Welcome to RTD Financial’s Aging Well Webinar Series. The first installment in our series features Tracy Russo of HTA Financial, presenting “Medicare – Everything You Need to Know, But Didn’t Think to Ask”. Tracy discusses the following:
- How and when to apply for Medicare, or change carriers
- Open Enrollment, Guaranteed Issue Periods, and late penalties
- What you should be doing as a retiree or soon to be retiree
- What happens when you and your spouse don’t turn 65 at the same time
- When to enroll or defer Medicare Part B if working past age 65
How to Ensure Your Coverage is Complete
- What does Medicare cover and not cover
- What is Medicare Advantage
- Is secondary insurance necessary and what are the options
- How do Medicare Supplement Plans and Original Medicare coordinate
Please skip to the 1:20 mark to begin the presentation.
Rachel Moran (00:01:22):
Hello everyone. Thank you for joining us for the first installment in RTDs aging well webinar series. My name is Rachel Moran and I’m a senior financial planner here at RTD. I’m excited to introduce this series, which was created to address some of the challenges our clients may face as they themselves, or their loved ones enter the later years in their life. We’ll be kicking things off today with the presentation by Tracy Russo of HTA financial on Medicare, everything you need to know, but doesn’t think to ask. Tracy is the president and owner of HTA, a brokerage office that seeks to solve the retirement healthcare needs offering both Medicare and long-term care insurance. Tracy has 19 years of insurance experience and has grown to become a nationally recognized specialist and advocate for both Medicare and long-term care education. She holds a certificate and long-term care designation and is the incoming president for a local chapter of the Pennsylvania national association of insurance and financial advisors. Tracy’s knowledge of the marketplace and products is unparalleled in the industry. With that I’ll pass things off to Tracy for today’s presentation.
Tracy Russo (00:02:31):
Thanks, Rachel, let me just get my screen up here, right? Okay. Hopefully you can see my screen. Good afternoon and welcome everybody this morning. My name is Tracy Russo. I’m with HTA, as Rachel mentioned, and I’m really excited to be involved in the aging wealth series from RTD. Today I’m going to go over a little bit of everything when it comes to Medicare. And just to start off by introducing who I am and what services we can bring to you as somebody who may be nearing or approaching retirement or Medicare age. My agency really focuses on simplifying and personalizing what Medicare means to you specifically. So the big thing is if you wanted to find information on Medicare, you could type in Medicare to your Google search bar, and you’re going to get so much information that you won’t know what to do with.
So what we do is we really take your individual, personalized situation, and we tell you how Medicare relates to you specifically. So simplifying and making a very complicated process, easy to understand. We’ve been in the Medicare market for over 20 years and we do weekly detailed education series through our whole staff. So whoever you talk to in our office, if you were to call in for any kind of counseling or guidance, everybody in our office is a specialist in Medicare. So we’re able to help you there. And one of the things that we’ll do is we’ll talk with you one-on-one about your situation, help you determine how, when and why is the best time to go on Medicare. And one of the reasons why we work well with RTD is because we have a similar approach to how we help clients.
If you were to call into our office, you’re not going to be speaking to a commissioned sales person. You’re going to be speaking with one of our salaried employees. So their income is not determined based on whether or not you buy something. Which will make it much more comfortable for you when you call in, because you’re not going to feel like somebody is trying to sell you something we’re truly there to give you unbiased advice and help you make an educated decision for what works best for you. In fact, we provide unlimited support. So whether you’re just going into Medicare or you need to shop your Medicare related products year over year, we can help you with that.
And one of the questions that we often get, so I just want to put it right out there is people often ask, you know, how do you get paid as an agency? And to be honest, the way we get paid as an agency is if you need to enroll in a secondary product. So you’re going to enroll in Medicare, a and B through the federal government, but there’s also Medicare supplements, Medicare advantage, prescription drug plans, dental vision. If any of those make sense for you and you need to enroll, we can help you with the paperwork. And we would say, if you found our education to be valuable enough, that you’d like to work with us, allow us to help you with that paperwork. You don’t pay any more for the insurance than you would if you went direct to ARP or Aetna, but our agency earns an enrollment fee for helping you with that process. So that way we can stay in business and we can continue to provide these counseling services to individuals and friends, such as such as you, that might need to go onto Medicare soon.
Tracy Russo (00:05:55):
So having said all that, what I’d like to do is just get started with what is Medicare. And then we’ll talk about proper times to enroll. Cause I think where most of the anxiety lies around Medicare or the stress is when do I get in Medicare? There’s an awful lot to be said about penalties and late enrollment fees and stuff like that. So we will be going through most of that today. So starting off with what is Medicare? Medicare is the health insurance that becomes available to you when you turn 65. So this is a straight 65 qualification age for everybody. And the reason I bring that up is because there’s a lot of talk nowadays about something called normal retirement age. So some people normal retirement age may be 66 or even pushing 67. That has nothing to do with Medicare. That is specifically for social security income. Medicare, you become qualified for Medicare when you turn 65. And at that point, you’re going to have a choice to make, do I take Medicare now or do I postpone it and enroll in Medicare later? Now Medicare also is available for individuals under 65. If you’re on social security disability income for at least two years, or if you have any kind of permanent kidney issues, kidney dialysis and stage renal disease, kidney failure, then you would also become eligible for Medicare.
Tracy Russo (00:07:22):
And to kind of lay this out in a visual, this screen shows you the different parts and pieces of Medicare. Many people call Medicare like an alphabet soup of coverages, and you can see why with the ABC and D up on the screen here. If you look at the left-hand side of the screen, you’ll notice original Medicare through the federal government is Medicare a and B, and that is represented by a red, white, and blue Medicare card that you get in the mail when you enroll. And then there’s the Medicare C and D. In order to have comprehensive health care coverage, when everything’s said and done at the end of the day, you’re going to have all four parts and pieces, a B, C, and D. So the C and D side, you actually choose which insurance carriers are most appropriate, and there’s 30, 40, maybe 50 carriers out there to choose from for various products. And that’s something that my team can help you kind of go through and make an educated decision on which one works best for you, because we do represent over 35 carriers in this C and D category. So the Medicare part C would be known as Medicare advantage, Medicare supplement, Medigap, maybe another word that you’ve heard of before. And the D is the drug portion of Medicare.
Tracy Russo (00:08:39):
So starting off with Medicare part a. Through the federal government, this is your hospitalization coverage. So Medicare part a, if you remember a for admission. If you’re admitted into the hospital, that’s going to fall under Medicare part a and if, just as a sidebar here, if any of you want a copy of these slides or recording of this presentation, RTD can make that available to you after the presentation, just send them an email or send Rachel an email, and she’ll be sure to send that out to you. So anyway, Medicare part a is for inpatient hospital admission. It does cover some other things like rehab and hospice care, but Medicare part a does not have a cost for many people. The only requirement to get Medicare part a at no cost is that either you or your spouse has worked in the United States and paid a paid Medicare taxes, a minimum of 40 quarters or 10 years throughout their lifetime. So even if you have not been the primary breadwinner, but your spouse has paid taxes for 40 quarters, you also qualify for Medicare part a at no cost.
Tracy Russo (00:09:51):
And then there’s Medicare part B. Medicare part B is called the medical piece of Medicare. I like to think of it as the outpatient services for Medicare. So things like doctors and specialists, x-rays, MRIs, diagnostic testing, surgeries, outpatient chemotherapy, and even things that you go to the hospital for, but are considered outpatient like emergency room services, or there’s something out there called hospital observation. Hospital observation is actually where you go into the hospital and you may spend a couple of days there, but you’re never formally admitted. They were there observing you that would be falling under Medicare part B rather than Medicare part a. And then things like durable medical equipment and some preventative services. Now for Medicare part B, there is a cost and the cost is for everybody, unless you qualify for Medicaid or state financial assistance, then you might have some help paying your Medicare part B costs, but the Medicare part B costs are based on income.
Tracy Russo (00:10:58):
So if we look at this slide here, this shows several different income brackets and on the left-hand side would be if you file your tax return as a single and the column right next to that would be if you file your tax return as a household. So as you can see in the top line as a single, a filer making less than 85,000 or a household under 170,000 in income, you would pay that Medicare base premium of $134 a month. So we do get a couple of questions about this. So first of all this is a per person premium. So each husband and wife are going to pay the Medicare part B premium. It is paid to the social security administration. So if you’re collecting social security income, this amount will be automatically drafted out of your social security income each month. If you’re not collecting social security income yet, this amount will be billed to you likely on a quarterly basis, but you can set up a monthly payment plan as well. If you look down the two columns and you’ll notice how the income brackets go up, and so what you might want to do is you might want to just kind of see where you are and you can see how your Medicare part B premiums go up accordingly.
So let’s just take this bottom column here. I’m sorry, this bottom row here, as an example. For individuals making less more than $160,000 or households over $320,000, the Medicare part B premium for 2018 is $428 and 60 cents per month. So just be mindful that this is a per person premium. And if you’re a husband and wife, a household filer, and only one of you is the breadwinner, this would be the assigned premium for each one of you. They take the household income and each person gets the same assigned premium. So sometimes there’s a little confusion with some of our clients. If only one person works, they think the working spouse pays the higher premium, and then non-working spouse pays the lower premium, but that’s not the case you’re assessed as a household. And then you’re each assigned the higher premium if you fall into that higher income tax bracket. The number that they are looking for many people ask, you know, what income are they looking at? And what they’re looking at is actually what’s called your modified adjusted gross income, your MAGI. And of course, to make it difficult for estimating that is not found anywhere on your tax return. So if you wanted to estimate what number the government’s going to be looking at when they assess your premium, the best estimate would be to look at line item 37 on your 1040. Line item, 37 is your adjusted gross income. And that is a pretty close estimate of what your modified adjusted gross income sometimes modified adjusted gross is just a little bit higher or a little bit lower than that.
The other thing that is a little bit of confusion for some of our clients is the fact that they’re looking at the income or the tax return from two years ago. So if you enroll in Medicare this year, 2018, social security, when they determine your premium is actually going to look at your 2016 income tax return, probably because that’s the one that they can most accurately assume that everybody has filed. You know, some people may not have filed their 2017 and for sure, 2018 hasn’t been filed yet. So they look two years back when determining your income. And many people think, well, wait a second, I’m retiring now, my income is going to go down. So two years ago, maybe I was at a higher income bracket and would have paid more for my Medicare, but now that I’ve retired and my income has gone down, am I still stuck paying this higher premium? And the answer is yes and no.
So basically what this is going to look like is they’re going to initially assess your premium based on your income tax return from two years ago. But every year they automatically review that. So in January of 2019, you would get a statement in the mail saying what your premium would be based on your 2016 income. So each year there’s an annual review. So eventually they will figure out that your income has gone down and your premium will go down accordingly. But there’s also a way that we can say, Hey, don’t wait two years. Look at me now, my income’s gone down now and ask for reconsideration. And also as a sidebar, any forms that I mentioned throughout this presentation, if we did a one-on-one consultation with you, and again, there’s never any cost for our consultations, no sales pitches, anything like that. But if we did a consultation with you, we would bring this stuff up on the individualized call, if it was meaningful to you, and we would provide you with any of the social security related forms that are necessary to make these things happen. And we would give you advice and counseling on how to file them to be successful in your requests.
So, as I mentioned, there’s a way to say, Hey, look at me now. I don’t want to wait two years for you to figure this out that my income has gone down. It’s called a life event form. And when you fill out this form, your life event is retirement income reduction, and you would put a projection of what you expect your income to be. And they would individually review that. And on an exception basis, they would be able to decrease your Medicare premium without waiting the two years for the automatic review. So just be mindful that there are different Medicare premiums. And if your income goes up or down throughout retirement, your Medicare premium may change accordingly, but always on a two year delay, unless we file a life of that form to bring something to their attention sooner. And just as an FYI, when people do have reduction in their income based on retirement, we typically see that those requests for reduction in Medicare premiums are honored. However, if you’re cashing in an IRA or selling a vacation property or selling a business, although we always recommend that you file the life event form, that’s not as clear of a clean cut approval. We typically put cover letters with that to explain the situation for the best success on trying to get that exception meet and get that rate down for you.
Tracy Russo (00:17:31):
Okay. So we talked about Medicare a and B being your hospitalization and your outpatient, but there are some things that Medicare doesn’t cover. So I want to bring them to your attention and the ones that I’ve highlighted in blue on the screen here are the ones that are the most common misconceptions where people think that Medicare does cover it, yet it doesn’t. And first and foremost is long-term care. So you may have mentioned on the part a slide, I said that long that Medicare covers skilled nursing rehab and home health care services. So I want to clarify that a little bit Medicare will cover skilled nursing rehab and home health care services provided it is in a skilled rehab capacity. So if it’s physical therapy, occupational therapy, speech therapy, if you’re doing it as a result of some kind of acute medical situation that happened, maybe it was a stroke or a heart attack, and you were in the hospital and then you need rehab to get better. That’s where Medicare pays that major medical, where they don’t pay is maybe you’ve had a friend or family member in this situation where they got to the point where they just needed help.
They needed help with normal, everyday things, help dressing, help, bathing, help getting to, and from doctor visits, getting in and out of a bed or a chair, preparing their meals. Those are more personal services and Medicare does not pay for personal services. So that’s where you really want to work with your financial advisors over at RTD, to make sure that you have a game plan set up, whether or not that includes long-term care insurance that’s for you to decide with your financial advisor. But this is where you really need to talk about that situation, because that is one thing that Medicare does not cover.
In addition, Medicare does not cover dental, vision or hearing AIDS. So the one side note that I want to make on that is when it comes to vision. Medicare will pay for again, major medical situations. So Medicare pays for cataracts, glaucoma, diabetic eye checkups, macular degeneration, things along those lines. What Medicare does not pay for when it comes to eyecare or like routine eye exams, glasses, contacts, things along those lines. And then of course, Medicare does not pay for dental and hearing needs. So that would be your responsibility, or there is, there are dental vision and hearing policies available. So if that’s a concern that would be something you would want to bring up with your advisor or with one of our Medicare consultants. And then the last couple of things on the list are a little bit more self-explanatory cosmetic surgery, acupuncture, alternative treatments like massage are not paid for by Medicare.
Tracy Russo (00:20:16):
And as I mentioned in the beginning, the biggest confusion lies around when, when do I enroll in Medicare? So if you’re on the line today and you have not yet retired, but you’re approaching your 65th birthday, you likely have gotten some literature in the mail. And for those of you that are 64 and a half or older, you probably know what I’m talking about when I say literature in the mail. I’m not talking a couple of brochures. I’m talking like two feet of stacked up mail saying, deadlines, penalties must enroll in Medicare. And although these warnings are accurate, they’re not accurate for everybody. Depending on your situation, whether or not you’re going to continue working and you have access to group health insurance. If you have a spouse on your plan. Things along those lines could determine whether or not you actually do need to enroll in Medicare when you turn 65.
So what we always recommend is give us a call before that stressful time comes up. Before you start getting those stacks and stacks of mail saying deadlines, penalties. I mean, the idea behind all that mail you’ll notice some of it looks very official like it’s government literature, but likely it is not. Unless it comes from the social security administration, it’s probably a solicitation from an insurance company that is disguised as official government literature. So the idea behind that, that mail that you get is to get you to call the 800 number on the booklet. So you can be on the phone with a commission salesperson that’s going to sell you or try to sell you whatever products they’re offering. So we say call our office way before that 63 64, we can have a short conversation with you. Talk a little bit about what your plans are for retirement and your timeline. And we can tell you exactly when you need to enroll in Medicare, if penalties will apply to you, or if you can defer for a little while, if you’re going to keep working.
Tracy Russo (00:22:18):
So what I want to do is I want to go through some of the most common scenarios as to when people need to enroll in Medicare. Obviously only one of these situations may pertain to you, but if you have a feeling for some of the different variables this will kind of help you understand the market a little bit better, because if you don’t enroll in Medicare at the appropriate time, there are some significant consequences that could happen. You could have lack of coverage where Medicare is supposed to be your primary coverage. So if you don’t enroll in Medicare, you don’t have full coverage on your health insurance benefits. Or there could be deadlines where if you don’t enroll in a certain timeframe, you could be locked out or locked out for specific periods of time anyway, or even financial penalties that will be assessed on your premium later.
Tracy Russo (00:23:06):
So we do have to take those warnings very seriously, but not everybody’s situation’s the same. You you’re, you’re likely different than your parents, your siblings, your neighbors, and maybe even different from what your coworkers are. So although your friends and family are gonna mean well when they try to give you advice, it always is prudent to get advice based on your actual situation.
Tracy Russo (00:23:29):
And that’s why we’ve created something called your roadmap to Medicare. With just a couple of quick questions that we can ask you over the phone, we can determine exactly when, how and why you should be enrolling in Medicare. And we will send you this one page free report that tells you specific to your situation when you should enroll in Medicare, or if you can defer without having to worry about penalties or gaps in your coverage or anything like that. And a lot of the times we have people call our office and say, Hey, can you send me the roadmap? And of course we can, but we do need to ask the questions first because to date we’ve come up with about 16 different roadmaps scenarios of when it’s appropriate and why it’s appropriate to, to enroll in Medicare. So it’s always good that we go over your specific situation first so you’re getting proper advice.
Tracy Russo (00:24:25):
So what I’m going to do today is talk about these most common situations. I’ve categorized them into three different columns to make it a little bit easier to visually see. And what I want to point out is right up at the top, this says based on the primary insured on the policy. So what I want you to do first is just think about your current health insurance if you’re not yet on Medicare. Is that through you, are you the employee holding the insurance, or is that through your spouse? Do you have coverage through your spouse’s employer? Whoever’s holding the insurance is the primary insured. So is that primary insurance still working? Are you covered under that group health plan at the place the primary insured is still working?
So not only do they have to be still working, you have to be getting coverage through the employer, through that they’re employed through. And the reason I bring that up is because every now and then we run into clients who maybe you’re a retired teacher, where you retired from teaching, you have retiree benefits, but you started working at a new employer where you’re, you are actively at work, but your group health benefits are not based on that current employment. So again, is the primary insurance still working? Are you covered under that group health insurance plan? And does the employer that’s providing the coverage to you have more than 20 employees?
If the answer to that is yes, that all of those situations apply to you. Then you actually do not need to enroll in Medicare when you turn 65. In fact, unless you’re collecting social security income, you will never be automatically enrolled into Medicare. So in order to not enroll in Medicare, when you turn 65, you simply do nothing. Do nothing has deferred your Medicare by default. If you’re collecting social security income, then we can just send the card back in and say, no, thank you. I don’t want my Medicare part B right now because I have group health insurance, but most people are not collecting social security income if they’re still working. So simply do nothing and you will not be enrolled unless you want to, because the choice is yours. At age 65, you can enroll or you can defer if you have a valid reason for deferring.
The middle column, the maybe column, this is for where the primary insured is still working and you’re covered under the group health insurance, but the employer providing the benefits actually has less than 20 employees. So maybe you’re self-employed or you work for a small law office or accounting firm. If that’s the case, the reason it says maybe here is because your group coverage is considered credible so you won’t have penalties later if you wait to enroll. However, the Medicare law says that if your group, your company has less than 20 employees, when you turn 65, Medicare will become your primary insurance. So even if you’re going to continue working and continue to stay on the group health plan, once you turn 65, Medicare is primary and your group health plan is secondary. Now Medicare pays about 80% of your medical bills. So if Medicare is primary and you did not enroll in Medicare, you are now responsible for 80% of your medical bills. Your health insurance.
When you file a claim will say, Oh, I noticed you’re over 65. We’re secondary now. We’re only responsible for 20% of your bills. So the reason it says maybe is because every now and then we run across a group where the insurer has agreed to remain primary even after age 65. So our advice here would be go back to your health insurance company or your employer and ask will Medicare be primary when I turned 65 or will my health group health insurance remained my primary insurance? And if, if they say your group health insurance is going to remain primary, great, you don’t need to do anything you can stay on it. But we would also recommend that you get that in writing from the insurance company, because you don’t want to find out at claim time. Unfortunately, we had a client who had a a hundred thousand dollars claim for $115,000 claim. And he found out after the fact that Medicare was primary and he didn’t have Medicare. So that was kind of a difficult situation. We had to get some attorneys involved to get them on financial assistance and stuff like that. So we never want to see you put yourself in that situation.
And then the last column over here is the yes column. These are people that absolutely must enroll in Medicare when they turn 65, or there’s going to be serious consequences, penalties, lockout periods, lack of coverage, things like that. So if you’re not working, if you’re not actively at work and on group health benefits, if you have individual ACA coverage or Obamacare coverage, if you’re, if you currently don’t have health insurance coverage or the last two bubbles, there are for people that have group health coverage, but it’s not based on active employment. So retiree benefits from an old employer or Cobra coverage, those are not considered credible for Medicare purposes.
Tracy Russo (00:29:49):
So what I want to do, we’ll revisit that in just a moment, but what I want to do first is talk about how to get enrolled in Medicare. So there’s going to be two times assuming that you’re not under 65 and disabled, that would be a whole different situation, which we’re happy to talk to you about one-on-one, but assuming you’re 65 or older, there’s going to be two situations for how you enroll in Medicare. Number one would be that you need to enroll when you turn 65. So for those individuals that are on individual health care, no coverage, retiree coverage, or maybe you’re just going to retire from your job when you turn 65. All of those individuals will need to enroll in Medicare when they turn 65 and it’s actually quite easy to do. And we’re happy to help you with this process. Up at the top of this screen here, it says, if you’re collecting social security income enrollment is automatic.
So if you’re collecting social security income prior to your 65th birthday, you will simply get your red, white, and blue Medicare card in the mail about three months before your birthday and your effective date for your Medicare, a and B will be the first of the month of your 65th birthday. So if your birthday is March 15th, your effective date would be March 1st. The only outside of that, the only exception to that would be if your birthday is on the first of the month. So if my birthday is March 1st, my effective date for Medicare will actually be the month prior. It would be February 1st, where it gets a little tricky is if you want to enroll within the months, following your birthday. So you’re going to have seven months to enroll in Medicare.
If you’re not collecting social security income, the way to enroll is to go online and literally it takes five minutes. You fill out an online form name, address, phone number, date of birth, social security number. And like I said, we can help you over the phone. We can do a screen share with you to help you with that if you need some help with that. But you’ll have seven months to do that. Three months before your birthday month and if you enroll during those first three months before your birthday month, your effective date will be the first of your birthday month. You can enroll during your birthday month, which would make your effective date the first of the following month, or you can enroll three months after your birthday month. So a seven month window.
And like I said, where it gets tricky is if you enroll in the three months following your birthday month, because there’s going to be a delay as to when Medicare can start either a one, two or three month delay before the effective date of actually when Medicare starts for you. So I don’t want to go over the details and it’s quite confusing. I don’t want to confuse you with it, but what I do want to let you know or caution you is if you intend to retire right around your 65th birthday within seven months surrounding your 65th birthday, it probably makes sense to have a quick phone call to talk about exactly when you should go online to enroll, to achieve the Medicare effective date that you want to correspond with when your group health benefits are going to end. So just remember that if you’re going to enroll right around 65, let’s talk before you go online and enroll to make sure you’re going to get the effective date you want.
Tracy Russo (00:33:04):
The other time where you might be enrolling. So maybe you don’t need to enroll at 65, maybe you’re on a group health plan, and you’re going to keep working for a couple more years. And your group health plan has credible coverage. So you’re going to enroll in Medicare after age 65. And the way to do that is it’s no longer as easy as just going online and filling out a form. You actually have to either go to your local office or do it through the phone and the mail. And we always recommend just honestly, from years of experience, we always recommend that you visit your local social security office to enroll in Medicare if you’re over age 65. We have had many people do it through the mail, but unfortunately more often than not forms get lost, they get delayed. They end up in the wrong hands and there’s a lot of time spent trying to track down the material that you’ve mailed in. So what we would do at that time is we would provide you with a form it’s called an employment verification form. And the employment verification form. You’re going to take it to your employer, your HR team, whoever’s providing the insurance benefits to you now, while you’re still working.
And you’re going to ask them to complete this form and the form asks two important questions. Number one, when has the primary insured been working there and when have you been covered under that group health plan? So as long as the primary insured has been actively at work there, and you’ve been covered under that group health insurance plan, and there’s not been more than an eight month gap in coverage, that form works as your golden ticket right in the door to Medicare, your ticket to admission. So you’re going to walk into Medicare with that completed form and say, I’m ready to enroll. And they’re going to say, okay, when do you want to start?
Some of the helpful tips that we give here, again, of course, would be to go to your local social security office. I know it may sound like more of a pain than it’s worth, but honestly it would probably save you a lot of time in the long run of just kind of knowing where your processing is. We normally recommend that you show up there early in the morning to get the fastest service. I don’t know if you’ve ever been to the local social security office before, but when they take walk-ins as the day progresses, the lines for walk-ins get longer and longer. So if you show up around eight 15 in the morning, doors open at nine, almost everybody I’ve talked to has said that by about 10 of nine there’s somewhere between 15 and 30 people in line already. So showing up there early, bring a book, read a book while you’re waiting for the doors to open. And I know a lot of people like to retire around the end of the year. That’s when the social security office is the busiest of course, cause that’s when many people are retiring and going on social security for the new year. So the lines may be a little bit longer in October, November and December, each year as well.
Tracy Russo (00:36:02):
Okay. Going back to this as a recap, and again, this would be more like what we would talk to you on a one-on-one basis. Instead of having to know all these different scenarios, we would speak specifically to what impacts you and where you are in these columns. But again, if you’re covered under large group insurance and your primary insurance is still working, you don’t need to enroll in Medicare because your group coverage is primary. So you have full benefits even without Medicare, you’ll have eight months from the time you come off of that group plan or end employment to take that golden ticket, that employment verification form down to your local social security office to enroll.
The maybe column for those people that intend to keep working past 65. But you have a smaller employer. Maybe because Medicare is likely going to be primary when you turn 65. So if Medicare is primary, you would need to have it for full coverage. So check with your current insurance company to see if Medicare will be primary. And again, you’ll have eight months to either you can either go online at 65. If you find out Medicare is going to be primary, or if Medicare is not going to be primary, you can wait and take your golden ticket in later. And then that yes column is people on individual plans, no plans or not actively employed. You definitely want to enroll because Medicare is primary. You need it for coverage. You’ll get late enrollment penalties and lockout periods if you don’t enroll at age 65 and you’ll have it that seven month window, three months before your birthday, a month of your birthday and three months after your to enroll online.
Tracy Russo (00:37:39):
One thing I want to bring up with group health insurance, and we often get asked or hear that. Well, my neighbor or my friend or my coworker told me that I know I don’t need to enroll in Medicare part B because Medicare part B costs money and I’m going to keep working. And I have group coverage. So I know I don’t need part B, but my friend or my neighbor, or my coworker told me that I need part a and I have to enroll in Medicare part a plus Medicare part a doesn’t cost anything so why wouldn’t I just enroll in Medicare part a? And to answer that question, yes, it’s probably not going to hurt you to enroll in Medicare part a. If you work for a large group, it’s going to sit secondary to your health insurance coverage. So it’s probably not going to provide you an awful lot of benefits because your group health plan is going to pay first, but at the same time, it doesn’t cost you anything.
So why not? And really the only time I would say, why not? If you have, what’s called a health savings account. So if your current group health plan is a high deductible health plan, and you have a health savings account, don’t be confused with a flexible spending account that’s different, but if you have a health savings account and you enroll in Medicare part a you can no longer make deposits into that health savings account. So I don’t want to spend too much time on it, cause I don’t know how many people in the line this impacts, but I would say if you do have a health savings account, maybe we can spend three to five minutes on the phone reviewing that, or you can just send myself or RTD an email and we can send you our email out about how health savings accounts work with Medicare. And we’d be happy to address that with you.
Tracy Russo (00:39:20):
Last question I get that revolves around enrollment is okay. I know I may not need to enroll in Medicare when I turned 65 because I have group health coverage, but there would there be any reason why I would want to enroll in Medicare at 65 and drop my group health coverage? And there’s really a couple of considerations there. Number one, how is your doctor network, if your doctor network’s good and I suggest, I would assume that in this area, Philadelphia area most of the doctor networks are pretty good, but maybe you’re a salesperson in a satellite office or you work remotely from home and your doctor networks based out of Chicago or out of Florida. In that case, you may want to go into Medicare just to have access to more doctors, or maybe you work for a hospital system. And in order to have full benefits, you have to get your coverage through that hospital. And that’s not the local hospital to your house. But for most people it comes up down to cost. Is it more cost-effective to be in my group health plan or is it more cost-effective to be in Medicare?
And so what I want you to do is I want you to think about the premium that you’re paying for your group health plan. What comes out of your paycheck plus any out-of-pocket expenses. Co-pays, co-insurances, deductibles when you use the plan, everything except for prescription costs. And do you think that adds up to more than about $300 a month or more than about $3,600 a year on average? So again, what’s coming out of your payroll deduction plus any out-of-pocket expenses that you have. If you work for a large company that breakevens about 3,600 a year or about 300 a month, if you work for a smaller company that break evens about 2,400 a month. This is assuming that you are in the base income bracket.
If you’re in the the higher income bracket, this break even would be a little bit different. So for people that have larger deductibles, sometimes they think, okay, well, am I satisfying that full deductible? Or am I, is my health getting to a point where I’m going to maybe have higher deductible impacts in the upcoming years? Well, in that case, you may to consider Medicare. If you think that your out-of-pocket expenses could get very costly under your group health plan. And the other consideration you may want to make is if you’re thinking about your payroll deductions on that premium, just be mindful that the employee and the spouse, the payroll deduction may be a little bit different.
So let me give you an example. Let’s say the employer is taking $300 a pay period out of my paycheck for health insurance, for myself and my spouse. My employer likely contributes more to me as the employees than they do to the spouse. So maybe $50 of that is for me and 250 of that is for my spouse. So a lot of the times we find that your dependent spouse that’s on your group health insurance plan. It’s more cost-effective to get them into Medicare when they turn 65, even if it makes more sense to keep you as the employee on the group health insurance plan until you retire.
So I hope that made sense if there’s any confusion there, what we typically do. And I gave you these, these breakeven points as a, as a starting point for discussion. If you think you’re paying more than 3,600 or 2,400 a year and benefit premiums and deductibles, then I don’t say get right off of your health insurance plan and go into Medicare. Let’s do a detailed cost analysis. What we’ll do is we’ll lay down the cost of your group health insurance plan versus the cost of Medicare. So you can make an educated decision as to what makes sense for you. And the good news is you’ll have the opportunity to get out of your group health plan when you turn 65, because it’s a life event, but you’ll also have the opportunity to get out of your group health plan every year on its renewal. So when you have your open enrollment at your employer, you can opt out if the premiums go up or the deductibles go up and you say, okay, well, Medicare, wasn’t better for me last year, but this year now, because of the changes in my group, health plan, Medicare is better. So you can, you can choose to go into Medicare any year on your renewal as well. And then of course at retirement.
Tracy Russo (00:43:39):
And the only consideration there is just bear in mind that if you’re the employee and you come off of the group health plan and you have a spouse, who’s not yet 65, they are not eligible for Medicare yet. So their options would be maybe Cobra or an individual health insurance plan can be, which can be very pricey. So a lot of people like to talk through that before retirement and figure out what they’re going to do with their underage spouse’s health insurance as they lead into age 65.
Tracy Russo (00:44:16):
Okay. So what I want to go into now, and this is going to be a much shorter part of the conversation would be the benefits of Medicare and some of the associated secondary coverage is the C and the D part. So if you were to have Medicare only. Medicare parts a and B. You could see on this screen that you would have some out-of-pocket expenses, Medicare part, a, you can see it’s $1,340 per occurrence. So each time you’re admitted into the hospital, you would pay $1,340. If you’re in the hospital for an extended period of time, over 60 or 90 days, you would start paying daily copays, which could be an excess of three to $600 per day. Under the part B side, the outpatient stuff. You have a pretty reasonable deductible. Actually. It’s probably better than many people’s deductible and group health insurance, $183 per calendar year. That’s cumulative of all of your out-of-pocket expenses on the outpatient side. Once you’ve satisfied that deductible, then you’re responsible for 20% co-insurance so you would pay 20% of all your bills.
Where the risk really lies with Medicare is in that 20% there, because that 20% has no cap, unlike group health insurance that says, okay, at some point you’re maxed out and we’ll, we’ll take over your responsibilities a hundred percent. Medicare never says that. So you’re paying 20% of that hundred dollar bill as well as 20% of that hundred thousand dollar bill. So that’s why we really need the C and the D to help pay for some of those, those risks, those financial risks with Medicare, not having a maximum out of pocket or a cap on their out-of-pocket cost sharing.
And then the last thing that’s listed here is again, on the part B side, the outpatient side, there’s something called excess charges, and believe it or not, doctors can accept Medicare, but can actually charge you more than the Medicare allowable rate for their services. In fact, they can charge up to 15% more over the Medicare allowable rate. And again, there’s no cap on that expense either. And I just want to make a disclaimer on that excess charge. Excess charges are illegal in Pennsylvania. So if you live in Pennsylvania, your doctor can never charge you excess charges. If they accept Medicare, they accept the Medicare rate. However, in 43 States, excess charges are legal, which means if you get your care at Johns Hopkins or Mayo or Cooper, or you traveled to Florida or Arizona or New Hampshire to see your, your children or you just like to travel in all of those States and many specialty clinics throughout the United States, doctors can charge excess charges. So that could get expensive.
Tracy Russo (00:47:18):
So what we have a choice on the C part is to choose between Medicare advantage or Medicare supplement. Medicare supplement also is known as Medigap. So if you’ve heard the term Medigap, it’s the same thing as Medicare supplement. And so I’m going to walk through the different Medicare supplement plans. I’m only going to touch on a couple of them. But if you look across the top of the screen here, you’ll see letters going across the top. Not quite sure why they do this, but to keep everything super confusing. Medicare supplement plans are all designated in letters as well. So you’ll notice that I’ve circled medic Medicare supplement plans, F and G. And if you look down the column here at plan F you’ll see that it’s a hundred percent, pretty much the whole way down. And most importantly, see this line across the bottom here, that’s red and yellow plan F and G are the only two plans that cover any excess charges.
So again, excess charges are not legal in Pennsylvania, but if you get care in almost every other state, they are legal. And we have seen doctors charging them. And honestly, as the government continues to reduce Medicare reimbursement rates to doctors, I would foresee that more and more doctors are going to exercise their right to be able to charge excess charges in the States where it’s legal. So I think this, this is a pretty important benefit here, but if you look down the column at plan F you’ll see a hundred percent all the way down. So what that means is all of these charges that I just mentioned here are paid a hundred percent by your Medicare supplement plan. So if you have plan F plus Medicare, a and B, you have a hundred percent coverage for all Medicare eligible services. So as long as Medicare says, this is a covered service, you will not pay anything out of pocket for that service. You pay your premium for the plan, and you don’t worry about any unforeseen health care needs.
And if you look at the column going down for G you’ll notice only one difference. It’s right here, highlighted in the blue. And that’s the Medicare part B deductible. Plan F pays that for you. Plan G does not. So if you have plan G and Medicare, you pay the part B deductible, which is the first hundred and $83 of your medical expenses each calendar year, and then you have a hundred percent coverage. So with plan G you have 183 out of pocket then 100% coverage. Plan f is just 100% straight out of the gate. Now there are lower cost options plan N and high deductible F. And those would bring the premiums down quite a bit. And we can talk about them on an individual basis, but I will tell you that out of all of our clients, probably North of 90% of them are either in a plan F or G plan with almost all of them being in plan G. Plan G seems to be the most popular plan right now.
Tracy Russo (00:50:19):
And if we look at the premiums, we can see why plan G is favored over plan F. So plan F average premium. This is for a female 65 in the Mid-Atlantic greater Philadelphia area. If you’re in a more rural area, these premiums could be lower. Males sorry, guys, but your premiums tend to run about 10 to 12% higher than females. But this is a pretty good estimate of what you can expect. Plan f being somewhere in the ballpark of about 150 a month. Plan G being right around 130 a month. So you’re saving about $300 a year in premium by going with plan G just for taking on the $183 deductible responsibility. So when everything’s said and done, you have a net savings of $130 a year by going with plan G over plan F. So it’s very, very comprehensive coverage. And it seems to be the most cost-effective right now. And you can see how plan N and plan high deductible F help. They would save you some money too. And again, we can talk about them individually, if you’re interested in a lower cost options.
Tracy Russo (00:51:31):
Now, when we shop for Medicare supplement plans for you, it’s really easy to do because the benefits are exactly the same, no matter where you go. So a plan G is the same benefits with AARP as it is with Aetna, Cigna mutual of Omaha. Doesn’t matter what company you go to benefits are exactly the same. The network is exactly the same, because all you do is ask your doctor, do you accept Medicare? Medicare is your primary insurance. So as long as they accept Medicare, they will accept any Medicare supplement plan that you have. Doesn’t even matter if they’ve ever heard of the insurance company. So you’re not calling the doctor saying, do you accept my trans America Medicare supplement? You’re calling the doctor and saying, do you accept Medicare? And if they accept Medicare, they will accept any Medicare supplement you have. The claims process is the same.
So Medicare makes all the claims, determinations. Your doctor sends the claim to Medicare. They say yes or no, and pay their portion. And then they forward it to the supplement company and says, this is what you owe. And they’re required to pay that claim. So you don’t, sometimes you say, Oh, well, I heard this company doesn’t pay claims, or that company doesn’t pay claims. That’s honestly irrelevant when it comes to Medicare supplements, because they don’t make those decisions. They just pay what they’re told by Medicare. And they all provide the same exact coverage anywhere you go in the United States. So regardless of if you have second properties or you travel, or you have children that live in different parts of the United States, you will have the same coverage everywhere.
Tracy Russo (00:53:03):
So what we do is we shop price. And in about 10 to 15 seconds, you can give us a call or send us an email and give us your zip code, your age, and your gender. And we can tell you the rate from about 35 different insurance companies, we can send you a spreadsheet saying here’s all the rates. And what most people do is they go with the lowest price plan. Or, you know, we’ll look at the, the three lowest cost plans, Cigna, Aetna. Transamerica. In this example that it’s not always the same and say, okay, out of these three companies, do you, do you have a special interest in one of the company names or do we know based on our experience that one company has better customer service than another company. But honestly, most people make their decision based on price, and we can easily search all of the prices for you with a click of a button. So you aren’t responsible for calling all those insurance companies and asking what they charge. And then of course being stuck on the phone with a salesperson, once you call those insurance companies that that wants to lock in your rate, if you signed today.
Tracy Russo (00:54:05):
Okay, so we’ve talked about Medicare supplement insurance and some of the options there. I’m not going to go over all the Medicare advantage options because they all are very, very different in what they cover, what their copays are and so forth. But what I want to do is I want to highlight the difference structurally between Medicare advantage and Medicare supplement. Okay. So Medicare advantage plans are managed care plans. Medicare supplements are not managed care. And what managed care means is that your doctor works with the insurance company to determine what your health care needs are and what services should be rendered. So the insurance company plays a more active role in helping you make those medical decisions.
Now they do focus more on the preventative side. So it’s good in the sense that they’re going to try to push you to the doctor, to get your physicals and do everything you can to stay healthy. But when you get sick and you need care, they will also be involved in those medical decisions as well. And because the insurance companies are involved, these are network-based plans. So unlike Medicare supplements, where all you have to do is make sure the doctor accepts Medicare, which 98%, 99% of doctors do accept Medicare. On the Medicare advantage side, you have to make sure that they accept not only the specific carrier you’re going with, but the specific plan. And I’ll give you an example, Keystone, which is independence blue cross, Keystone has three different Medicare advantage plans. And out of those three different plans, two of them have different doctor networks. So you have to drill down all the way to the plan to figure out if your doctor accepts it. So these are going to be PPO plans, HMO plans.
The attractiveness of them is they have lower premiums. So rather than, you know, 130 to 150 to maybe even up to 200 for your Medicare supplement plan, a Medicare advantage plan may cost you $20 or $40. It may cost you nothing. Some of them have zero premium, especially some of the HMO plans, but when you use your Medicare advantage plans, you’re going to have copays for every service. You know, a doctor copay, a specialist copay, a surgery copay, a hospital copay, you name it, there’s a copay. Probably the most extreme copay on a Medicare advantage plan is for outpatient chemotherapy and infusion drug treatment. Infusions typically have a 20% copay. So if you’re getting infusion chemotherapy likely you will max out your policy, your out of pocket maximum on a Medicare advantage plan is usually $6,700 in network per calendar year. So lower premiums, but more costly to use the plan.
And the other nice thing about Medicare advantage plans is they include your prescription drug plan. Versus if you get a Medicare supplement, you would buy your D your drug plan separately. And then the last of the rows on this sheet here talk about enrollment. And the one thing that I just want to highlight, cause sometimes we have people say, okay, well, I’m pretty healthy now. I’m going to go with a Medicare advantage because it’s cheaper. I rarely ever go to the doctor. So I don’t really care about the networks of the managed care piece, but if I get sick, then I’ll switch over to a Medicare supplement because it’s lower out of pocket costs with no networks and no managed care. And although in theory, that can be done. And there are some plans out there that that will accept you. For the most part you’re going to get an open enrollment window on your Medicare supplement plan when you first go into Medicare. And then after that, if you need to change plans or you want to go into a Medicare supplement plan later, they’re going to ask you medical questions to determine if you’re eligible and what your premium should be. So it could be more costly to wait to go into a Medicare supplement plan.
Tracy Russo (00:58:03):
Just to wrap up Medicare advantage. All the plans are different. There are different benefits, different networks, different claims paying processes. So what we do when we shop those for you, we get a list of your doctors. We first check all the networks out, and then we talk to you about the premiums and benefits to help you best choose what’s most appropriate for you.
Tracy Russo (00:58:24):
Okay. And then what I’m going to wrap up with in the last three minutes here is the prescription drug plan. And again, this is more of an individual conversation because the way we shop prescription drug plans is we’re actually going to ask you for a list of the prescriptions that you’re taking, the dosages and what pharmacy you shop at. Because whereas every prescription plan covers hundreds of medications, they don’t all cover the same meds and they don’t rank the meds in the same tiers. So you may have a med, that’s a tier one with one company, a tier three with another company and not even covered by the third company. So it’s important that when we talked to you about prescription plans, we talked to you about the ones that are right for your prescription needs, and it’s as easy as us just plugging your prescriptions into a database. And it pulls up all 26 plans that are available in Pennsylvania, or however many are available in the state you live in if it’s not Pennsylvania.
And from there, we can show you which plan will be the most cost effective all the way to the least cost effective based on the drugs you anticipate taking and the place that you like to shop. So please know that as confusing as prescription plans are we can help you through Medicare’s reporting process, pick out the plan that is absolutely the most appropriate plan for you based on what you plan to take. And the other nice thing about prescription plans is you will have an open enrollment for them every year. So what we will do is we will help you choose your most appropriate plan out of the gate. And then every October, we will reach out to you with a letter in an email saying, it’s time to make any prescription updates, let us know what’s changed in your prescription list. And we’ll let you know if your current plan is still most appropriate, or if it makes sense to change for the upcoming calendar year. And we can just renew you into a new plan each and every year. And we always are available to do that for you at no cost to you. And again, you never pay more for the insurance by allowing us to help you with the enrollment. But where are these plans are all the same as in these stages.
And the one thing that I want to mention is a lot of people have heard this term donut hole. So I just want to quickly explain what this is. And honestly, sometimes it’s more confusing than it does good by explaining it, but at least you’ll get kind of an impression of what I mean here. With every plan you’re going to start off in stage one, which is the deductible. Now the deductible could be $0, or it could be as much as $405. Where you pay the full amount of your prescriptions until you’ve paid out that much money. Once you’ve met that deductible, you go into stage two, your copay stage. This is where you’re going to pay a co-pay or co-insurance for your drugs. Probably similar to what you’re used to in group health insurance. But if your drug costs reached $3,750, your full total drug cost, not what you’re paying, but your full drug costs. Then you go into stage three, your donut hole. And during your donut hole, you pay more for your drugs.
You’ll pay 35% for your brand names and 44% of the cost of your generics. But if you ever get to $5,000, then you go into your fourth and final stage for the year, which is your catastrophic stage. And you’ll pay 5% of the cost of your drugs for the balance of the calendar year. Once we get to January, you go back to stage one again, with every plan. So the bottom line to this is your, your prescription costs may go up or down throughout the year. But the good news is when we plug your prescriptions into the report, we’ll be able to tell you exactly what that means to you and what month you can expect these changes to occur and exactly what the cost are in each stage. Then the only other thing I want to bring up there is the donut hole, the donut holes going away. So if you’re not in Medicare yet, or you haven’t reached your donut hole before by 2020, the donut hole will be a 25% cost share, which is pretty close to what the normal benefits are under the plan. So the donut hole is becoming less and less of a concern.
Tracy Russo (01:02:28):
And then just like how you had to pay more premium based on your higher income on your part B the same thing applies to your part D your drug plan. So most drug plans cost in the ballpark of about 30, $35 a month. $33 a month is the national average. You can get a drug plan for as little as $12 a month. They, they come as expensive as a hundred dollars or more a month, but most of them are about 30 bucks a month. But if you have a higher income, you’ll also pay a surcharge to the federal government, an income surcharge for that prescription drug plan on a monthly basis. So you’ll pay the carrier premium plus whatever your monthly income adjustment is.
Tracy Russo (01:03:12):
Now, these last two slides just show you a quick view of when we talked to you over the phone, what we do is we help simplify this and lay out exactly what this means to you. So you’ll get a sheet similar to this, which breaks down your Medicare part, a cost, your part B costs, your Medicare supplement, your prescription plan. If you have any income surcharge and what you can expect in total monthly premium for all your holistic retirement health care package. So for somebody who’s in the base income bracket, this is a pretty good estimate. $312 a month is a pretty good estimate of what somebody can expect in Medicare, monthly premiums per person. But if you’re in the highest income bracket, meaning household over 320,000, you’ll be paying more for your part B, you’ll be paying an income surcharge 650 to 700 is a better per person premium estimate for your Medicare.
Tracy Russo (01:04:13):
So I’m hoping that I gave you a lot of good information today. I know it was a lot, but please understand that we are here to help you simplify and decipher exactly what this means to you. If you do need help, we partner with RTD. We’re able to help you as the RTD clients or any of your friends or family. You can simply call the number I have on the screen here, or email us at firstname.lastname@example.org. We’ll do a short intake with you to ask you a couple of quick questions and then we’ll schedule a phone appointment for a date and time that’s convenient to you and or your spouse to review what your options are. When we get off the phone with you, we email you in writing exactly what we went over with you over the phone, and we will give you any pertinent links to reference sources to show you that the information we gave you is accurate so you know you’re making your decisions based on an informed and educated viewpoint. So I hope you got a lot out of that. Please feel free to contact us directly or RTD with any questions. At this point, I’m going to pass the presenter role back to Rachel so she can finalize the meeting.
Rachel Moran (01:05:25):
Perfect. Thank you. Thank you, Tracy. That was super informative and educational. I know I personally really appreciated the tips about timing retirement with your Medicare effective date and coordinating with your HSA. That was really interesting. We will provide a recording of today’s presentation along with the slides. If anyone does have any additional questions, please feel free to contact Tracy through email@example.com or you can contact her at rtdfinancial.com. Just to give you a heads up. We do have future installments in our aging well webinars series in June. We’ll be doing aging well, early planning and preparation in July housing options for managing healthcare costs in retirement, and finally in September recognizing and preventing elder abuse. So thank you again for joining us and feel free to reach out if you have any further questions. Thanks everybody.