Chapters
Shownotes Transcript
People who generally can't afford a Medigap plan should absolutely be exploring Medicare Advantage plans. Medicare Advantage plans are very similar to your typical employer-provided health care plan.
Welcome to the Stay Wealthy Podcast. I'm your host, Taylor Schulte. And today we are talking about the overly complicated government program known as Medicare. I'm joined by Ashby Daniels, who you might remember from episode 47, which is still the second most downloaded episode in the history of this podcast. So if you missed it, go check it out.
Ashby is a fellow financial planner in Pittsburgh, and he recently wrote a book called Medicare Simplified, What Retirees Need to Know About Medicare in 100 Pages or Less. And I picked up the book a few weeks ago, and it truly is one of the best books out there on the topic. Amazon buyers seem to agree because it's been a top seller in the Medicare category since it was released.
If you want a copy of the book, Ashby was kind enough to donate five copies to our podcast audience. So if you're interested, all you have to do is shoot me an email at podcast at youstaywealthy.com with your name and mailing address, and we'll send a copy to the first five emails received. So that's podcast at youstaywealthy.com. For all the links and resources mentioned in this episode, head over to youstaywealthy.com forward slash 73.
So on the very first page of the book, you wrote that the book is dedicated to every retiree trying to make sense of a complicated government program supposedly designed to serve the American public.
So when I first read that, I felt like there's some strong feelings, I think maybe baked into that sentence. So I thought I'd start with maybe asking you to just expand a little bit on that. And then maybe also just talk about how we got here with Medicare, why it's such a complicated program. And then is it too late to simplify it? Like, could we do things to simplify it going forward? Yeah.
I think that you're right that that dedication is a little bit of a cut at the government program of Medicare. But how we got here is probably even a question above my own head. I know that
The way that the pricing has evolved over the years has a lot to do with the involvement of the insurance companies and the pharmaceutical industry to a large degree. But beyond that, I think that is it too late to make changes? I'm not sure. But here's what I will say is having done an immense amount of research on the topic, obviously, I actually don't think the program is terrible. What I think the program...
The problem is, is people don't know how to make the most of it. And frankly, that's why I wrote the book. Well, I wrote the book for two reasons. One is because I was asked a lot of questions about Medicare from clients and I didn't feel like I knew enough. What started off as just a research project to better serve clients ended up being like, okay, well, there's a lot of ifs, ands, and buts everywhere.
in the Medicare program and the entire Medicare process. Like if this, then this, but only if this is true. And so I just felt like it needed to be simplified, but I do think that the program itself actually functions pretty well. So even though the program itself is a bit of a mess, if you know what you're doing, you can actually get a very good program at a pretty reasonable price, if that makes any sense. Okay. No, that makes a lot of sense.
Let's try to help break some of this down for the listeners. And let's just start with what is Medicare exactly? And then I'd love for you to talk about the gaps that exist in the coverage that lead a lot of people to being exposed to what you say in the book, virtually an unlimited amount of financial risk.
Medicare, obviously, is the federal health insurance program that covers people who are age 65 and older. It also covers a few other sects. But let's just say that for purposes of this podcast, we're talking about people who are 65 and older. So Medicare is broken into multiple parts. You have Medicare Part A, which most people get for free. That covers inpatient care. Medicare Part B covers outpatient care. Most people pay $144.60 a month.
at least in 2020. But what happens is, let's just say that you're signed up for part A and part B. Where's the risk coming from? Because based on that short description, it would seem like, well, that might be all you need. The problem is, is that even once you have parts A and B, that only covers about 80% of your medical costs. The other 20%, whether people realize this or not, and I'll hazard a guess that most people do not know this,
they are on the hook for the remaining 20%. And I don't know what the last time is that you looked at a summary of benefits bill that you got from a hospital or your physician, but healthcare is not cheap. I think I used as an example in the book, if you are diagnosed with cancer or some disease that requires any kind of a hospital stay, it does not take long to rack up $100,000 in medical bills. If all you have is part A and B, you're on the hook for about 20,000 of it.
So there is no cap whatsoever. And that's why I say the risk is limitless. There is no cap whatsoever on your share of the medical costs. And I equate a lot of the bankruptcies that happen, particularly to retirees, to medical costs and not being adequately prepared for
for making the transition into Medicare and all of the things that go along with that decision. So there are some ways to fill that gap and better protect yourself against that risk, which we'll talk about in a little bit. If somebody wants to understand every nuance between the different parts, part A, B, C, D, they can grab the book and read through those chapters. But are there any other maybe misconceptions around these different parts, what they cover, what they don't cover? And
in no particular order, but are there any that really stand out that typically surprise retirees when they first start learning about all these different parts of Medicare? The one misconception I've found is that a lot of people hear that Medicare Advantage plans are called Part C, which is true. Medicare Advantage plans are called Part C, but that is not part of the actual government-provided Medicare program. And so that tends to confuse a lot of people where they think...
think that, well, they must get a Medicare Advantage plan because that's obviously part C. But in reality, there is what's called a Medicare supplement plan, generally referred to as Medigap, that isn't an alternative option. And frankly, for a lot of the people whom I serve, whom you serve, probably many of whom listen to this podcast, in a lot of cases, a Medicare Advantage plan
is not the ideal health insurance program for retirees, particularly if you're going to travel. There's a lot of underlying ideas of when one plan might be better for somebody than another. But as far as misconceptions go, I think that a lot of people believe that Medicare Advantage plans are part of the government program. And in fact, they are not. Well, I was going to save the Medicare Advantage bashing till a little bit later, but since you went there, let's tackle it now. So there's a lot of misconceptions around Medicare Advantage plans. And
You note this in the book that they are the only plans that you'll see advertised on television, online and magazines, so much so that retirees start to believe it's their only option. And what happens is, as you know, they end up in some insurance agent's office and they're about to sign off on this insurance policy that helps this agent meet their sales quota for the month. And they don't even realize that there are other, maybe better options out there. So maybe just talk more about the Medicare Advantage plan.
the conflicts that exist, and then maybe who is and isn't a good fit or a good candidate for a Medicare Advantage plan. Medicare Advantage plans, I hesitate to use the word bashing so much as not transparent.
which in a world of financial services, which is generally characterized as not transparent, I tend to take non-transparency personally. So Medicare Advantage plans are not the most transparent plans. There's a reason why people who are, say, 64 and a half start to get thousands of pieces of mail and
unwelcome phone calls from insurance agents. And that is because the Medicare Advantage plan is an absolute cash cow to the insurance industry. And this comes back to one of the books that I read was Get What's Yours for Medicare by Philip Moeller. I hope I said his name correctly. I apologize. If not, he mentions in his book, and he's somebody who has been intimately involved with the Medicare program and worked with a lot of the government agencies
And he indicated in his book that every Medicare Advantage plan per enrollee, every Medicare Advantage plan that is sold, that insurance company is getting about $10,000 a year per enrollee.
So if you are, say, 64 and a half, and you get something from UnitedHealthcare every single week until you turn age 65 and a half, they will make up whatever their mailing costs are, printing costs, everything within the first year because they're going to get a $10,000 distribution from the government cash cow that is Medicare. That's not to say that Medicare Advantage plans are bad. They're just not transparent. So
Where I'm going with that is I can't confirm that number. And I can tell you that for hours, I tried to confirm that number via Google, via reading every government website. And it is very clear that these Medicare Advantage plans, or Medicare Advantage insurers, are getting this style kind of kickback, if you will. But
It is so not transparent that in multiple hours of actively looking, I couldn't find the exact number. It says thousands. It's just very not transparent yet again. And so that's my problem with it. But that's not to say that it's all bad. But that is why you can get a Medicare Advantage plan at zero premium.
So when you watch CNBC during the day, you'll see Medicare Advantage plans being advertised as zero premium. That's how they can be zero premium because the government's paying your premium. They're paying about $10,000 a year for your coverage.
So you might say, well, why not just get that? The reason is because it may not provide the coverage that you're looking for or that you're expecting. But who might a Medicare Advantage plan be for, as your question? Which is, people who generally can't afford a Medigap plan should absolutely be exploring Medicare Advantage plans. Medicare Advantage plans are very similar to your typical employer-provided health care plans.
So if you're somebody who either may not have saved as much or you really just don't leave your general area, like let's just say that I have family members who almost never, ever leave where I'm from. Well, then a Medicare Advantage plan would be fine for them because they're never going to be outside of the network. But if you're going to be somebody who travels, if you're going to be somebody who may have more extensive health care costs, you're somebody who already has some significant pre-existing conditions, then
Medicare Advantage may not be the right plan, but Medicare Advantage plans absolutely have a home in the world of retiree health care. And I certainly don't want to only bash them. They provide a much needed service for a significant section of the population. But as a general rule, for the type of person who's probably listening to this podcast or the type of people who we're typically working with, in most cases, I'll hazard a guess that a Medicare Advantage plan probably isn't the right choice.
You mentioned that a company like UnitedHealthcare might be sending out these advertisements to retirees as they approach age 65. I can't imagine UnitedHealthcare being the only insurance company sending those out. So can retirees shop the market for these Medicare Advantage plans? Can they pin some of these companies against each other to get a better price? Or is it just a flat static price for everybody?
I don't know that answer in terms of can you negotiate a better price? I am 100% sure that there are no shortage of insurance companies that are willing to offer you a Medicare Advantage plan. I mean, there's a reason you get thousands of pieces of mail at that point in your life, and that's because there's
so many insurance companies competing for that business. But if I was going to be looking for a Medicare Advantage plan, one thing I'd be looking at is the plan ratings. So all of these different insurance companies and their
their respective plans are offered a plan rating between zero and five stars. I'd probably stick with the four to five stars. And then at least one other question that I would anticipate asking, or I would encourage asking is what the rate of premium increases have been. So a lot of times when a Medicare Advantage, a new insurer comes on with a new plan, they may offer lower than market premiums with the idea to get an
bait and switch or something like that. And they'll just try to get enough of a kind of foundation of enrollees to,
to provide the coverage. And then within the span of a couple of years, they will raise premiums and then they've pretty much got you. So I would just say to be weary of new insurance plans that are just coming onto a platform. I would stick with the higher rated plans and I would be curious of a plan's proposed increases or history of premium increases. And what if you're listening to this right now and you feel like you've chosen the wrong plan?
What are the rules around changing plans? How do you go about doing that? And is there any pitfalls to watch out for? So if you've been in a Medicare Advantage plan, I mean, generally speaking, I don't know of too many people who have signed on for Medigap and then have moved over to a Medicare Advantage plan. And there's reasons for that, which we can go into if you'd like. But generally speaking,
it's kind of a one-way ticket. People want to get out of their Medicare Advantage plan and into a Medigap plan. And that's just generally because the premium is not lower, but your overall out-of-pocket costs may be lower. As a general rule, if you're a Medigap plan owner, you pay your premium and then they pick up the remainder of
almost all of your medical costs, minus maybe a few co-pays, deductibles, things like that, but very small out-of-pocket. Versus the Medicare Advantage plan, maybe you're out-of-pocket $6,500 a year, depending on when catastrophic begins to take effect, because that's more in line with what a company-provided healthcare plan is like. So to get back to your question, it
If you're in a Medicare Advantage plan and you're looking to make the switch, basically, if you enroll at age 65 in a Medicare Advantage plan, you're basically given a 12-month trial period to where you can change over to Medigap and still receive guaranteed issue rights. Outside of that window, if you want to switch from a Medicare Advantage plan to a Medigap plan, you have to go through health underwriting. Now, inconveniently, the time that most people want to make that switch is when they start having health issues.
So I would just say that if you're in a Medicare Advantage plan, you want to explore Medigap plans and you're still healthy, then start looking now. Don't wait until later to do so. Now, the reverse, if you want to go from Medigap to Medicare Advantage plan, for whatever reason, I mean, certainly there are people who do that. You can kind of do that at will during any open enrollment period. So because if you think about it, these Medicare Advantage plans, going back to the kind of government cash cow, they want you. And
And they will take you in almost all cases. So we'll just leave it at that. Let's back up a little bit. And for those that aren't quite 65 yet, but maybe they're in their early 60s and starting to think about Medicare, will you talk to us about the different enrollment periods? There are three different enrollment periods. And what should listeners know about those different enrollment periods?
You have three enrollment periods. You have the initial enrollment period, which is the seven-month window, so around your birth month. So if you are, say, turning 65 on Independence Day, on July 4th, then you have from April through October to enroll in Medicare Part B. Obviously, your Medigap enrollment or Medicare Advantage plan enrollment is
a slightly different enrollment period, which is all covered in the book. We don't need to get into specifics on that. But your initial enrollment period is a seventh month window surrounding your birth month. Unless of course your birthday is on the first of the month, in which case it's a seventh month window around the month prior to your birth month. This is like the whole complicated workbook
world of Medicare is there's always these if, ands, and buts. And that's what I was talking about kind of when we opened. The secondary is the special enrollment period, which is the eight-month window that begins the month your group health coverage ends or when your employment ends, whichever comes first. Again, here's the if, ands, or buts, unless one of those occurs during your initial enrollment period, in which case you would have to abide by the initial enrollment period.
So, there's, again, always those ifs, ands, and buts within the Medicare program. But those are the two primaries. Those are when, I would say, a very significant majority end up enrolling in Medicare. If you're already, say, you're 63 and you're already receiving Social Security, you're going to be automatically enrolled in Parts A and B when you turn 65 anyway. But
If you are still working or you're getting ready to retire and you're 64, those are the two most popular enrollment periods. And lastly, you have the general enrollment period. So if you miss your initial enrollment period and the special enrollment period, it's important to note you may be subject to penalties. But the final option is the general enrollment period. And that runs from January 1st to March 31st each year with coverage then eventually starting on July 1st. So that is the third one.
I mean, as you've already shown us, this stuff does get really complicated and there's a lot of different nuances, ifs, ands, and buts. If you're going through this process or you're getting ready to go through this process, and let's say you manage your financial plan on your own, you manage your investments on your own, or your life is just really simple, where might you go to get some real honest guidance on this enrollment process, what to choose, weighing the different options? Are there Medicare hourly specialists available
Is the Medicare office a helpful resource? Who might somebody lean on for just honest, objective advice if they don't have a full service financial planner helping them? One of the things I have in the book is the last chapter of the book is a set of resources that are available to everybody.
And in almost all cases, they're free. But I think the best option for somebody who is a do-it-yourself or even a financial advisor who's listening to this podcast who may not know enough where they might refer their clients to is there's something called the SHIP, which stands for State Health Insurance Assistance Program. They missed the A in their abbreviation, but that's what it's called. It's a program that's
It's a federally funded program, and they have thousands of trained volunteers who can answer virtually any Medicare question or problem. I mean, they can help you file a claim or a complaint. They can help you deal with billing problems, help you with Medicare enrollment, help you find a plan. Each state has their own SHIP offices. So if you just look for
Well, their website is shiptacenter.org or something like, I believe that's correct. But if you just Google State Health Insurance Assistance Program, they are probably the best source of information from A to Z and can help you. You can literally get somebody on the phone talking with you about your specific health circumstances and information.
While they may or may not make specific recommendations, you can at least get any and every question you could ever think of answered by utilizing your local ship office. And I believe you can visit some of them in person, but even the state of Pennsylvania, as big as we are, I think only has one office. So in most cases, just giving them a call on the phone is probably the best bet.
Awesome. I'll make sure to throw all that in the show notes too with some of those links. But yeah, you do have a great chapter on Medicare resources that people can take a look at too.
Shifting gears a little bit here and wrapping up, we talk a lot about HSAs on this show and how to properly use them. So for those that have been using them properly as a savings and investment tool while they're accumulating their retirement assets, I'd like to just kind of cover how HSAs are used in conjunction with Medicare. What exactly can your HSA dollars pay for and what can't they pay for?
So your HSA dollars can pay for just about everything except for your Medigap premiums. So if you are somebody who signs up for a Medigap plan, Medigap premiums are not reimbursable, but you can use your HSA dollars for just about everything. You can reimburse yourself for your Part A, Part B, Part D premiums. If you do sign up for a Medicare Advantage plan, they can reimburse you for your Medicare Advantage plan premiums.
You can use it for co-pays, co-insurance, just about anything except for your Medigap premiums are not reimbursable. Why they've made it that way, I don't know. But that is, as a general rule, the one tripping point that you're not able to use those funds for. So you mentioned SHIP and you mentioned that you have a whole resource section in the book. Are there one or two other resources you want to throw out there for listeners? I'll tell you that just the Medicare sites themselves...
are actually quite fantastic. They have a ton of white papers, or I can't remember what they call them, white papers or just resource pages, where you can go and get those publications. And that's right on the medicare.gov site. There's also something called, I want to say, Ask Medicare, or What's Covered, I think is what it's called. And that's right on the medicare.gov site.
If you go to find that online tool called What's Covered, I believe it is, you can literally type in just about any medical question that you have and find out whether Medicare covers it or not. And one thing I would mention is, as an example, throughout the book, I talk about how Medicare writes what is covered and what is not covered. But what I would recommend is that people, just because it says it's not covered, to assume it's not.
And if it says it's covered, I wouldn't assume that it is. And that really stinks. And that probably comes back to the part about my opening of the book is a program supposedly designed to serve the American public. But don't make the assumption that something's not covered and don't make the assumption that something is. Always confirm. So you have a right to ask your healthcare provider whether or not something is covered. And if so, at what level? So Medicare being so...
such a confusing world, you have to be your own best advocate. And that's unfortunate, but that's true. Just be sure that you are taking the time to educate yourself. My kind of brief description of the book is you can learn 98% of what you need to know in less than two hours of reading. And
The problem is that the 2% I'm missing can be super valuable. So you still have to be your own best advocate. So understanding what's covered, what's not covered, understanding your rights associated with the Medicare program is absolutely critical for everybody who's about to go into the Medicare program.
No, that's really good advice. And again, I'll be sure to link to some of those resources in the show notes. Obviously, the number one resource is your book, Medicare Simplified, What Retirees Need to Know in 100 Pages or Less. I got to tell you, I thought it was extremely well-written. It was really easy to read. I think it's a great starting point for everybody that just needs that primer on Medicare. They're gearing up. Maybe you're in your early 60s, approaching age 65.
Check it out. There are a lot of books on Medicare on Amazon, but Ashby, correct me, you're up there in the number one or number two right now? I was number one new release. I actually looked right before I call. I actually have number 10 in Medicare total volume. So it's been a really good launch. It's only been out for a month, but it's been pretty popular so far.
Love it. Well, everyone, this is Ashby's second time on the podcast. So let's support him. Go out there, check out his book, buy it, leave him a review. We'll be giving some copies away to listeners, as you guys know, as I mentioned in the intro. So let's support him. Let's keep this going. If anybody else wants to reach out, where can they find you, Ashby? You can just go to retirementfieldguide.com. That's got all my contact information. And feel free to reach out if you have questions.
that I can help answer. I certainly am more than happy to be a resource to your audience and happy to answer any questions anybody has. Awesome. Thanks so much for joining us today. Thanks for having me, Taylor. I appreciate it as always. This podcast is for informational and entertainment purposes only and should not be relied upon as a basis for investment decisions. This podcast is not engaged in rendering legal, financial, or other professional services. ♪