Bogleheads® Chapter Series – Medicare Basics
Announcer: Welcome to the Bogleheads Chapter Series. This episode was hosted by the Pre and Early Retirement Life Stage Chapters and recorded October 29, 2022. The topic is Medicare, presented by Lonnie Thibodeaux.
Bogleheads are investors who follow John Bogle's philosophy for attaining financial independence. This recording is for informational purposes only and should not be construed as personalized investment advice.
Jim: Thank you, welcome to the Pre-Retirement Life Stage discussion today with Lonnie Thibodeaux. He's going to talk about Medicare and we'll be turning it over to him shortly. But at the beginning here I'd like to talk about a few things. We will be recording this. It will appear on Zoom, on the Bogleheads YouTube channel, so if you could, please keep your video turned off.
Secondly, we're going to be having questions. You can ask questions in the chat. Sometimes people will answer them for you, and if they look like they need to be asked, the moderators will ask Lonnie about them. We're going to use during the question and answer period the “raise-hand” function, and if you look at your Zoom control you should have a control to raise your hand--and if you want to try doing that right now you can just check that out if you've never done it. And I see a whole bunch of people with raised hands, which is good. And then you can hit the lower hand on the control also to lower it, so that's very good.
Okay, so this afternoon our meeting will be hosted by Lonnie Thibodeaux. He's an insurance agent that owns his own agency. He was born in Rayne, Louisiana. Most of his career was spent in the aviation industry, and now he's in the healthcare business. We've talked to him a few times before, and he loves his job and loves helping people.
I'll turn it over to Lonnie. Lonnie, if you want to share your screen, you can share your slides.
Carol: Did you want to do the poll first?
Jim: Oh yes, we’re going to have a poll first so Lonnie can see what we’re dealing with here. So I’m going to turn the poll on -
[Technical issues with implementing the poll, then the poll results come in]
Jim: Ok, we’re going to end the poll now and I’ll share the results so we can see where we stand. So, it looks like we have a number of people that are going to be eligible soon, and a few people that are already on Medicare, and then most of the people seem to be getting their insurance right now from their employer with a small portion of ACA, and some of the people of course are on Medicare and about 10% of the people are going to be using Cobra to get to Medicare. So if that helps you Lonnie, in your speech or your talk.
Lonnie Thibodeaux: It does, thank you.
Jim: All right, I'm going to stop sharing the poll results and I'll turn it over to Lonnie.
Lonnie Thibodeaux: All right Bogleheads! Well first of all, as Jim said, I'm Lonnie Thibodeau and I run an insurance agency and we specialize in Medicare plans. And you guys have invited me to come on board and talk about Medicare, how it works, when to enroll, etc.
So what I'd like to do is just take a few minutes and go over some basic information and then leave the bulk of our time together this afternoon for Q & A, because as I visit with clients here in my office, I find that me talking and not listening doesn't work very well. But I will talk first then I'll shut up and be happy to answer any questions you guys have.
So let me just get started. The first question is: when do you enroll in Medicare. Well, if you're enrolling in Medicare due to your age, you become eligible for Medicare the first of the month that you turn 65, unless your birthday is actually on the first of the month - then you're eligible for Medicare the first of the prior month. And you can begin the enrollment process with the Social Security Administration up to 90 days prior to your Medicare eligibility date.
Now if you're receiving Social Security retirement benefits prior to turning 65, Medicare will default to enrolling you in both Medicare Parts A and Part B. You should receive a Medicare card in the mail that contains an 11-digit alphanumeric Medicare number and it should include the effective days for both Part A and Part B on that card.
Now if you're not receiving Social Security retirement benefits prior to turning 65, then Medicare will default to enrolling you in Medicare Part A only, and to enroll in Medicare Part B you'll want to go to either ssa.gov or call the Social Security Administration at 800-772-1213.
Now for those who are enrolling due to End-Stage Renal Disease, meaning if your kidneys no longer work and you need dialysis, you're eligible for Medicare. And if you're eligible for Medicare due to at least 40 quarters of work, if you're already receiving Social Security or retirement railroad retirement benefits, then you're the spouse, or if your spouse of a dependent child or a person who meets the requirements listed above, you can enroll in Medicare on the first day of the fourth month of your dialysis treatment.
On the other hand, If you're receiving Medicare Social Security Disability [SSDI] you're also eligible for Medicare after a 24-month qualifying period, meaning you can enroll in Medicare on the first day of the 25th month of your SSDI.
For those who don't have a Medicare card, this is what it looks like.
Now what happens if you don't enroll in Medicare in a timely fashion? Well upon turning 65 you have a seven-month window to enroll in Medicare Part B. It begins three months prior to the month of your 65th birthday and ends three months after the month of your 65th birthday. If you don't enroll in Medicare when you're eligible and you don't have qualified health insurance, you're subject to a Part B late enrollment penalty of 10% per year for each full 12 months you're late. It's an annual penalty and will be levied on you for the rest of your life.
Qualifying health insurance means employer-sponsored health insurance. So if you get your health insurance through your employer or your spouse's employer, you don't have to enroll in
Medicare Part B when you turn 65. Now one thing that's kind of interesting about this is we've had some clients who've come into our office and said, “Hey I have Cobra, and so I'm going to postpone my enrollment in Medicare Part B.” Well, currently, having Cobra--even though it comes through your or your spouse's employer--does not exclude you from the late enrollment penalty. That, however, is under review, so it may change in the near future.
So what if one spouse is eligible for Medicare and the other isn't - a common situation. Well every situation is different, but here's some of the general guidelines. First, if the older spouse is the primary or only wage earner and is retiring and losing Group Health Coverage, the younger spouse is eligible for Cobra for up to 36 months instead of the typical 18 months. Now if Cobra won't last long enough to get your non-working spouse to Medicare age, then the Affordable Care Act individual health plans are available. Many states also allow for temporary health insurance policies, and for those who qualify, we have some clients who are on Christian-based Health Care Sharing Ministries.
How much does Medicare Part A and Medicare Part B cost? Well for most people, Medicare Part A is premium free, and if you you or your spouse has worked at least 40 quarters of qualifying employment or self-employment throughout your career, you will qualify for premium free Medicare Part A. If you haven't worked enough quarters, then in 2023 your premiums will be either $278 per month or $506 per month, depending on how many qualifying quarters you have. In the Medicare documents they used to spell out specifically how many quarters gave you each premium level, and unfortunately, in preparation for this presentation, I couldn't find that table.
Medicare Part B. While most people get Part A free, there is a standard premium for Medicare Part B, and in 2023 that standard premium is $164.90 per month, down approximately five dollars per month from 2022. Now for some people, you'll be subject to paying IRMAA. IRMAA stands for Income Related Monthly Adjustment Amount, and boy, is she mean. If you look at this table, in 2023 these will be your Medicare Part B premiums if your 2021 income is above $97,000 for an individual or $194,000 for a couple who files a joint tax return. I'll just pause here for a second and let you look at these premiums, and you can see where your income might fall in the state.
Now in addition to a higher premium for Medicare Part B, if you are subject to this higher income level then you will also pay a higher premium for Medicare Part D or your prescription drug coverage, and it works like this. If you fall into the category of, as a married couple, $246,000 or above, then you pay whatever the Medicare Part D premium is plus $12.20 per month.
How much does Medicare Part D cost? Well, in the county where our office is, Part D premiums range anywhere from $6.60 on the low end to $108 dollars per month on the high end. And we select a Part D plan for our clients based on the total estimated out-of-pocket costs and that’s dictated by the prescriptions they take on a regular basis.
How much does Part C cost? In our county, Part C premiums range anywhere from zero to $213 a month. We also have some plans that charge zero premium and in addition reduce your Medicare Part B premium by as much as $125 dollars a month. Now this varies from county to county all across the country.
How much does a Medicare Supplement Plan cost? Medicare supplement plans have a very wide range of range of premiums depending on the selected plan, age, sex, and zip code. We see premiums in our area from about $45 per month for a high deductible plan to as much as $500 per month for people who are in their 80’s and 90’s for a very comprehensive plan.
Now one of the things I was asked to do was talk about Health Savings Accounts (HSA) because I understand many of you have Health Savings Accounts. So here's how they work when you're on Medicare.
Prior to enrolling in Medicare, you must stop making contributions to your Health Savings Account (HSA) because Medicare does not qualify as a high deductible health plan. Money that's in your HSA account can still be used to pay for all the same qualified medical expenses as you did prior to enrolling in Medicare. In addition, you can pay for your Medicare Part B, Part C, or Part D premiums from your HSA account. However, currently you cannot use your HSA funds to pay for a Medicare Supplement Plan.
All right, so let's talk a little bit about how Medicare works. Medicare Part A is your hospital coverage. Medicare Part B is your medical coverage. And in general terms, Medicare Part A has a per benefit deductible of $1,600--that covers you for up to 60 days in the hospital. If you're in the hospital beyond 60 days, day 61 through 90 has a $400 daily co-pay. If you're there beyond 90 days, days 91 through 150 have an $800 co-pay, and after day 150, you pay all costs.
Medicare Part B works differently. It has an annual deductible in 2023 of $226. Then Medicare covers 80% of your eligible expenses, leaving you, the beneficiary, to pay 20%. By the way, there's no cap on the beneficiaries’ 20% co-insurance. Parts A and B are the only two original parts of Medicare and are still the only parts of liability by the federal government, or an agency thereof, CMS, the Center for Medicare and Medicaid Services.
Medicare Part D prescription drug plans are offered by health insurance companies that have been approved by Medicare and meet CMS criteria for benefits, deductibles, etc. In 2023 the standard Medicare Part D deductible is $505. Many Part D plans waive the deductible for Tier One and Tier Two drugs.
Enrolling in a Part D plan can happen when you first become eligible for Medicare Part A, and then you can choose any Part D plan during the annual Medicare enrollment period, which runs from October 15th through December 7th each year. You can also enroll if you qualify for a special enrollment period, such as moving from one county to another.
Typical Part D tier categories are tier one, preferred generics, tier two generics, tier three preferred brand, tier four brand, tier five specialty, and tier six select diabetic drugs. In addition most Part D plans have networks of pharmacies and preferred networks of pharmacies, and as you might imagine, your lowest co-pays are usually found at preferred pharmacies.
[Technical adjustment problem rectified]
Okay Part C, also known as Medicare Advantage Plans. Enrolling in Part C means that your Part A and Part B benefits of Medicare are actually being delivered to you by a health plan instead of by CMS. If you choose a plan that offers Part D, then obviously you're getting prescription drug coverage from your Part C plan as well. Part C plans have to cover all the same medical procedure codes as original Medicare. However, your out-of-pocket cost responsibility can differ from original Medicare with a Part C plan.
There are different types of Part C plans. They come in HMO, PPO, PFFS or Private Fee For Service, special needs plans, and MSA plans. I'm going to focus on two types. HMOs and PPOs because they probably constitute 90% plus of all Medicare Part C plans out there.
Now both these plans have networks of medical providers you need to choose from, but the major difference is this--in most cases enrolling in a Medicare HMO means no coverage outside the plan's network unless it's a medical emergency. In addition, in most cases you must get a referral from your primary care physician prior to making an appointment with a specialist. PPO plans have a network as well, but you can typically get coverage for using non-network medical providers at a higher cost to you and you don't have to get a referral to visit a specialist.
All Part C plans are required to have an annual out-of-pocket maximum. The highest allowed by CMS in 2023 is $7,500 in network and $12,450 outside the network. But many plans offer a lower out-of-pocket maximum than allowed by Medicare. Many Part C plans offer benefits that Medicare doesn't--things like vision, dental, hearing, over-the-counter benefits and a fitness benefit.
Now in order to enroll in Medicare Part C, you must be enrolled in Medicare's Part A and B. You can enroll when you first become eligible for Part B, and in each year during the Medicare annual enrollment period or with the special election period, you can choose a different Part C plan. The important consideration about enrolling in a Medicare Part C plan is - there is no medical underwriting.
Medicare Supplement Plan enrollment--with Medicare Supplements you enjoy a six-month Medicare Supplement open enrollment period beginning the date you enroll in Medicare Part B. During that time, you can choose any Medicare Supplement Plan offered in your area with no medical underwriting. You also get a guaranteed issue window when just enrolling from an employer plan. Now after your open enrollment period, enrolling in a Medicare Supplement Plan usually requires underwriting. This is an outline of what Medicare Supplement Plans look like.
So as you can see, Medicare Supplement Plans carry letter designations A through N with some of the letters skipped in there. And one would think that we would start on one side with the least comprehensive plan and go to the other side with the most comprehensive, but unfortunately that's not the way it works.
The most comprehensive plan available for some people is Medicare Supplement Plan F, now I say for some people, plans F and C are no longer available to people who enroll in Medicare by January 1, 2020, and beyond. So Plan G has become the most popular plan and most comprehensive for most people eligible for Medicare after January 1, 2020.
What this grid is designed to show - and I'm going to focus on Plan G for a moment - you see the green check marks in the boxes in the G column, and what that means to us is for all the things that Medicare does not cover 100%, Plan G picks up those things. Now you see the red X under the Medicare Part B deductible, and that simply indicates to us that Plan G does not cover the Part B deductible, and as we discussed earlier, the Medicare Part B deductible in 2023 is $226 dollars for the year. So that means enrolling in Medicare Part A and B and enrolling in a Medicare Supplement Plan G means that you're only out of pocket cost for medical expenses is to satisfy that $226 dollar annual deductible.
Now when I visit with Medicare clients in my office, the first thing I typically do is pull out this page or this document right here. And the reason I do that, what this page is designed to do is simply indicate the two basic ways you can get your Medicare benefits delivered to you. On the left hand column what we see are original Medicare Parts A and B being delivered to you by the federal government. And then at your option you can add Medicare Part D, a prescription drug plan, and in addition to that, add a supplement plan.
The alternative way to get your Medicare benefits delivered to you is Medicare Advantage, also known as Part C. With Part C, as we discussed previously, it means you're getting your Medicare Part A and B and prescription drug benefits delivered to you all together in one plan.
Now I tell people who are in my office there are pros and cons to each way of doing this. First of all, let's look at the left hand column. The benefit to enrolling in original Medicare with a Supplement Plan is that you have a very defined out-of-pocket maximum for your health care. In addition to that, you have no networks to contend with. You can go see any medical provider who takes Medicare.
The benefit to Medicare Advantage Plans is often you can get these at much lower premiums, and you can get a Medicare Supplement Plan combined with the Part D Plan. The downside is they do have networks for these plans. Oh, one other benefit is most of these plans do offer extra benefits that Medicare doesn't provide as we discussed earlier, things like vision, dental, over-the-counter benefits, hearing benefits and a fitness benefit, etc.
All right, well that's the down and dirty. That's the very quick version. So I'm going to stop talking and I'm going to open up to questions and I'll be glad to answer any questions you have.
Jim: So I would suggest anybody who would like to ask a question, please click on your raise hand function. And we have a question from Mark. I'll turn it over to Mark.
Mark: I'm probably about a year and a half away from having to consider Medicare. I retired about nine months ago and I'm on ACA for now. Coming into this I know nothing about Medicare and basically the presenter all nearly lost me on like the first few slides. So I have absolutely zero knowledge of this, but within like about the next year I really need to come up to speed on this.
Jim: Well the slides will be part of the video. We'll have all the sides there and you can take your time later and read them thoroughly.
Mark: All right. But is there any sort of book that you might recommend that I can read things over a couple of times, come back later, use as a reference while I try and come up to speed?
Lonnie Thibodeaux: Well yeah. The bible for Medicare, if you will, is a document called Medicare and You, and Medicare publishes a new one every year. If you're not getting one of those mailed to you yet, you can go to Medicare.gov and do a search at that website for the book Medicare and You and you should be able to download one in PDF format.
Mark: Okay. That answers my question for now. I may have questions later and I'll let anybody else ask a question. Thank you.
Jim: Okay, I just put a link to that in the chat. And the chat will be published with the video too. LadyGeek, did you have your hand up, and Mark if you could put your hand down.
LadyGeek: There's a book called Medicare for Dummies. I haven't read it but someone
was recommending it. I’'d like to first answer Mark. You are not alone in this question because I'm actually a year out. As a co-host I couldn't fill out your survey, but I'm in with them. I'm exactly within the one year range of this, of needing all this, just got my first spam email about Medicare. But what I wanted to point out is that you don't need to do this alone. I am using a medical insurance broker. And I mean I'm very novel in investing in insurance, but on this, something like this, I think--as of course you offer your services Lonnie--there are many, many people across the country who do this. So maybe Mark's first search would be a medical insurance broker.
This is very different from an insurance agent. You can Google them. They're all over the place, but I hooked up with one who served me for years and all I did when my parents were ready to go, he just showed up to the house, here's the plans, here's your choices, sign. And I just told my parents to sign it and it's done.
The other thing I wanted to know is, I'm a widow and my late husband was on Medicare and he had private insurance. How does the subrogation work when, if I have, if I go on some kind of plan like an ACA plan? With Medicare how do I - like you show your choices in the chart - but how does that relate in priority? I'm worried about subrogation. If I have a better plan, do they go to the plan first and then Medicare? So how do I know what benefit will apply?
Lonnie Thibodeaux: Are you over the age of 65?
LadyGeek: No, I'm 64. I'll be next week.
Lonnie Thibodeaux: Okay. So when you enroll in Medicare and if you're still employed, or you're getting health insurance through your or your spouse's employer, when you turn 65 you'll be automatically enrolled in Medicare Part A. So in the background, if you will, Medicare Part A and your group health insurance plan will coordinate benefits with one another. Once you turn 65 and you're retired and enrolled in Medicare though, then it's typically a scenario where it's either/or--if you have an employer that offers retiree health benefits, then you choose those health benefits, or you choose individual Medicare plans. But you don't do both.
LadyGeek: Okay, that's right. Right now I am retired and I'm on an ACA plan now. So I said there will be a transition period next year. Yes, okay. So it's just--I'm an engineer, so I'm trying to over analyze this--so okay, I'll just chill and work it out with my broker then. Thank you very much.
Lonnie Thibodeaux: Yeah, every situation is completely different so it's hard to make a general statement about retiree health benefit plans versus individual Medicare plans.
Miriam: Jim, I just wanted to show, this is the book that Lonnie mentioned, The Medicare and You book, it came in the mail. It looks pretty comprehensive, I haven't read it.
Jim: And the links are in the chat notes, somebody provided the direct PDF link. And a couple other suggestions from other books. So I think we have a comprehensive list in the chat now too.
Jim: Okay, thank you.
Miriam: I just wanted to mention in the chat someone posted that you can go to the Medicare.gov website and enter your current prescriptions and it will show the total cost of different plans, including prescriptions for your ZIP code. Does that seem correct Lonnie?
Lonnie Thibodeaux: That's absolutely correct. I'm glad you brought it up, Miriam. In fact, when we have clients who call or come to us seeking to find what's the best prescription drug coverage for them--and best is maybe not the best word to use--but the lowest overall out-of-pocket cost for them, that is the tool we use at Medicare.gov because it shows you every prescription drug plan available based on the county you reside in. And it will sort those plans based on total out-of-pocket costs. So it's a very effective tool.
Miriam: And then during open enrollment every year would you adjust that?
Lonnie Thibodeaux: Well yeah, I think it's an excellent idea to review that every year during the enrollment period. And the reason is from one year to the next these plans can change their formularies, meaning they can move a drug from say tier one to tier two, or they can increase the premiums and unfortunately if you're not paying attention, you get into January, for instance of 2023, and you find a prescription I paid $5 for last year is now $45, for instance. Well now it's too late to change plans because we're not in the enrollment period any longer.
Miriam: Thank you.
Lonnie Thibodeaux: Sure.
Jim: Okay, Karen, you have a question?
Karen: Yeah. I'm wondering if people choose Medicare Advantage because it seems cheaper. The premium is less and they get more stuff covered. And then later when they need it due to illness or something, are they able to get the supplemental insurance, or to go where they want or see who they want, or do they regret the Medicare Advantage plans. I wonder about that.
Lonnie Thibodeaux: Great question. And it's an important consideration. So the way it works is with Medicare Supplement Plans, we talked about the initial open enrollment period you have when you first enroll in Medicare Part B. After that enrollment open enrollment period is called for Medicare Supplement Plans, then you would have to medically qualify. So an answer to your question is if you've been enrolled in a Medicare Advantage plan and let's say you develop some medical condition, and I'll just use cancer as an example, when you get to the enrollment period the question is can I go back to a Medicare Supplement Plan, and in a situation like that, the answer is probably no. At least that's the case here in Texas and in the other three states I'm licensed, in Louisiana, Oklahoma, and Arkansas. Now you might have different laws in your state that would allow you that opportunity, but in those four states the answers are resounding no.
Now, let's go to do people sometimes regret that? Quite possibly, but let me cite an example. There's a very popular Medicare Advantage Plan in the Dallas/Fort Worth area, also out here in the county where I reside, and we have a dear friend who had been enrolled in that plan with no monthly premium for probably 20 years. In her mid-80’s she developed cancer and I was visiting with her at the hospital and I said, “Oh Dottie I'm so sorry we didn't know this was going to happen. We could have enrolled you in a Medicare Supplement Plan.” And she just chuckled and said, “Oh, are you kidding me. For all the premiums I've never paid for a Supplement Plan for the last 20 years, I'm so far ahead I'll never spend that much money.”
So I guess part of it depends on your philosophy. Part of it depends on the math. You know how much money you would have paid for a Supplement Plan versus no premium on a Medicare Advantage Plan, etc., and how much risk you are willing to take. The very popular Advantage Plans in our area have annual out-of-pocket maximums for medical expenses of about $3,900 a year, and that was the kind of plan that she was enrolled in.
People ask me on a regular basis what's better, Supplement or Medicare Advantage, and my answer is there's no better, there's different and it depends on what fits your situation.
Karen: Thank you.
Lonnie Thibodeaux: Thanks for asking.
Jim: Hey, Charles, you have a question. Charles you're muted. Okay, how about Wes. Wes, do you have a question?
Wes: Sure. Charles was in the chat. He sent a question directly to Lonnie because he has no microphone.
Jim: Yeah, Okay we'll catch that up in a minute. Yeah, go ahead Wes, if you have a question.
Wes: Sure, let's see. So I'm a ways from Medicare myself, but I'm trying to help my parents with the decision. They are ex-IBM’ers. I don't know if you know anything about the specifics of this situation, right? So IBM for their retirees helps them out with their benefits, medical and dental and so on, offer some subsidy, and that's been through traditional Medicare until this year, where they are trying to encourage everyone, well strongly encourage everyone to go to Medicare Advantage by only offering their subsidies through the Medicare Advantage Plan.
So I guess my question is maybe two parts. One, if you do happen to know any of the particulars about this situation, if you have any insight into these options.
And maybe in general, I'm still wondering about the choice between traditional Medicare and Medicare Advantage Plans, and I'm wondering whether, you know, you say that one is not necessarily better or worse than the other. But I do wonder about once you're under a Medicare Advantage Plan, like the one that is being pitched sounds great--like oh we cover this and this and this with all these low co-pays--but I guess I wonder, aren't you in the position then of having to fight with this private insurance company that's incentivized to deny your claims and deny you new coverage, basically?
Lonnie Thibodeaux: So let me get to the last question first. Again when it comes to choosing between Medicare Supplement and Medicare Advantage, I think every person has to decide what's the right fit for me. And to your point, if you have concerns that I may end up having to spend some time, energy, and frustration fighting an insurance company over the potential to claim, then that's some cause for concern with the Medicare Advantage Plan.
And I will tell you we probably have 1300 to 1400 clients through this office. About 60% are Medicare Advantage, the other 40% on Medicare Supplement. Now the nice thing about Medicare Supplement Plans, when it comes to claims filing, is they are secondary to Medicare. If the claim gets filed first with Medicare and Medicare will either approve or deny the claim, and in the vast majority of cases it's approved. If Medicare approves the claim the supplement company has no choice or vote in the matter, they must pay the amount of co-insurance they are required to pay based on the plan that you're enrolled in, so that is kind of a nice benefit without question.
When you're on a Medicare Advantage plan, then yes it is up to the plan. I mean they have to live within the CMS guidelines, but there can be some things that original Medicare would have approved that perhaps a Medicare Advantage plan would not approve, or maybe would have to require someone to get prioritization for. So that's a potential concern or consideration.
Now going back to the IBM scenario. Unfortunately no, I'm not aware of that. In general terms I can tell you the teacher retirement system here in the state of Texas years ago used to offer Medicare Supplement Plans for their retirees and they've gone completely to Medicare Advantage as well. So I see that as a trend that's happening in a lot of places. Then I answer your question?
Wes: Yeah. I mean maybe as much as you can. I wonder if you could offer some general advice to what should we look for in a Medicare Advantage Plan in making a decision about--I mean effectively this is go with the Medicare Advantage Plan with a subsidy to the monthly premium by IBM, or stick with Medicare Advantage and the current Medigap plan but lose any subsidy the company was providing to retirees.
Lonnie Thibodeaux: Yeah. So I think you're just going to have to do some math with that one. So if I'm assuming the subsidy if they enroll in a Medicare Advantage Plan would be there to help them pay for any co-pays or co-insurance that they're responsible for. So I think you'd have to sit down and do the math.
And a couple of big considerations. One is are the medical providers that they want to see in the network for the Advantage Plan that IBM is offering. And two, can they use any kind of a subsidy as I said to pay for those co-pays. And they're typically extra benefits on the Advantage Plans. Are those the kind of benefits that they would take advantage of or do they really hold no real value for your parents. And just weigh the pros and cons of either side.
Jim: Thanks. Okay, Dan, you have a question?
Dan: So I'm 49 years old and I got a ways to go to the Medicare kicks in, obviously, I hope at least, and between now and then a lot can change. And I'm looking at this this presentation and it's all applicable now, and I'm wondering what we expect on the road. So in kind of looking backwards in the past, maybe 10 years or so, in your experience what have you encountered or seen or observed that has changed significantly about Medicare and do you have any insight into what you think may happen or change in the next several years as well, as far as further programs being administered, or what it might cover, not cover, and changes to cost or whatever.
Lonnie Thibodeaux: Good question, and Dan I'm going to take a little liberty with your question. I'm going to go back a little more than five years. You may or may not know but we didn't get prescription drug coverage for Medicare beneficiaries until 2006. Prior to 2006, if you enrolled in Medicare there was no prescription drug coverage, and also in 2006, Medicare Advantage was really formalized. Prior to those years, going back to the 1990’s it was a pilot program, I think it was termed Medicare Plus, and a number of companies that are currently in Medicare Advantage Plans helped Medicare with those pilot programs.
In regards to Medicare Advantage, over the last five to seven years, at least here in Texas and the other three states that I'm licensed in, we've seen Medicare Advantage Plans become more comprehensive and more competitive. We've also seen the population that's enrolled in those plans grow significantly. I couldn't give you percentages, you can probably find that stuff online, but I haven't looked at it in a while.
Medicare Supplement Plans, on the other hand, remain what I would call very stable, meaning there's been a plan or two added over the last several years, there's been a plan or two taken away over the last several years, but for the most part the very core plans provided the same coverage 5, 10, 15 years ago that they provide today. Premiums are a little bit higher, but as compared to the escalation we've seen in prices for commercial health insurance, premiums on Medicare Supplement Plans have been a lot more moderate or modest. Does that answer the question?
Dan: That's most of it. I'm kind of wondering what to expect down the road and particularly my retirement plan offers projections on what my cost for health care will be when I retire and I'm kind of wondering how accurate can that be if there are significant changes to the program and I'm wondering if the past informs the future in this case.
Lonnie Thibodeaux: Oh thank you for reminding me. So future---a couple of important things have been announced recently, we'll see if they come to fruition--but as I understand it by 2025 the federal government Medicare is expecting to cap out-of-pocket expenses for prescription drug costs at $2,500 per beneficiary per year. So if that happens that would be a very welcome change for some of our clients because we've got, not a high percentage, but we got a few folks spending seven, eight, nine thousand dollars a year in co-pays for their prescription drugs because they take very expensive prescriptions.
Another thing more specifically to folks with diabetes is there are a number of insulins right now on a list for which you can get them for a $35 co-pay for a 30-day supply. It's my understanding that discussions are in the works so that within the next couple of years, maybe 2025-2026, all insulins on Medicare prescription drug plans would be a $35 co-pay for a 30-day supply. That too would be a very welcome relief.
Other than that, I would expect we would continue to see more competition in the Medicare Advantage world because those plans, at least in areas of a high population, are getting more competitive all the time, and I think that's a trend that will continue for a while.
Jim: Okay, thank you. Mark, you have a question?
Mark: Hello. Could you go over the registration sequence again that you did in the very initial, I guess, paragraphs that you did?
Lonnie Thibodeaux: Sure, and I'm assuming you're talking for when you turn 65. Is that correct ?
Mark: That's right. I'm 63 now, turning 64 in a few months and I was surprised to hear there was a countdown coming up so soon that I had to do something. So I guess I was a bit struck by that but I like to hear what you have to say. Thank you.
Lonnie Thibodeaux: Sure. So as you're approaching your 65th birthday you can expect that your Medicare eligibility will begin the first day of the month that you turn 65, unless your birthday actually falls on the first of the month, then your first day of your Medicare eligibility will be the month prior to your birthday. Assuming you're not getting Social Security retirement benefits, then Medicare is going to default to enrolling you in Medicare Part A only. And for the vast majority of people there's no premium, so that's okay.
If you're retired, then you will want to also enroll in Medicare Part B. So you'll either need to go to the Social Security Administration website and enroll online, or give them a call at the toll-free number 800-772-1213. And you can begin that process up to 90 days in advance of your Medicare eligibility date.
Mark: Okay, thank you.
Lonnie Thibodeaux: Thank you.
Jim: Okay, Carol has a number of questions that were submitted with the RSVP, so I'll turn it over to Carol.
Carol: Okay, this question says, if I have a Medigap policy in the state where I live but I periodically travel to receive services in a different state like Massachusetts which does not offer that Medigap plan, would my Medigap coverage still work for those services?
Lonnie Thibodeaux: I'm going to say yes. I'm not familiar with laws in Massachusetts but I don't know of any reason they would not accept your Medigap plan.
Carol: Okay great, thanks. I guess I'll keep asking as long as nobody else has their hand raised. How does a retiree Blue Cross Supplemental health insurance coordinate with Medicare?
Lonnie Thibodeaux: Good question, and I'm going to tell you that here in Texas you either get retiree coverage that behaves either like a Medicare Advantage Plan or acts much like a Medicare Supplement Plan. So that, and if it's not a standardized Supplement Plan that you can buy at an individual marketplace, most of them are designed to cover most or all of the things that Medicare Part A and Medicare Part B don't cover because for retiree plans, companies have known for decades now that Medicare Part A and Part B are serving as the foundation of your health insurance, from that point to the time you pass away.
Carol: Can you comment on how Tricare for Life works with Medicare?
Lonnie Thibodeaux: Oh, I’m not an expert in Tricare for Life. Let me just make this very general comment. We have clients or spouses of clients who have Tricare for Life, and I would just say as a very general statement, if you have Tricare for Life you probably don't need any other coverage. Again kind of like a corporate retiree plan, it dovetails nicely with Medicare and leaves the beneficiary of Tricare for Life with very little to no out-of-pocket costs for medical care. So for those who have served and are qualified for Tricare for Life, thanks for your service and good for you that you have this awesome benefit available to you.
Carol: Great, thank you. Okay, the next question is are all Medicare Advantage Plans high deductible and in-network plans?
Lonnie Thibodeaux: All Medicare Advantage, well, the vast majority of Medicare Advantage Plans have a network, as I said in the presentation, if you're in an HMO plan then you must remain in the network unless it's a medical emergency. If you have a PPO plan you can go outside the network typically at a higher out-of-pocket cost than using an in-network provider. And what was the other part of the question, Carol?
Lonnie Thibodeaux: Most Medicare Advantage Plans have no deductible for medical cost. Some have a deductible for your prescription drug coverage, but typically tier one and tier two drugs are not subject to that deductible. Now all these plans have an annual out-of-pocket maximum but most have no deductible.
Carol: Okay, thank you. I do have more RSVP questions, but we do have a an audience member that has a live question so we'll do that, okay.
BigH VenKat: [Technical problem with sound, repeat question]
BigH VenKat: Lonnie, what is the reason that Medicare Advantage plans have acquired such a bad rap? Celebrities like Joe Namath and others have been criticized for promoting these plans. AARP magazine, consumer groups, Ralph Nader have criticized, and Medicare Advantage Plans, they've almost acquired the same kind of reputation as annuities, that is buyer beware. Read the fine print. And one specific criticism that I have read about Medicare Advantage Plans is that they are a good deal for the enrollee during the early years of their retirement when they don't have as many health care needs, but that during the later years of their retirement there's often denial of benefits, denial of coverage.
So my question is general to you Lonnie, and my question is can you address some of the more common bad raps against Medicare Advantage Plans, and can you also maybe address some of the counter narratives to the bad raps on Medicare Advantage Plans because it just seems in popular media, AARP magazines, these things that seem to be quite controversial. There are a lot of warnings and a lot of cautions to readers. And so that's my question.
Lonnie Thibodeaux: Okay, I'll do my best to answer that. So first of all, Medicare Advantage plans, I think have gotten a bad rap because when you compare them to original Medicare, one of the things is that they have a network, and a lot of people who are on Medicare have or prefer not to have the network. So that's one.
Secondly, even some medical providers who have signed the network agreements and accept these Medicare managed plans are not crazy about them. And I suspect that's because the claims filing process is more cumbersome and more complex than the claims filing process for original Medicare.
Let me give you an example. Three or four years ago my mom, who has since passed away, was in the hospital with cancer. I was visiting. The doctor walks in the room and he's discussing her potential treatment, and he makes the comment that hey, I think you should be on original Medicare instead of this Medicare Advantage Plan that you're enrolled in. And my question was well, if you don't like it why'd you sign the contract, that kind of a deal.
Now it is true there had been some Advantage Plans, there are some Advantage Plans who make it difficult for folks to get treatment, specifically for very expensive things that might be going on in their lives.
Now the other side of that is every Advantage Plan has an appeals process, and the initial appeal in that process, of course you're talking to the insurance company, so maybe there's not too much incentive for them to overturn their original decision to deny coverage. However there are several levels of this appeal and by the time you get to the third level you're talking to a third party that's not associated with the health plan at all. And look, I've had out of all the clients we have here, I've had maybe five that have gone through an appeal of any sort, and I can think of one who's gone to the third level of appeal, and once they got to the third level of the appeal, the original decision to decline coverage is overturned and they were able to get the treatment that they'd asked for, and that they needed.
Now I can't tell you that's going to happen every time, and I mean I can tell you that I, like you, when I look at TV commercials and JJ Walker and Joe Namath and you know other celebrities of years past are touting these plans, and it gives me kind of a cheesy feeling about them to be quite frank with you. But I guess I'm going to go back to something I said earlier and that simply is this: everybody needs to make the decision that's best for them, and when I had clients that I talk with over the phone and or in my office and will ask me point blank which should I do--and my answer is consistently, I'm not here to tell you which one you should do. I'm here to inform you about how this one works and about how this one works and I want you to pick the one that works best for your particular situation.
Now let me go back to one thing that you said, and after I say that, please remind me of other things I haven't addressed. And that is in later years when people maybe are inclined to need more medical services, Medicare Supplement Plans might work better. What we've actually seen here in our office is we've had clients in their mid to late 80’s with Medicare Supplement Plan premiums getting to be, oh let's say $350 or so dollars per month for each spouse.
So they're spending five, six, seven thousand dollars a year in premiums for each of them. When you calculate the event sub premium plus a prescription drug plan premium, etc. And what we found is if we can find them in a Medicare Advantage Plan with an annual out-of-pocket cost lower than the premiums they are paying on their Medicare Supplement Plan that seems to serve them well. And at least here in Texas, we haven't had what I would call the significant number of problems with treatments being denied or claims being denied for things that people really need. I'm not telling you it hasn't happened. I'm just saying I haven't seen a lot of it here in our area. Have I missed anything?
BigH VenKat: Just as a quick corollary question to that. Are there invented and lists out there from say, reliable sources. I'm sure I can Google search on this, but just wondering if you know offhand is there a list by reputable sources of plans that are vetted. And I'm not sure how to phrase my question but, you know, like the ones you should avoid, the ones that deny coverage and are really hard to deal with, versus the ones that are on the up and up.
Lonnie Thibodeaux: The only resource that I'm familiar with is CMS, the center for Medicare Medicaid Services gives every Medicare prescription drug plan and every Medicare Advantage Plan a star rating. And for instance, one of the more popular plans in our area enjoys a five star, which is the highest rating that one of those plans can get. And I would look at that and you can find that information either in the documentation from the plan itself, because they all have to provide that document to you, or if you go to cms.gov, input your ZIP code, county, and look for Medicare Advantage Plans. That star rating information is on that website.
BigH VenKat: Thank you.
Lonnie Thibodeaux: You're welcome.
Jim: Thank you. Carol, do you have some questions from the chat or the RSVP?
Carol: Yes, okay. Now this is a few sentences, so let me read the whole thing. Question on Medicare Advantage trial right. The situation is: I enrolled in a Medicare A and B at 65 with a G Supplement and Part D plan. This was more than 12 months ago. Question, does the Medicare Advantage trial right allow me to return to original Medicare within 12 months with the guaranteed issue right of the G Supplement from either ( A ) any insurer in my state or ( B ) only the plan of my current insurer. I hope you understand that question.
Lonnie Thibodeaux: I do understand the question and it's a very good question. So yes, anytime you enroll in a Medicare Advantage Plan and it's your first time to be in a plan and it's within the first 12 months, you have what's called a 12-month trial period, and anytime during that trial period if you choose to go back to original Medicare, then you have a couple of options on supplement plans. If you can medically qualify, then you can apply for any Medicare Supplement Plan available in your area and enroll in that Medicare Supplement Plan and also enroll in a Medicare prescription drug plan of your choosing.
If, on the other hand, you've developed a medical condition and you can no longer medically qualify to enroll in a Medicare Supplement Plan. And then you have an entry right to go back to the Medicare Supplement Plan that you were enrolled in, enrolling in the Medicare Advantage. Now the exception of that is if…
….you can enroll in a Medicare prescription drug plan without any underwriting. However in order to enroll in a Medicare Supplement Plan you must be able to medically qualify to get into that plan.
Carol: Okay, thank you. Robert, why don't you go ahead and I'll get some more from my lists, if you want to.
Robert: Okay. This question, Lonnie. is not specific to Medicare but it's still with Medicare and Social Security. Currently I'm on Medicare but I'm not on Social Security yet. But next year I'll be going on Social Security. I'm assuming at that time that--and right now I'm paying for my Medicare just withdrawal out of my checking account--when I go on Social Security they will automatically begin taking my premiums out of my Social Security, at that time I assume, and I'll have to stop my checking payment. Hopefully there won't be an overlap there, right, where I overpay on them.
And then my second part of that is my wife, who's on Social Security right now, but not Medicare, will be going on spousal Medicare next year when I go on Social Security and I'm assuming at that time also her Medicare will be then change also. So this, I guess my question is, does Medicare and Social Security handle this pretty transparently or can I expect some problems?
Lonnie Thibodeaux: I've never heard of anybody having major problems with the premiums for Medicare Part B. And to your point when you start getting a Social Security retirement check they will automatically begin deducting that check from your Social Security before you see it, and the same will happen for your wife as well. And they should automatically stop drafting out of your account if that's how it's currently set up. So I don't expect you'll have any problems at all.
Robert: Great, thank you.
Lonnie Thibodeaux: Thank you.
Jim: Miriam, you want to go ahead.
Miriam: I would just like to ask Lonnie, you just mentioned that if one is on an Advantage Plan, that you can switch to traditional Medicare during open enrollment including the drug plan without a physical, without being medically qualified for it - I assume that's a physical. However for your 20% the Medicare does not cover you for, you would need to medically qualify for that plan. Is that correct? Is that my correct understanding?
Lonnie Thibodeaux: That is a correct understanding. Let me just note one thing when I say medically qualify. I'm not talking about a physical. I'm talking about do they ask medical questions on an enrollment form, and so for prescription drug plans, or no medical questions. It's a matter of are you eligible to enroll based on the fact that you're just getting on Medicare or because we're in the enrollment period. So there's never any medical questions asked on those.
Unlike the Medicare Supplement Plans where there are medical questions asked and underwriting, meaning they can determine whether they want to accept your application or decline.
Miriam: And this would be, for example, do you have diabetes, do you have, you ever been treated for cancer. Those types of questions?
Lonnie Thiboodeaux: Yeah, good question. Let me talk a little bit about that, and of course what I'm about to tell you probably will vary from state to state, but here in Texas for most Medicare Supplement companies it's okay if you've had cancer as long as you haven't been treated for cancer let's say in the previous two years, or in some cases, three years. For people who have diabetes, if you're not taking insulin, that's typically not a problem at all. And there are some companies even for people who are on insulin but are taking let's say 50 units or less per day. Often times they can qualify.
Another area that can sometimes cause people to be declined is heart situations. So have you had a pacemaker installed, implanted and those kinds of things. Or people with blood pressure. For instance, we have a couple of companies that will ask the medical question: do you have high blood pressure and do you take three or more medications to control that blood pressure. That seems to be a concern for underwriting in some companies. So cancer or any kind of debilitating disease like Lou Gehrig's or Parkinson's. If you've developed those kinds of diseases then typically, for most companies in Texas, you're not going to qualify for a medically underwritten Medicare Supplement Plan.
Miriam: In other words you really can't plan for the future on something like this. That when it seems that when you come close to the Medicare decision you should really look very carefully down the road, what you can get out of in case it's not working out, and perhaps, when you approach the Medicare decision, you might want to just go for a safer route because you don't know what your medical history will be.
Lonnie Thibodeaux: Well, that's a good point, but sort of like investing. Some people are willing to take more risk than others with their investment styles. So it depends on what you want to do. And let me give you an example. Here in Texas we have some Medicare Advantage Plans. Now in most cases, well the one I'm thinking of in particular, offers no prescription drug coverage, so it's not designed for everybody for sure. But we have some people who are eligible for VA benefits and get their prescriptions filled through the VA system. But this Advantage Plan, in addition to having no monthly premium, will reduce your Medicare Part B premium by as much as $125 a month.
Well for some people that's kind of an important situation, living on a fixed income that maybe hasn't kept pace with inflation over the last 10 years or so. So again, I'm going to go back to the statement - you need to do what fits your situation when it comes to choosing your Medicare coverage.
Miriam: Right. It's very personal. It really depends on your overall financial situation, your personal situation, your health situation, your family situation. The whole big picture.
Lonnie Thibodeaux: Without question.
Miriam: Thank you.
Lonnie Thibodeaux: Yeah, thank you.
Carol: I'm going to jump in with two more. Okay, this should be fairly simple. I'm a retired federal employee collecting an annuity and I'm covered by the federal employee health benefits, FEHB. That, and I do not receive Social Security. How will I pay Medicare Part B premiums?
Lonnie Thibodeaux: I don't have any idea. I'll take a stab. For instance, people who have railroad retirement benefits versus Social Security benefits, that system will automatically deduct your Part B premiums. I would guess that a federal retiree would have the same situation happen, that they would have it deducted from their pension, if you will. But again that's a guess.
Carol: Okay, thank you. Okay I'll do one more. Do any special enrollment periods apply for Medigap if enrolling several years after enrolling in Part B. So at age 65 I will have Part B plus supplement coverage through my former employer, and continue until I'm age 69 when I would like to purchase Medigap coverage. So the question is about the enrollment period for Medigap coverage like at 69.
Lonnie Thibodeaux: Okay. So as I understand it you're going to work to age 69 and I'm assuming you're going to have group health coverage through your employer up until the point that you retire.
Carol: That's what the question says.
Lonnie Thibodeaux: So in that scenario you will still have your Medicare Supplement or Medigap open enrollment period at the point you retire. And technically it might not be an open enrollment period, but it might be a guaranteed issue period. But in either event you will be eligible to get on a Medicare Supplement Plan without having to go through the underwriting process.
Carol: Okay, thank you. Wes, you can go ahead.
Wes: Yeah, so I want to follow up on the last question about medical qualification for Medigap plans. And I guess my question is, you know based on medical questions on the application they can decide whether or not to accept you, but is the premium also dependent on your answers to those medical questions?
Lonnie Thibodeaux: For the vast majority of companies that I represent you either get accepted or declined. And the only thing that will change your premium is whether you use or don't use tobacco products. Now there is one company that I represent that there are a set of questions that if you answer yes to any of those questions, you're going to be declined, but then there's a second set of questions you can answer yes to, and it's not so that you would be accepted or declined but to determine whether you qualify for the very lowest premium. And there's about a five percent, six percent difference between the very lowest premium and the next premium tier up.
So that happens with some companies. In fact, United Health Care, if I remember correctly, at least in the State of Texas does that as well.
Wes: Okay, thanks.
Carol: Donna, you can go ahead with your question.
Donna: Hi, thanks Carol. My question was about getting advice that is really objective and not tied to the person I'm talking to making a profit, and I don't want to offend you Lonnie, I'm not clear about the whole idea of Medicare brokers. I feel like my husband will be eligible for Medicare early next year and we've just gotten a ton of stuff in the mail, right? Everyone wanting to ‘quote’ help us and I know also there's a non-profit in my area M map which, someone on the chat was mentioning that they thought the volunteers at nonprofits frequently didn't know very much. So can you help us understand when you talk about the companies you represent, like what do I look for when finding someone to work with on this, if I wanted to work with someone.
Lonnie Thibodeaux: Sure. So I would suggest you probably have friends or family members that are in Medicare, and I would hope there's at least one or two of those that are working with an agent or broker with whom they're very satisfied. If that's not the case, then maybe do a search online and make a couple of phone calls. And I think one of the fast ways to determine if an agent or broker is working in your best interest instead of his or her best interest, is that they ask more questions than they make statements.
If you call my office you know what you'll find is we want to learn about you because we want to learn, one, what drugs do you take that we need to be aware of, that we can price appropriately or find out how to get covered. Two, if you're looking at Medicare Advantage, who are your doctors. Because the last thing we want to do is enroll you in a plan that would cause you to have to change your doctors if that's not what you want. And three, I think we're all experienced enough in life at this point you can tell when somebody's trying to sell you something rather than someone's trying to help you find the best fit for your situation. And what state are you in Donna?
Donna: Oh Michigan, the state of Michigan.
Lonnie Thibodeaux: Okay, well you need to move further south. [Laughter] No chance, but yeah, I would think, you know, look around. You can find somebody reputable that'll help you find the right plan and find something that fits for you.
Donna: Okay, thanks.
Lonnie Thibodeaux: Thank you.
Carol: All right I'll take a couple more from the RSVP list. What evidence of creditable coverage will I need to have if I'm continuing to be covered under an employer plan after age 65? How do I get that evidence, and to whom do I need to submit it, and when?
Lonnie Thibodeaux: Good question. So if it's an employer-based plan, your employer should be sending you a letter every year from the time you turn 65. And that letter will confirm that your plan offers creditable coverage, and this is specific to prescription drug coverage that is at least as good as Medicare's prescription drug coverage. And you may need to submit that once you enroll in a prescription drug plan. And the reason you may need that is because if you cannot provide evidence that you've had creditable coverage from the time you've turned 65 you may be subject to a late enrollment penalty for prescription drug coverage.
Carol: Okay, thank you.
Lonnie Thibodeaux: Sure.
Carol: Here's another one from the RSVP list. I would like to know the impact on pricing of Medigap plans as one moves from one state to another. Is it different if you wait till open enrollment as opposed to doing a special enrollment? In other words should I time my move with open enrollment because I will get a better price during that period? Would not be surprised if that makes a difference.
Lonnie Thibodeaux: In my opinion, no you shouldn't time your move based on an enrollment period. And if you're in a Medicare Supplement Plan by a major company, I'm talking a Humana, a United Healthcare, any national company, in all likelihood they will offer Medicare Supplements to the place you're moving to as well. And if that's the case there may be an adjustment in the premium you pay based on the ZIP code you're moving from versus the ZIP code you're moving to. Now I can't tell you whether it's up or down, but it shouldn't be a 50% change. We're probably talking to five to ten percent change at the very most, in my estimation.
Now, if you were to happen to move from one area to another area and you're in enrolled in let's say Blue Cross/Blue Shield of your state and the parent of Blue Cross/Blue Shield of your state is not the parent of Blue Cross/Blue Shield of the state you're moving to, then you will get a guaranteed issue period for a Medicare Supplement Plan when you move to your new location.
Carol: Thank you. Mark, why don't you go ahead with your question?
Mark: Okay, thank you. You know I'm demonstrating my noob status with Medicare, but could you go over the evil 10% IRMAA penalty again? I was kind of struck by that you know, a 10% for life. That was kind of difficult to swallow. I'd like to hear a little bit more of that. Thank you.
Lonnie Thibodeaux: Okay, so the IRMAA (Income Related Monthly Adjustment Amount) is not a straight across the board 10%, and it's not for life unless you enjoy very high income well into retirement. The way it works is, for instance, in 2023 they're going to base any IRMAA you might be subject to on your 2021 income, and they're always two years behind.
So for instance, let's say you sold some property in 2021 that brought your income up by two, three, four hundred, five hundred thousand dollars, whatever. That will increase your Medicare Part B premium in 2023, but as you move to 2024 and you don't have that property sale in 2022 then your Medicare Part B IRMAA adjustment will go back down. Does that answer your question?
Mark: Yes, sort of I guess. I think it's good enough for now. Thank you. I mean I don't know enough about it to ask an educated question, I'm sorry.
Lonnie Thibodeaux: That's all right.
Mark: I like to say I came into this cold and I'm kind of struck by it. So yeah, I got to come up to speed. Thank you.
Lonnie Thibodeaux: Okay, and look, you guys have access to my phone number if you have something specific or you want to get into more detail. Just call me, even if you don't live in a state I serve, I'm happy to answer your question. Now the caveat is this busy time of year it may take me a while to get back to you.
Carol: Thank you. Don why don't you go ahead. Don are you there, you have your hand raised.
Okay, in the meantime I'm going to ask another one from the RSVP. This one's a little bit lengthy so bear with me. Are there any insurance companies that are considered the best for us to use to purchase Medicare Supplement Plans? Any guidance on how to pick an insurance company for the supplement? What happens at the insurance company we pick goes out of business or stops offering supplement plans? I've heard that AARP allows users of their United Health Care Medicare Medicare Supplement Plans to change between their plans without having to get a medical review. Is this true? I'm interested in starting on a plan G high deductible but would like the option to move to standard Plan G down the road. What are your thoughts on the high deductible supplement plans? Was that too many questions in a row?
Lonnie Thibodeaux: Well I'll answer what I can remember, and what I missed, if you would remind me Carol.
Okay, so as far as picking a company, one, I'm always looking for a competitive premium with the caveat being I want to be with a company that is on solid financial footing, so I look at AM Best ratings for a company and I want them to be at least an A minus rating. That's just my personal opinion, and there are a lot of companies in our area that are rated AM Best A minus or higher that offer very competitive premiums.
Now when it comes to selecting a particular Medicare Supplement Plan, in your example, high deductible Plan G, yeah that fits your situation, that's fantastic. When you select a high deductible plan versus a standard Plan G, obviously the premium is going to be significantly less. Here in Texas it’s probably 55% lower premium for high deductible G versus a standard Plan G. Just understand you've got the deductible and if that fits your situation, that's fine.
Now in regards to having the idea that I'm going to start off with a high deductible Plan G and then later move to the standard Plan G, remember moving from one's Medicare Supplement Plan to another Supplement Plan, even if it's with the same company, is going to require medical underwriting. So just keep in mind that your plan to move will work as long as you don't have a medical condition that will prevent you from qualifying for underwriting. And Carol, what did I miss in that question?
Carol: The only thing I think there was a question about whether United Health Care allows a change between Supplement Plans without having to get a medical review, and specifically if the state matters, this is Florida.
Lonnie Thibodeaux: Yeah well it must be different in Florida. In Texas moving from any plan to another plan, United Healthcare or otherwise requires underwriting.
Carol: Thank you. Okay this is a quick question. Is there a premium for Part D if you sign up after age 65 because you still work and have employee medical benefits. Does that question make sense?
Lonnie Thibodeaux: I think so. So all Medicare Part D or prescription drug plans have a premium. I think what you're probably asking is a related enrollment penalty and that goes back to a previous question. If you're working, getting health insurance through your employer or spouse's employer, you're okay delaying enrollment in Medicare Part B and in a Medicare Plan without penalty. But your employer should be providing a letter every year letting you know that your prescription drug coverage is creditable drug coverage based on Medicare guidelines. And as long as that's the case then you shouldn't face, or won't face, a late enrollment penalty when you decide to retire and enroll in Medicare.
Carol: Thank you, here's a question. I think most of this has been covered but I'll go ahead and ask it anyway. It's about how do you choose Supplement insurance or is it better to take Medicare Advantage which includes a drug prescription plan. This is kind of a multi-part question. Can you get part delayed with no penalties? I think you just talked about that. Can you switch from a Medicare Supplement Plan to an Advantage Plan for the first time and then switch back to Supplement Plan within the first 12 months without doing medical underwriting? This is the State of Michigan.
Lonnie Thibodeaux: Okay, so we've talked about the Medicare Advantage trial period that you get the first time enroll in an Advantage Plan for for 12 months. Now if you're moving from a Medicare Supplement Plan to an Advantage Plan you can do that any year during the annual enrollment period October 15th through December 7th. There's no medical underwriting for that. The other part of that question, Carol?
Carol: I think you covered it, or because you did talk about Part D later. Can you get Part D later with no penalties? Is it better to take Medicare Advantage with a drug prescription plan? And you in detail, you kind of said that one is not necessarily better, they're just different. And it kind of depends on how much risk you want to take in your situation. So I think we covered most of that.
Lonnie Thibodeaux: Since you mentioned prescription drug plan late enrollment penalty, let me just talk for a second about how that works.
Lonnie Thibodeaux: So if you don't enroll in a prescription drug plan when you first become eligible and you never enroll in a drug plan, then there's no late enrollment penalty. But if you fail to enroll when you're first eligible and then enroll in some subsequent date, what Medicare does is they take the average price of drug plans across the country - that's about 33 dollars a month - and they multiply that times one percent, so 33 cents, and they multiply that times the number of months that you were eligible but didn't have a plan. So if it's five years that you were without a drug plan and then subsequently enrolled, those numbers multiplied times 60.
I did the math for somebody just the other day. So that equated to about a $19 monthly late enrollment penalty that you're subject to paying every month for as long as you have a prescription drug plan in force.
Carol: Great, thank you. Here's a general question. What does Medicare cover? Maybe you could talk about what it doesn't cover. Some of the things that it doesn't cover that Medicare Advantage does cover. Maybe that would be a good question.
Lonnie Thibodeaux: So Medicare's Part A and B, obviously hospital coverage, medical coverage, and this is, well in a word, “medical” - so no long-term care. And of course Medicare Advantage Plans don't cover long-term care either. Medicare is designed to help with medical expenses, not custodial expenses, for our long-term care.
Now as far as the things that Medicare, original Medicare, does not cover that Advantage Plans do cover--or in many cases cover--often times they offer a fitness benefit. A very popular program offered by some Medicare Advantage Plans is called Silver Sneakers and what Silver Sneakers does is it allows the beneficiary to enroll in a local fitness club, often YMCA's are very popular within that program, for which you don't pay any premium to be enrolled, or any monthly fee to be enrolled.
Many plans also offer dental coverage. Now that dental coverage can vary dramatically from one plan to the other, and let me just say a word about dental coverage as well. Often the dental coverage is offered by any individual plan or any Medicare Advantage Plan does not have a broad network of dentists to accept the plan. So that's an important consideration.
A lot of these plans offer some type of vision coverage, not amazingly comprehensive, but for instance, a typical scenario might be that you get your prescription at no co-pay at an optometrist. And then a plan will pay somewhere between a hundred and three hundred dollars toward your glasses or contacts each year, might be a typical scenario.
A lot of plans also offer some significant help with hearing aids. So co-pays might range anywhere from $150 on the low end to $1,200 on the high end. And it all depends on what level of sophistication or technology you need in the hearing aid.
And then finally a lot of these plans offer an over-the-counter benefit. Well, you get either a paper or online catalog where once every calendar quarter you can order things out of this catalog. A typical scenario might be that you would order fifty dollars worth of things from a catalog that provides items that you would normally buy over the counter in a pharmacy. . .
Don: . . . Just for full disclosure, a lot of typical insurance agents--and I know that this particular crowd is a do-it-yourself crowd so I understand there's always a little bit of suspicion--but here's a couple reasons why you might, if you and your spouse have very different health scenarios. So one, spacing a cancer diagnosis, the support has already had cancer together, in great health, you've got a pretty complicated and sharing situation that you might want to use an agent because the agent's got a guide.
For the second reason, and this is actually just for people who love, without having to go through that process that's appropriate for you. Now you still have to go ahead and answer a question there, and qualify. And all that, is that correct? Man that is correct, and so you might want to consider using agent because when I tried to shop Supplemental Pans I can get close, but I never forget the right number unless I'm willing to put up with a lot of sales calls.
And then the last thing is one of the people asked the question about trying to pick out Advantage versus original Medicare. The future is uncertain. We all know that. The only thing I can tell you to sort of alleviate some of the uncertainty is look at your own health. Figure out whether you're a healthy person, not so healthy. Look at your family history. Determine whether you're healthy or not. None of that really is going to necessarily predict whether you're going to need a lot of medical services or not, but that might take away some of the uncertainty.
Because if you know if you exercise regularly--you know you're a marathon runner or something like that - that doesn't mean you're not going to die tomorrow - but it does mean that you're in fairly good health. If, on the other hand, both your mom and dad died of heart disease at the age of 62, you know you’ve probably got a heart disease problem somewhere along the line. That might help you pick a better thing, and as Lonnie says, determines you have to figure out what risk you have, but only you know what your own personal risk is by looking at your family history, if you have it, that's it.
Lonnie Thibodeaux: Well Don, thank you for that plug. A hundred dollars will be in the mail to you tomorrow! Okay, we have no business relationship.
Carol: Is anybody, Jim are you around? Does anybody else have any more questions? Now's your chance. I think I got all of them from the RSVP, or at least the ones - there's one about Social Security that didn't involve Medicare that doesn't really apply in this meeting. so I'm not going to ask that one.
Well, we've had Lonnie on the line here now for 90 minutes and he's done a great job explaining all this. Plus we'll put all the slides in the video online in the next week or so. So maybe we should call it quits here. Jim, I did have a slide with Lonnie's contact information. Is it okay if I share that screen, or do you have…
Jim: Yes, go ahead.
Carol: There we go. And this will also be in the slide packet. So you can contact Lonnie later if you would like to--yeah we put that in the chat also. You want me to talk about the upcoming meetings, Jim?
Jim: Yes, please.
Carol: Okay. So there are three upcoming meetings that I want to mention. Wednesday November 2nd at 7 pm Central the New York City and South Florida Bogleheads will have--'m hoping I’m pronouncing this correctly--Eric Balchunas, who's the author of The Bogle Effect.
And then on Saturday November 5th at 12:30 Central the Sacramento California Area Chapter will do health care coverage. It will include a small segment on Medicare and then what are the other things Jim is going to cover? Just general ACA questions, Cobra. And there was one other item - to sign up for this--meaning it's not on the regular Boglehead calendar. You have to go to Boglehead [forum] threads called Sacramento California Area Chapter Master thread. I'm sorry it's a little more difficult to sign up for this one.
And then the third one is Wednesday December 7th at 7 pm Central. We're going to do a meeting, just an open discussion on the “One More Year Syndrome” where people, you know they want to retire, and like oh, I'm just going to do one more year, especially in this kind of bear market, oh maybe I should just do one more year. And then they just can't decide, and the next year they say I want to do one more year.
I'm sure there are a lot of people who would like to discuss, especially at this late time in the year where you're kind of just wondering, oh should I quit at the end of the year, should I do a whole other year - that kind of thing. We think people might enjoy that kind of an open discussion.
We definitely want to thank Lonnie very much for his time. We're very lucky that we got him to agree to do this presentation especially during his busy period when everybody's trying to do the Open Enrollment and, of course, there's another period, you know people have periods based on their birthday. So basically it's year round. But I know there's a special enrollment period right now, so we're lucky to have him.
Thank you so much Lonnie, we appreciate your presentation and all your patience with the hour of Q&A, more than an hour of Q&A.
Lonnie Thibodeaux: Well it's been my pleasure. Thank you for having me.
Carol: You're welcome. Thank you so much. And you were very capable at answering questions. You really picked up on the questions very quickly, and some of them were quite complicated. So thank you so much.
[Lonnie Thibodeaux contact screen posted]
Carol: Great, all right, so if we're ever in Louisiana we have to stop in Reyne, right. Is that the name of it Reyne?
Lonnie Thibodeaux: That's right. Capital of the world. Get some fried frog legs.
Carol: Okay, thank you. Well thanks again Lonnie, excellent job.
Lonnie Thibodeaux: Thank you. Have a great weekend.
Carol: All right, bye-bye. Thank you all. Thanks for joining us everybody.