slightly over 200 next year.

We don't know those numbers yet, but that is all you would have out of pocket. And then everything else would be covered 80, 20, that's the most full coverage settlement, but there are plans out there that cover less. So for example, if you wanted to get a little bit lower premium, and you were willing to take on a little more cost sharing, as you use your benefits, you could consider a Medigap plan N and on that plan, you still pay the part B deductible, just like you would on plan G. But you're also going to have some copays at the doctor copays for emergency room. And, uh, you also pay something called excess charges, which means if you go to a doctor that accepts Medicare, but it doesn't accept, Medicare's assigned rates. Those providers can charge you 15% more than what Medicare will pay and on plan N you would pay that 15% difference if you happen to see a provider that doesn't accept assignment, whereas on plan G it, that would cover that for you.

So a consumer savvy shopper might say, well, Hey, I can get this plan N and it's going to save me, let's say $30 a month in premiums depends on the geographic area, but they might say, well, I'm okay with, you know, asking my doctors, do you accept assignment and making sure that I go to doctors that do, and I'm okay with the $20 doctor copay, that's fine. I don't go to the doctor very often. So someone might choose a plan. And for the lower premiums, a lot of that's going to be based on your medical usage. So when you work with a broker, they're going to help you look at the different plans, quote them and determine kind of which one feels good to you. If you really like full coverage, you might want to go with the plan G if you're fine with paying some things yourself, you might go with one of the other plans that covers a little bit less, but then you're going to usually get lower premiums because of,

Okay. And I can't believe the deductible is $198, less than $200. Yeah. It's really amazing. And

The reason for that is because you have Medicare picking up the bulk of the expense at 80% Medicare pays for, so those Medigap companies, they're only covering deductibles in that other 20%. And so you can get really low deductibles, uh, with a plan G like I said, you and I would love to have them.

Yeah. And wasn't there a plan F that went away or that got replaced by G yes.

Okay. So for many years, plan F was the most popular seller and it covered everything, even the part B deductible. So literally you could get that plan and you go to the doctor, pay nothing, go to the hospital, pay nothing, a hip replacement, pay nothing cancer treatment, pay nothing. It was fabulous, but Medicare, um, kind of took the view that, you know, if we cover the first dollar on everything, then little Joey over here, or Sally, you know, they get a sniffle or sneeze, and they're going to run off to the doctor at the first sign of illness. And this of course increases the amount that Medicare pays for the healthcare of everyone on Medicare. And so there was legislation that was passed back in 2015, the macro legislation that took away plans that covered the part B deductible, because they think if you have to come out of pocket $198, you know, Joe or Sally might think twice about going to the doctor for the first little sniffle or sneeze that they have that year.

And the idea is that it would reduce the overall spending for the Medicare program. Now, I don't feel like I necessarily agree with that. Cause I don't feel like $198 as a whole lot to come out of pocket. If you're sick, you're sick and you want to go to the doctor, but that's the rule change that they made. So as of January 1st of 2020, if you're eligible for Medicare, um, on or after January 1st of 2020, the most comprehensive plan that you can buy is a plan G if you were eligible before Medicaid for Medicare, before that date, you can still buy a plan F even if you're retiring now, and you're over 65, those people can still buy plan F but you have to remember that we have no new turning 65 people coming into that book of business anymore. So we expect that over time, some of the rate increases on plan F will be higher because they won't be able to balance that risk out with new and younger people coming into the program.

Oh, I see. Okay. Yeah. I was wondering about that. Um, because I do remember hearing a, saw a presentation on this maybe about a year ago that, that, that F would still be around, but that makes sense that it would, it'd be an aging population or an aging group over time. Yeah, that's right. All right. Let's talk about this. Are you stuck in the same plan always? Or can you make a change? So the, is it depends.

Um, Medicare has election periods for things, and I can tell you some of the most important things. So sometimes, um, people will look at the two routes that you can go Medigap or Medicare advantage. And then the natural question is, well, could I go with this less expensive Medicare advantage and, uh, do that now. And then if I get sick or I develop a major health condition, then could I switch back to the Medigap plan, which has the fuller coverage. And the answer is generally no. When you first become eligible for Medicare and you activate your Medicare part B, you have a six month window, one time, six months from your part B effective date to enroll in any Medigap plan that you want with no health questions asked, which is great. You can get any plan, you just sign up for it. And then once that six month window is gone, that window is gone forever.

So now if you change from one Medigap plan to another, in most States, you would have to pass medical underwriting, you'll have to answer health questions. And, um, then the underwriter will look at your health history and your prescription usage and determine if they would let you change. So when you're on a Medigap plan and you get a rate increase, it's typical for those people to call their broker and say, Hey, my plan just went up $10 a month. Is there anyone else offering the same plan for less? Well, if we find one that's less than we go through the health questions with the client and make sure they can answer no to the health questions and the person can change. And the same thing happens if you're on Medicare advantage coverage, if you try that and you're on it for a few years, and then something happens, and now you're incurring more expenses because you've developed a health condition, or you change your mind for any reason, it's very easy to leave the advantage plan and get back to original Medicare.

But to add that Medigap plan is going to require health questions in most States. So if you think you want to go the route with a traditional Medicare supplement, like the plan G where you only have $198 out of pocket, and then everything is covered, you're going to want to get that right out of the gate at 65, when you can get it with no health questions, and then you would keep that coverage for the long-term. As long as you can continue affording the policy. If you chose a Medicare advantage plan, those don't have any health questions at all. So the only thing controlling them or your access to them are election periods. So you can enroll in an advantage plan right out of the gate. And when you first become eligible for Medicare, or you could enroll in one during the annual election period, which comes up every year in the fall, it runs from October 15th to December 7th.

And that's the time of year when people can enroll in change or disenroll from either a part D drug plan or Medicare advantage plans. Since those two types of coverage have no health questions. Medicare gives you a window of time when you can sign up from them or leave them. And that creates some stability for the insurance company. So they don't have, uh, their actuaries can base, you know, their projected losses based on the number of policy holders. And they don't have people jumping in and out of the plans all the time. So it is important to make a good choice upfront. And, uh, we do have people sometimes that will say, you know, I'm really healthy. I don't take any medications. I only go to the doctor once a year for my preventive care. And I just really don't want to spend $100 a month or more for a Medigap plan.

I like this advantage plan I can pay as I go. And I'm fine with using a network. And those people will enroll in that plan and he may be very happy with it. Um, we just tell people to be aware that, you know, later when health conditions occur, you will have some more spending on those plans. Medicare advantage plans have certain things where you pay as much as 20% out of pocket. And that does include things like cancer treatment on many plans, but those advantage plans have a cap on them, which limit your annual spending. So for example, if you had a Medicare advantage plan with a $5,000 out-of-pocket maximum, even if you were having a bad year with lots of health expenses, you're paying 20% on some things. Once you hit 5,000 out of pocket on a and B services, then you're done for the year and you, that will be nothing else out of pocket for a and B through December 31st when everything resets.

So there's a lot to think through when you're making your choices a lot to think about thinking about what's good for you now, and what's going to be a good fit for you down the road. If you really value freedom of choice, you might opt to go the Medigap route. Um, if you have been on HMO's and PPIs for quite some time, and you're totally fine with that, and your doctors are in one of the local networks, you might decide to save money and do the advantage plans. And so it's great that you have options so that you can kind of pair your benefits with your, you know, your budget and your needs.

Great. Well, one of the things I try to talk about a lot on this podcast is thinking about our future selves and how we want to take care of our future selves. And it's, it's hard to do that when we're, you know, some of us 2015, 20, 25, 30 years away from age 65, but it's still so important to when you're around your parents who are aging, for example, or, or grandparents, or aunts and uncles, to just look around you and see what they're going through and what they're struggling with and what kind of health issues they may have, whether they are just, um, chronic types of issues or every once in a while, you know, having something come up health wise. So what the nugget that I really got out of out of that piece is that you really want to make the right decision at age 65 when you make your initial choice.

Yeah. That's very important. If you think you're going to want the Medigap route, you want to make that choice early on. And one other thing, um, to throw in there is with Medigap plans, they don't change their benefits from year to year. The benefits remain steady. There are rate increases just like there are with any type of insurance. Um, usually once a year on your policy anniversary, you may have a small increase, but your benefits don't change. And so if you go the Medicare advantage route, the benefits do change on the plans from year to year. So there's a little bit of extra homework there in September. You need to sit down with your packet that comes from your insurance company and look to see what's changing on your plan for the next year. So you could also say, am I someone that's going to do that?

Knowing knowing me and how I handle my insurance now for other things, am I going to sit down and review that packet and look to see if it makes sense for me to change elsewhere, to keep my self in the most cost-effective plan? And if you know that that's not your forte, then maybe a Medigap plan, that's going to be a little more predictable from year to year would be a better fit. But if you're the kind of person that sits down and calls, uh, your broker every year to get homeowners and auto quotes, and you, you look through it every year and you're always working to find the most cost-effective coverage, then you're already used to that. And maybe a Medicare advantage, the fact that they change from year to year, won't be a problem for you because you know that you'll sit down and do it.

Great. So, so helpful. Uh, one thing we haven't covered is if you are still working at age 65 and earning an income, um, you know, my parents own a health store and they're still earning an income and my dad is up there running that place every day. So can you talk about the issues there? Uh, and what, what kinds of penalties, or what can we expect if that's the case?

Yeah. So when you're working at 65, the main thing that you need to be aware of is that the size of the employer matters. So if the company has 20 or more employees and you're on the group health coverage there, and this applies whether it's your employer or your spouse's employer, same thing, if you're on that coverage, 20 or more employees in the plan, that coverage is primary. So in that scenario, most people will enroll in just part a and they'll delay parts, B and D. And the reason for that is part a doesn't cost. Anything for most people, you pay FICA taxes throughout your whole life, um, to, to make part a cost, nothing. When you turn 65. So a lot of times you'll enroll in just part a which coordinates with your employer group coverage could reduce your spending. If you have a hospital stay, can't really hurt you.

Unless of course, you're contributing to an HSA account in that scenario, wouldn't want to enroll in part a either, but most people do part a with their group plan and they delay the parts B and D. And then later, when you get ready to retire, you'll be given a special enrollment window by Medicare to sign up for parts B and D so that you don't end up owing any kind of late penalty. And so the consideration there, if you're working for a large employer is going to be a lot about what, what am I paying for this employer coverage versus what would I pay if I went on Medicare? And a lot of times it's cheaper to stay with your employer because they're paying portion of the premium for you. Um, and sometimes it could be that you're carrying dependents that are younger too. So there's a few things that come into play there.

Now, if you work for a small employer with 20 or less employees, Medicare is primary. And so it's really important that you sign up for both a and B during that seven month window. And I've seen many people make this mistake over the years, they talk to their friend and their friend says, Oh yeah, I delayed parts B and D. You don't need that when you have group insurance. Well, that was the case for your friend who worked for a large employer, but you work for a small employer. Medicare is primary. And so the downfall can be, if you didn't know that, and you didn't sign up during that seven month window, um, the first thing would be, wow. If something happens to you, you don't have part B to pay 80% of that surgery that you need, or that cancer treatment that you need, you were supposed to enroll in it, but you didn't, you are on the hook for that 80% in a lot of circumstances.

So you can be in a situation with, um, no coverage and then to add insult to injury later, when you do figure this out and you go sign up for part B, you have to wait until the next general enrollment period, which runs from January 1st to March 31st, every year. And you sign up then and two things. The first is the benefits, even though you sign up between January and March, the benefits don't start until July. So that's even longer that you're going without coverage. And then of course, the second thing is a penalty. So for every 12 months that you should have been enrolled in part B, but you were not, you will have a 10% penalty. Um, I have seen people where they'll call into our office when they're just figuring this out. And they're 72 and they're retiring now and they've never had parts a and B, and now they owe 70% late penalty added to their part B premium for the rest of their life. So pretty big financial incentive to make sure that you get signed up right at 65 there, if you work for a small employer.

Wow. And do you also, I'm sorry if I miss this, do you also need to sign up for part D if that's the case?

Well, if you, if you sign up for parts a and B, when you're working at a small employer and the, and you're staying with employers, insurance coverage, Medicare a and B are primary, and the employer's coverage is secondary. And that employer coverage probably has drug benefits built in. Most of them do. So, as long as that, uh, drug coverage built into your employer, coverage is creditable for part D. Then you can delay the part D benefit until you retire. And the way that you learn, if it's creditable is you can ask your benefits representative at the company that you work with. You can call the insurance company and say, Hey, is this creditable coverage? Or you could ask the HR person where you're working. They should know this, because if it's not creditable, they're required to send you an annual notice every year in the fall telling you, Hey, you better sign up for part D because this coverage we have here at your place of employment is not as good as part D and you're going to owe a penalty if you don't sign up.

So, um, most of the time that employer coverage is creditable, and you can delay the part D but if for some reason it wasn't, then yes, you would want to go ahead and sign up for part D because party does also have a late penalty. That penalty is 1% per month of the national average base part D premium for every month that you could have been enrolled that you weren't. So a 1% of, I think the national average is around $35 right now. So you're accumulated that accumulating premium is getting bigger and bigger. So if you waited five years and you went with no drug coverage and you didn't have any other creditable coverage, when you do sign up for part D you would pay a 60% penalty every month that you're on part D for the rest of your life. And so these penalties can creep up on you, if you don't know about them and, and really, uh, be a financial pain. Um, and this of course is why people need to know all of these things ahead of time, so that hopefully they don't make these Medicare mistakes.

Absolutely so valuable. And, you know, as we talked about from the beginning, it's very complex to navigate this stuff. Um, I want to encourage everyone who is listening to go check out, check out Daniel's book 10 costly, Medicare mistakes you can't afford to make. And I'm going to ask you in a minute, Danielle, where, where else we can find you a line, but I wanted to ask about one more thing. Um, in turn, what about Irma in terms of earning too much income when you're 65 and up?

Yeah. And this is really important for someone that's working with a financial planner or, you know, listening to a show like yours, because this is something you need to plan ahead of time. And the way the Irma works is whenever you enroll in Medicare, they're going to tell you what your part B premium will be for most people. It's one 44 60. So roughly $145 a month. And I would say probably about 95% of people will pay that much for their Medicare. But if you, uh, have a higher income than most, which currently Medicare deems that to be 87,000 as an individual filer, or 174,000 as a married filer, if your income is higher than that, then they're going to give you an income related monthly adjustment amount, which is w which is the acronym we call IRMAA income-related monthly adjustment amount that you pay on top of that part B premium.

And so, depending on your income level, it can go as high as $491 for part B, if you're in the highest bracket. And this is obviously something so important to discuss with your financial planner, because if you have been making all your projections based on you paying $145 for part B, but then you get to Medicare age and you are in the higher income bracket, and you've got to pay double that. Let's say it may be really difficult for you to retire when you had planned to and switch over to living on your investments and social security and things like that. So about 5% of people will pay an income related monthly adjustment amount. And the tricky thing is that they base that on your IRS tax return from two years prior. So right now in 2020, someone coming on to Medicare will get a letter from social security that says based on your income that we show for you in 2018, here's what you're going to pay for part B.

And one bit of good news is that if you have retired since then, and you're no longer making that income, but the IRS just hasn't gotten the Mo the latest tax returns, of course, over to social security. It takes a couple of years for that to happen. Then you can appeal with social security and ask them to reconsider what they're charging you for part B based on work stoppage. So there's a form you can download online at the social security website, and you can fill it out and say, yeah, I retired last year. So although in 2018, I was making that right now. I'm not making that any more. And here's why. And so you provide them with some proof, you could provide a pay stub, or, um, from the, from your last year at work showing where you earned over the limit, and then you could show, um, what your social security check is today.

Plus how much you're pulling out of your investments. You ride whatever documentation you can, and then social security will, can lower that for you instead of you having to wait for that data to catch up with you. And this is really important because, you know, my mom, she lives here in the DFW area, out in flower mound, and she was in this situation. And so she would have paid considerably more for part B, except that, of course her daughter is a Medicare broker. So she was really lucky in that I was right there to tell her, Oh, no, no, you don't have to pay that because now you're retired there. Some other things that also can affect that, like, if you a marriage or divorce that affected your income, and now you earn less than you used to, you could also file a reconsideration for that.

But what won't get you a lower premium is let's say you took a big distribution from your savings that you've put in an IRA or 401k that you've been saving and all your life, or you sell some property. Um, and you have a big cash when fall that one year because of the property you sold on those types of things, Medicare will say, yeah, you made a lot of money that year, so you can afford to pay these higher premiums this year. Um, and so those are all things to talk over with your financial planner and plan ahead of time when you might sell those properties, or when you might take a big distribution, knowing that it could impact your part B premium in a couple of years.

Great, very, very helpful there. And I'm assuming that if you continue working and you continue exceeding those income thresholds for another eight to 10 years beyond age 65, you will continue to pay those higher premiums.

Yeah, that's right. You will. So, you know, if you find that out, maybe if you are still working and you still have access to employer coverage, that might be a great route to go, because you can delay the parts, be if you're working for an employer with more than 20 employees. And so all of those things kind of mix into that consideration of when you would retire and what we will pay when you do retire,

It could really impact a small business owner or a self-employed person who doesn't have 20 employees. Maybe it's just a really small firm, or it's a solo. Yeah, that's right. Because you would still

Will be working and you would have maybe a giant part BB premium, because as a business owner, you're still earning money. Um, but you have less than 20 employees. So Medicare is going to be primary either way. You've got to sign up for PRP at 65. And, uh, you may end up paying quite a bit more for, for Medicare because of the income that you have as a business owner.

Okay. That's good to know. All right. I will. I said the last question, but I have one more. No worries. And I'm going to let you go, I know you don't have a crystal ball, um, and I don't want to get political at all, but obviously we're in a, a crazy election year. And to your knowledge, or do you have any thoughts about, is anything at stake here? Could anything major change with Medicare as it exists today, the age for eligibility be delayed? Or what are you hearing through the grapevine? Yeah,

We get this question a lot and of course I can understand why people are concerned. Um, so, so far what we have heard is that if Joe Biden were to be elected, his plan is to make Medicare available to people at age 60, as opposed to 65. Um, it's called an early buy-in. And the way that it looks is that people would be able to buy in probably to Medicare advantage plans for those five. And then later when they turned 65, they would have the expanded option of Medicare and supplements. And the reason that that would be critical or something actually positive would be that one of the groups of people that are uninsured right now, um, are people in there, the early retirees. And because of COVID, we have some that didn't expect it retire early. They're not sick right yet. And plans on the affordable care act are devastatingly expensive.

So if they had access to Medicare, even at a bar, if they had to buy into it, we hope that that, that would be less expensive than what they're having to pay on the affordable care act that sometimes can be, you know, really high deductibles and really expensive. Um, we do hear people that say they're concerned that, you know, doing that would be a slippery slope maybe into, um, single-payer health healthcare. And of course there isn't a crystal ball there, but I also think it's unlikely because right now, as a nation Medicare, the trust fund is struggling. And it's expected that in, I think it's 2026, that Medicare will start being unable to pay 100% of part a claims unless Congress acts to do something. And we expect that they will. But considering that we have say 60 million people on Medicare now, and those people pay premiums and there's deductibles and there's cost sharing.

It's hard to think that we would be able to very easily transition over to having 300 million people on Medicare, all paying nothing and that it would just be provided. Um, that would be a pretty massive change to Medicare. And so we've seen that, um, you know, from the other, from the candidacy, from the Democrats right now that the plan would be to just instead take the Medicare program, we have that's working and make it available to people just a little bit earlier. And so that's probably what we would expect to see if there was a change, um, in the presidency due to the election. And of course it also matters what happens in the house and Senate. And so I guess we'll all be watching and waiting to see,

Oh yes, we will. And we may not know for a while. Yeah.

It might be a year.

Yeah. Well, I appreciate you providing your perspective there. I just, um, I find that to be very helpful and to just start thinking about what are the possibilities, and obviously we'll know a lot more in a few months there. Well, Danielle, this has been amazing and, um, I kept you for a long time and I apologize for that. I just really enjoyed going to school on Medicare and you have so much great information. And I know my listeners are appreciating that as well. And, um, thank you so much for coming on. Tell us where we can find you online. Where would you like I'll link to wherever you would like me to in the show notes so that my listeners can easily find

Of course. So we are pretty easy to find. Um, our website is boomer benefits.com, and you can also find us on YouTube and on Facebook for boomer benefits. We have a private Facebook group, which you can join by going to our main Facebook page. And so you can join there. It's a free group and you can come on in and ask questions. You can post them and myself and my team will give answers. And we really welcome anyone that has questions. So even if you are someone who will never need our help, maybe you have a tri care or, um, do you have other retiree coverage from an employer? That's okay. You're welcome to come and join and get your questions answered. And then we also have a website for the book, which is available on Amazon and Barnes and noble 10 Medicare mistakes.com. So those would be just some great ways to start doing a little education and take some time to read up on this stuff. When you first turned 64 and get to know it, so that by the time you turned 65, you will have a good working knowledge and you won't be feeling like you have to make a quick decision under pressure.

Great advice. Well, thank you so much for everything that you've shared. I really appreciate it. And, uh, very much enjoyed having you on today. It's my pleasure. Thank you so much for having me. If you're in your forties, fifties, or sixties, I'd love for you to join my women. Retire smart community. You'll receive these podcast episodes by email, as well as additional ideal retirement resources that can help you retire smart, secure, and happy visit retirement money, gal.com forward slash community to join. This show is for informational and educational purposes only. Please do not consider any of the content as personalized financial investment tax or legal advice.

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