Navigating the Maze of Retirement

About three months before their 65th birthday, most Americans will be contacted by Medicare. Those receiving Social Security at the time will be automatically enrolled, while all who are eligible will receive an Initial Enrollment Questionnaire. Most will want to enroll, although some exceptions are made for those with employer- paid coverage that meets certain criteria. The more educated you are about Medicare before you get that form in the mail, the better. Healthcare costs are one of largest expenses you’ll have in retirement, so the choices you make about Medicare can have a profound Winning at Retirement 126 impact on your health and financial security as you age. A Harvard University study showed that 62 percent of personal bankruptcies in the US were the result of medical expenses.1 Stunningly, 72 percent of those people had health insurance. Running out of money is a huge fear for most retirees, and going bankrupt or becoming a financial burden for your children is definitely not an example of “winning.” With Medicare enrollment, you have to choose how to structure what will most likely be one of the biggest costs you have to deal with for the rest of your life. Tackling Medicare takes some effort, but it is worthwhile to spend some time and get it right. Your Medicare coverage choices will impact expenses of course, but also the degree of freedom you have in selecting healthcare providers. You will need to weigh whether minimizing costs or maximizing choice is your bigger priority. The Story of Medicare Medicare is a social program aimed at helping older Americans shoulder the burden of rising healthcare costs. It began in 1965 with a bill signed into law by President Lyndon B. Johnson. The intention was to help retirees and individuals with disabilities pay for a portion of their healthcare. The goal was for the program to pay 80 percent and beneficiaries to pay a 20 percent share. The program has evolved significantly over the years and now provides critical support to millions of Americans. You’ve probably heard reference to the different “parts” of Medicare. There are four main components, known as Part A, Part B, Part C and Part D. 5: Navigating the Maze of Medicare 127 • Part A and Part B, combined, represent what is called Original Medicare. Part A covers hospital expenses, and Part B covers medical insurance. These two components represent Medicare’s seminal intention: to help with expenses when someone goes to the hospital or sees a doctor. • Part C—called Medicare Advantage—is composed of privately offered health insurance plans intended to mimic Parts A and B. Many plans offer prescription drug coverage and some non-traditional healthcare services (more about this later). • Medicare Part D was added more recently (2006) and provides outpatient prescription drug coverage. Over time, people with Original Medicare came to want coverage for the gap between what healthcare actually cost and what Medicare pays for. So Medigap insurance (also called supplemental coverage) was invented. Today, Original Medicare covers around 62% of total healthcare expenses.2 Medigap coverage is one way to get help with the other 38 percent. Figure 5.1 (next page) provides a good summary of the program and what is covered under each part: Winning at Retirement 128 Figure 5.1: The Different Parts of Medicare Medicare Part A (Hospital Insurance) helps cover • Inpatient care in hospitals • Skilled nursing facility care • Hospice care • Home healthcare Medicare Part B (Medical Insurance) helps cover • Services from doctors and other healthcare providers • Outpatient care • Home healthcare • Durable medical equipment • Many preventive services Medicare Part C (Medicare Advantage) • Includes all benefits and services covered under Part A and Part B • Usually includes Medicare prescription drug coverage (Part D) as part of the plan • Run by Medicare-approved private insurance companies that follow rules set by Medicare • Plans have a yearly limit on out-of-pocket costs for medical services • May include extra benefits and services that aren’t covered by Original Medicare, sometimes for an extra cost Medicare Part D (Medicare prescription drug coverage) • Helps cover the cost of prescription drugs • Run by Medicare -approved drug plans that follow rules set by Medicare • May help lower your prescription drug costs and help protect against higher costs in the future Data source: Medicare &You, the National Medicare Handbook 2018 5: Navigating the Maze of Medicare 129 Medicare.gov is a very good resource, as is the Medicare & You handbook you’ll find there.3 You will want to download the most recent edition of the handbook from the website or call 1-800-MEDICARE to request a paper version. The document is quite long, but is written in plain English, and it is the bible of the Medicare system (it’s where we got several of the charts you’ll see in this chapter). Your Two Options: Original Medicare vs. Medicare Advantage The healthcare costs for people over the age of 65 in the United States are primarily covered either by Original Medicare (meaning Parts A and B, perhaps with Part D and/or a Medigap supplement)—OR they are covered by a Medicare Advantage Plan (Part C). Figure 5.2 from Medicare.gov shows the two paths you can go down, and the ancillary decisions you need to make as a result. The difference between Original Medicare and Medicare Advantage boils down to two key areas: (1) cost and (2) options for care. Other considerations are whether you travel a lot, and where you expect to receive your care. Winning at Retirement 130 Figure 5.2: The Two Medicare Coverage Options Option 1: Original Medicare Option 2: Medicare Advantage (Part C) This includes Part A and B. Part D Part D Part B Part B Part A Part A Hospital Insurance + Medical Insurance YOU CAN ADD: Medicare Prescription Drug Coverage YOU CAN ALSO ADD: Medigap Medicare Supplement Insurance (Medigap policies help pay your out-of- pocket costs in Original Medicare.) These plans are like HMOs or PPOs, and typically include Part A, B, and D. Hospital Insurance + Medical Insurance + Medicare Prescription Drug Coverage (Most plans cover prescription drugs. If yours doesn’t, you may be able to join a separate Part D plan.) Data source: Centers for Medicare & Medicaid Services, Medicare & You 2018 5: Navigating the Maze of Medicare 131 In the following subsections, we’ll compare Original Medicare and Medicare Advantage based on six components: a. Which providers you can use b. How premiums work (including potential increases) c. Co-pays and deductibles d. Obtaining care when you travel e. Wellness visits and preventive measures f. Drug coverage A) Which Providers You Can Use Depending on which doctors and hospitals you use, this decision may be fairly easy to make. Simply put, Original Medicare will let you see almost any doctor you want, while Medicare Advantage limits you to in-network physicians. The difference resides in how hospitals and doctors are paid. Original Medicare is a fee-for-service program. That means Medicare will reimburse any doctor or hospital for the services you use. Because of this fee-for-service model, you can go to any doctor or hospital you like, as long as they accept Medicare. (Don’t worry—9 in 10 doctors participate.4 ) By contrast, Medicare Advantage plans are issued by private insurance companies. The plans keep costs down by restricting you to physician networks or coordinated care groups like HMOs and PPOs. They must provide at least the same coverage as Original Medicare Winning at Retirement 132 (Part A & B), and can provide additional coverage like dental and vision. Some even go as far as covering gym memberships and other holistic care. Medicare Advantage plans receive money from Medicare for each of their participants (about $10,000 per participant annually5 ), no matter how much it costs to keep that person healthy. The obvious advantage with Original Medicare is that you have the ability to choose your providers no matter where they practice. It might not mean a lot to you now, but imagine if you have a serious illness in the future. What if the specialist you want to see is in another State or is out of network? With Original Medicare, you have more freedom of choice. With Medicare Advantage, if you want to see someone out of network, you could face significant out-of-pocket costs. This is something to really think about. Settling for a physician because he or she is in your network, as opposed to them being the best doctor for you, is serious stuff. Especially if you are dealing with a major medical issue. Let’s look at an example to see how Medicare Advantage works: Jane is in picture-perfect health and has few medical needs beyond routine care. John, however, is battling diabetes. As a result, he sees a number of specialists and has an expensive regimen of care and medications. Medicare will pay the private insurer who administers the Medicare Advantage plan exactly the same amount for Jane as they will for John, even though Jane did not generate much cost to her plan and John was far more expensive. From the Medicare Advantage insurer’s perspective, there are millions of reasons ($) why they want to keep their subscribers healthy. The fewer trips to the doctor people make, the more money the insurer keeps. 5: Navigating the Maze of Medicare 133 Some evidence suggests that patients who use a network of physicians have better health outcomes.6 The network should know your history better than a scattered group of doctors. Moreover, there should be less redundancy in testing and treatment because your providers are able to share your health information easily with one another. The insurance company’s incentive to keep costs low may result in a higher focus on preventive care than you might experience with Original Medicare. As mentioned before, the big downside with Medicare Advantage is the cost if you go outside the selected network. Reflect on what is more important to you: freedom to choose healthcare providers, or working with a coordinated network of providers at what might be a lower cost. B) Premiums The good news is that Medicare Part A is free as long as you qualify— and there is a good chance that you do. You are eligible for Part A if you are 65 or older and you or your spouse worked and paid Medicare taxes for at least 10 years. Medicare Part B premiums must be paid by all enrollees, even those who choose a Medicare Advantage plan instead of Original Medicare. The price of that premium depends on your income. For 2022 the standard monthly cost is $170.10. From there it goes higher based on your modified adjusted gross income (MAGI). MAGI in this context—there are other versions—is your regular AGI (found on your tax return) plus any tax-exempt interest income. The chart below illustrates the difference in Part B premiums based on MAGI. Note Winning at Retirement 134 that payments are based on tax returns on file with the IRS, meaning the figures typically represent your income from your return from a prior year—in this case, the MAGI from a 2020 return filed in 2021 is used to determine 2022 payments. Figure 5.3: Part B Premiums for 2022 To use this chart, find your filing status (individual, joint, or married filing separately) then move down to the row that corresponds to your income. The last column tells you what your premium would be as of 2022. (Source: https://www.medicare.gov/your-medicare-costs/ part-b-costs/part-b-costs.html). What if your MAGI drops? Your premium in a given year is based on your MAGI from the prior year. If you expect a drop in income based on one of the following reasons, you can notify the Social Security Administration and request a lower premium: • You married, divorced, or became widowed 5: Navigating the Maze of Medicare 135 • You or your spouse stopped working or reduced your work hours • You or your spouse lost income-producing property because of a disaster or other event beyond your control • You or your spouse experienced a scheduled cessation, termination, or reorganization of an employer’s pension plan • You or your spouse received a settlement from an employer or former employer because of the employer’s closure, bankruptcy, or reorganization The bullet points in the sidebar and the following are copied verbatim from the 2018 version of the publication “Medicare Premiums: Rules for Higher Income Beneficiaries”7 : You should consider working with a tax professional to make sure there are no surprises with your Part B premium. A high MAGI in a given year can impact your Medicare premium for several years. Medicare Advantage premiums As noted, everyone is required to pay Part B premiums. Medicare Advantage users must pay an additional premium, which varies by plan. It’s important to shop around because even plans offering the exact same benefits can have different premiums. Remember, Medicare Advantage plans are run by private insurers, and each can set a different rate. Remember too that premiums are only part of the picture—you also have to consider deductibles and co-pays (more on that later), which also vary. Winning at Retirement 136 Typically, Medicare Advantage is less expensive for most people. That is, the total cost to Medicare Advantage users—which includes the Part B premium, plus any extra premiums for the plan, plus out-of- pocket expenses for co-pays, etc.—is generally lower than the total cost for Original Medicare users (which can include costs for Medigap and Part D coverage). Premium cost increases The monthly Part B premium does rise over time. These increases tend to be fairly modest, because Medicare is a government program and it needs to be accessible for Americans of all means. Being a government program suggests a certain amount of stability; Original Medicare cannot suddenly withdraw coverage from participants. The same is not true for Medicare Advantage. Since Medicare Advantage plans are privately run, premium increases can vary more widely than those of Medicare Part B. Moreover, Medicare Advantage plans are not guaranteed to be offered year after year. They can be withdrawn from your state by the companies that manage them. If you favor stability in pricing and provider choice, then Original Medicare may be better for you. If lower costs out of the gate are of paramount importance, then Medicare Advantage is typically a better fit (again, depending on your particular needs). C) Co-pays and Deductibles The other costs to consider when deciding between Medicare and Medicare Advantage are deductibles and co-pays. These are your out- 5: Navigating the Maze of Medicare 137 of-pocket expenses. For Medicare Part A, your deductible and co-pays are based on any time you spend in the hospital. This can get a little tricky, so please visit https://www.medicare.gov/coverage/hospital-care-inpatient.html for details. Be mindful that when you go to the hospital, you must be very clear about whether you are admitted or are under observation. Medicare Part A will kick in when you are considered admitted, not when you are under observation. This will impact the amount of coverage you will have while in the hospital and therefore the cost you may be responsible for. Deductibles and co-pays for Part B under Original Medicare are a bit more straightforward. First, you are responsible for a yearly deductible of $183, then Medicare will pay 80% of costs and your co-pay is 20%. For example, if your first visit to a doctor in a calendar year costs $283, you are responsible for the $183 deductible, then Medicare will pay $80 and you will pay $20 for the remaining $100. In any future visits, the 80/20 split will apply between Medicare and you. Medicare Advantage is different in that co-pays are a flat rate rather than a percent. This makes it easier to project your out-of-pocket spending for a given year. But because private insurance companies have discretion over your co-pay, there is the potential for more price fluctuation from year to year. Winning at Retirement 138 Summary: Costs and financial exposure risks for Original Medicare and Medicare Advantage The most significant risk you face if you choose Original Medicare over Medicare Advantage is that Original Medicare has no out- of-pocket limit. This means a catastrophic health issue can become a catastrophic financial issue. If you choose Original Medicare, you should consider purchasing supplemental insurance commonly known as a Medigap plan. Medigap policies can help cover deductibles and co-pays to protect you from large financial outlays, and therefore protect you from financial ruin. In contrast, all Medicare Advantage policies are required to have an out-of-pocket maximum for participants when they choose in- network care, which is a huge safety net. Buyer beware, though . . . there is no out-of-pocket maximum for out-of-network care. Remember that your spouse and your family may also be impacted by the coverage decisions that you make. And bear in mind not only your current health issues, but other problems you may encounter down the road. D) Obtaining Care When You Travel Travel and retirement are like peas and carrots—they just go together. When we talk to clients about their retirement plans, travel is almost always part of the picture. It is important to understand how travel can impact your health insurance if you get sick when you are away from home. In the United States, Original Medicare will cover you wherever you go as long as the doctor or hospital accepts Medicare. But remember, Medicare Advantage plans will penalize you if you see a doctor out of network, and most doctors out of your state will be out of your network. Thankfully, all plans cover emergency or urgent care anywhere in the country. 5: Navigating the Maze of Medicare 139 Travel overseas is another story. One of our client couples has children that live out of the United States, and they visit them regularly. They had two options for coverage while out of the country. Under Original Medicare, they could buy a Medigap policy that would cover a majority of their costs. Under Medicare Advantage, they would have to buy a supplemental travel policy every time they went abroad. Our clients felt that the supplemental Medicare Advantage was the way to go because they were traveling overseas just one or two times a year for a month at a time. If you are traveling abroad frequently, then the permanent Medigap policy may be less expensive. Additional details about overseas coverage can be found here: https://www.medicare.gov/coverage/ travel. E) Wellness Visits and Preventive Measures Original Medicare now offers an annual wellness visit (at no cost) that can help you benchmark your health from year to year, with the goal of helping you to avoid getting sick. Certain other preventive measures such as screenings, vaccines, and counseling may be fully covered as well. Medicare Advantage plans must fully cover all preventive services that are provided at no cost under Original Medicare, and may cover some others as well. Original Medicare will not pay for a gym membership, but some Medicare Advantage plans will. Are any non-traditional wellness practices important to you? For example, do you see a chiropractor, an acupuncturist, or a naturopathic doctor? Some of these services are covered by Medicare Advantage plans, but they are not covered by Winning at Retirement 140 Original Medicare (except for chiropractic care, which is covered only when deemed medically necessary). While Original Medicare does not offer extra preventive services, some Medigap policies do. These relatively new versions are called Innovative Medigap policies and are offered in 21 states. We will talk about Medigap options shortly. F) Drug Coverage The cost of prescription medications in the U.S. is staggering. Spending for drugs in the U.S. far exceeds that of other high-income countries,8 and unless something is done, costs will continue to climb. The idea that a commonly used chemotherapy drug, Revlimid, can cost on average $182,972 per year9 is pretty incredible. Currently drug price negotiations are handled by the private insurers that offer Medicare Part D drug plans. Many believe better savings could be had if the government itself handled negotiations with pharmaceutical companies, leveraging the full buying power of the American public. On the other hand, there is some concern that squeezing too much profit out of the drug business will stifle innovation and new drug development. It is a complex topic that we won’t wade into, but suffice to say that rising drug prices are a serious concern for all Americans, especially retirees. Most Medicare Advantage plans include prescription drug coverage. If yours does not, or if you choose Original Medicare, you should consider an optional Medicare Part D prescription drug plan. You will pay an additional monthly premium, but paying a little extra each month in premiums can prevent you from having to pay a lot more 5: Navigating the Maze of Medicare 141 in prescription costs, especially as you get up higher in age or encounter a serious health problem. Frankly, given the stratospheric costs of some drugs, we consider some form of Part D a must. Bear in mind that if you delay signing up for Part D instead of signing up when you are first eligible, your monthly costs will be higher —forever—because you will be older when you enroll (there is more on enrollment later in this chapter). There are exceptions to this if you have something called “creditable coverage” from another source, but that is a complex subject we will not delve into. (Seek knowledge and help with the subject if you plan to delay enrolling in Part D because of you have other drug coverage.) Like Medicare Advantage plans and Medigap supplemental plans, prescription drug plans are offered by private insurers, so you will have no shortage of marketing offers coming your way. Throw them all in the trash. You don’t want to pick your plan based on a sales pitch, but rather on your personal circumstances, along with a bit of research. In Medicare for Dummies, AARP Medicare expert Patricia Barry says that the right plan should be one that covers all the drugs that you are taking now, at the lowest cost, with the fewest hoops to jump through to get it.10 Later in this chapter, we’ll instruct you on how to do a healthcare assessment and prepare a list of all the medications you currently take, and in what dosage and frequency. No matter where you live, you most likely will have 25 or more prescription drug plans to choose from. Having a list of medications will help you whittle that list down to about two or three options that are best for you. The good news is that you have the ability to change your Part D coverage each year without penalty, so if your prescription needs are different down the road, you can adjust accordingly. Winning at Retirement 142 By the way, Medicare for Dummies is a terrific resource. It provides explicit detail on all things Medicare, and goes far deeper than what we will cover in this chapter. Medigap Policies Original Medicare requires you to pay premiums, deductibles, and co-pays, and it has no out-of-pocket maximum. These costs can present a significant cramp in your lifestyle at best, and at worst can completely upend your well-planned retirement. Medigap policies are the answer. They are supplemental policies offered by private insurers that cover a variety of the out-of-pocket costs you might face. Unlike the vast number of Medicare Advantage plans out there, Medigap has only 10 versions to choose from (like the Medicare parts, they are named with letters: A, B, C, D, F, G, K, L, M & N). No matter what private insurance company you buy your plan from, they all are exactly the same in structure because they are regulated by Medicare. So if you buy policy F from one insurer, it should be exactly the same as if you buy policy F from another insurer (with the exception of Innovative policies, which throw in a bit of extra coverage). Figure 5.4 (next page) is from Medicare & Medicaid Services and illustrates the difference between the plans and what they cover. You need to decide what components of coverage are most important and least important to you, and then start whittling down which options you want to pursue in terms of getting quotes. For example, if foreign travel is not in your plans, then you could eliminate the options that provide foreign travel coverage. 5: Navigating the Maze of Medicare 143 Figure 5.4: Comparing Medigap Plans11 If you want to have your Part A deductible covered, then you’d need to look at plan options that include that benefit. Winning at Retirement 144 Be aware that there is some complexity involved if you want to change Medigap coverage. While you can sometimes make changes during the annual open enrollment window, you are not guaranteed access to other plans outside of the initial enrollment. Also, there can be issues if you initially elect Medicare Advantage and later want to switch to Original Medicare. During initial enrollment you have access to any Medigap policy regardless of your health status. If you initially sign up for Medicare Advantage and later try to switch to Original Medicare, you will probably be subject to medical underwriting for Medigap coverage, and could be denied access for health reasons (some states have exceptions to this). Some experts advise that you buy a Medigap policy with the most comprehensive set of benefits you can afford at initial enrollment, because upgrading in the future can be expensive.12 While the plans are the same, the premiums vary. Insurance companies can price premiums in three ways: community rating, issue- age rating, and attained-age rating. Visit medicare.gov to become familiar with the pricing models. You will likely find that most plans are based on attained age (meaning how old you are at the time of purchase). All plans are subject to price increases due to inflation even if they don’t increase based on age. Study the chart above to see what characteristics of a Medigap plan might be of interest to you. The Kaiser Family Foundation maintains a list of plans by state: www.kff.org/medicare/state0indicator/plans/?currenttimeframe=0. You can also use the Medigap section of Plan Finder on Medicare.gov 5: Navigating the Maze of Medicare 145 to shop for coverage: https://www.medicare.gov/find-a-plan/questions/medigap-home. aspx. Choosing an Option and Enrolling in Medicare Now that you have a general sense of Medicare and its various components, it’s time to start working toward a decision about what will be best for you. Step 1: Start with a self-assessment of your health There is one thing we are completely sure about when it comes to this whole Medicare thing: the first step is to gather as much information as you can about your current health status and healthcare needs. Each decision you make, and each conversation you might have with people who can give you advice about Medicare, will be based on your unique healthcare situation. You—and, if applicable, your spouse—should complete a health assessment by filling in a form that describes everything about your wellness and medical life. You record the doctors you see, any current health issues, family medical history, and the medications you take (the last is of particular importance). Think about it: you can’t figure out how to best cover your healthcare needs without first accurately describing them. You can download a healthcare assessment on the health and wellness page of RetiredHappy.me. Fill it out in as much detail as you can. Also, look at your list of doctors. Reach out to them to see if they Winning at Retirement 146 (1) accept Medicare and (2) are in or out of network for any Medicare Advantage plan you consider. It is said that Michelangelo was once asked how he created his masterpiece of sculpture, and the artist replied: “It’s easy. You just chip away the stone that doesn’t look like David.” In essence, we suggest that you start your search for the right Medicare plan with that concept in mind. The vast number of options makes it nearly impossible to compare all of the plans together, so you will be much better off if you can eliminate the ones that don’t fit right from the beginning. Once you can winnow the options down, it becomes easier to make comparisons. Step 2: Compare options Choice and quality of care, cost, travel needs, and additional service options are all factors to consider when making your decision about what path to choose when it comes to Medicare. Table 5.A (next page) provides a summary of the discussion earlier in this chapter. If you travel the country frequently and want freedom of choice, then Original Medicare is for you. If you love your community doctors and hospitals and seek a lower cost option, then Medicare Advantage might be better. It is not always easy to cross one or the other off the list. You might need to find a good Medicare Advantage policy option, then compare it with the benefits and costs you’d receive under Original Medicare plus a supplement (Medigap) and a prescription drug plan (Part D). 5: Navigating the Maze of Medicare 147 Table 5.A: Summary of Original Medicare vs. Medicare Advantage Features Original Medicare Feature Medicare Advantage There’s no limit on how much you pay out-of- pocket per year (unless you have supplemental coverage). Cost Plans have a yearly limit on your out-of-pocket costs. If you join a Medicare Advantage Plan, once you reach a certain limit, you’ll pay nothing for covered services for the rest of the year. Medicare covers medical services and supplies in hospitals, doctors’ offices, and other health care settings. Services are covered under Part A or Part B. Coverage* Plans must cover all the services that Original Medicare covers. However, plans may also offer benefits that Original Medicare doesn’t cover, such as vision, hearing, or dental services. You can add a Medi- gap policy to help pay your out-of-pocket costs in Original Medicare (such as your deduct- ible and co-insurance). Supplemental coverage It may be more cost effective for you to join a Medicare Advan- tage plan because your cost sharing is lower (or included). You can’t use (and can’t be sold) a Medigap policy if you’re in a Medicare Advantage plan. You’ll need to join a Medicare Prescription Drug Plan to get drug coverage. Prescription drugs* Most Medicare Advantage plans include drug coverage. You can go to any doctor that accepts Medicare. Doctor and hos- pital choice You may need to use healthcare providers who participate in the plan’s network. If so, find out how close the network’s doctors or pharmacies are to your home. Some plans offer out-of-network coverage. Winning at Retirement 148 Original Medicare Feature Medicare Advantage You can get a snapshot of the quality of care that health care pro- viders (and facilities) give their patients by visiting Medicare.gov. Quality of care The Medicare Plan Finder at Medi- care.gov/find-a-plan features star rating systems for Medicare plans. Original Medicare generally doesn’t cover care outside the U.S. You may be able to buy supplemental insur- ance that offers travel coverage. Travel Plans usually don’t cover care you get outside of the U.S. * If you have other types of health or prescription drug coverage, check to see how it works with the type of coverage you’re considering before you make any decisions. Source: Centers for Medicare & Medicaid Services, Medicare & You 2018 With your medical information in hand, you can use the Medicare Plan Finder on Medicare.gov to research Medicare Advantage (called “Medical Health Plans” in the system), and Part D plans. This link takes you to the appropriate section: https://www.medicare.gov/find-a-plan/questions/ home.aspx. Check out the video on the right of the page under the title “Step-by-step overview on how to complete a plan search.” It’s a pretty good tutorial provided in five lessons. If you already have Medicare coverage, you can use the Personalized Search option; otherwise use General Search. Medicare for Dummies provides step-by-step instructions for using the system. Based on your state and the medications you take, the Plan Finder will provide quotes on a variety of plans that you can then compare. It includes information about premiums, as well as deductibles and 5: Navigating the Maze of Medicare 149 co-pays. It also shows an estimate of your annual costs with a given plan, and a number for the maximum out-of-pocket costs that you might face. Medicare also provides ratings for plans based on a star system (you can find an explanation of that system on the site). There is a link next to each plan that will take you to a registration page once you decide on the coverage you want. Step 3: Enroll in Medicare One common misconception about Medicare is that everyone is enrolled automatically. That is not exactly the case. It is true that individuals who are already receiving Social Security at age 65 will be automatically enrolled in Parts A and B. If that applies to you, about three months before your 65th birthday, you will receive a Medicare card and a letter explaining that you have been signed up. This is a nice service, but it can cause confusion. There are other choices you still have to make, including whether to use Medicare Advantage, whether to get a Medigap policy, and how to get prescription drug coverage. But what happens if you are not taking Social Security at age 65? Then you have to self-enroll. If that’s the case, you have a window of time to sign up for Medicare, which includes the month of your 65th birthday, as well as the three months prior and the three months after. Enrolling during this window assures you will face no penalties and will not run the risk of spending time without healthcare coverage. As mentioned earlier, you will receive the Medicare Initial Enrollment Questionnaire in the mail about three months before your 65th birthday. You also have the option to complete that form, as Winning at Retirement 150 well as the enrollment documents, online. Visit https://www.mymedicare.gov/ registration.aspx and create an online account. Keep in mind, it must be three months before you are eligible for Medicare (the month of your 65th birthday) to six months after coverage begins in order for you to access all the forms. For assistance, you can call the 24-hour toll-free hotline: 1-800-633-4227. If you continue to work beyond age 65 and have coverage at work, you may not need to sign up at that time. Instead, you might be able to continue coverage from your employer. Then whenever you leave work and lose healthcare coverage from the employer, you will have an opportunity—called Special Enrollment—to get into Medicare. This is a complex subject that we’ll discuss in the next subsection. General enrollment: If you miss your Initial Enrollment or Special Enrollment window, you must wait until the next General Enrollment period. This runs from January 1st to March 31st each year, with coverage beginning July 1st. Be careful: if you end up missing Initial or Special Enrollments, you can be left without coverage (possibly racking up medical bills) for months. Or even years if you continue to delay. Delaying costs money, even if you don’t encounter any medical bills. For each month that you wait beyond when you should have signed up, your monthly costs will increase permanently. This goes for all the various forms of coverage. How Medicare Is Affected if You Work Past Age 65 In the not-so-distant past, people typically retired at 65, when full Social Security and full pension kicked in. Today, pensions have become rare, and the full retirement age for Social Security is creeping up to 5: Navigating the Maze of Medicare 151 67. People are commonly working well past 65. In fact, many have no interest in retiring at that age. This retirement evolution has led to a new question: who covers my healthcare costs when I work past 65? If you plan on working past the traditional retirement age, you may be able to delay enrollment in parts of Medicare. While having options is great, it introduces a complicated concept: overlapping coverage. Your HR department may be able to walk you through this issue, but if not you’ll need to do a bit of research on your own. In the words of Patricia Barry in Medicare for Dummies: “For as long as you’re covered beyond age 65 by group health insurance provided by an employer for whom you or your spouse still actively work—and that employer has 20 or more employees—you can delay Part B enrollment until this employment or the health coverage ends (whichever comes first). At that point, you’re entitled to a Special Enroll- ment period to sign up for Part B immediately and without penalty.” As noted, Medicare will send you the Medicare Initial Enrollment Questionnaire about three months before you become eligible (although we advise you to begin educating yourself on the subject long before that). The form allows you to notify Medicare if you intend to keep your employee coverage instead of activating Medicare Part B. Complete the form accurately and on time and you can save yourself a world of trouble. A properly completed questionnaire can ensure that your bills are paid promptly and by the right payer. Make sure to keep Medicare informed when your coverage changes too. If you change jobs or retire, you should contact the Medicare Winning at Retirement 152 Benefits Coordination & Recovery Center (BCRC) to have your file updated. You can reach the BCRC at 1-855-798-2627 for assistance. If you work for a small employer, Medicare is your primary insurance and you must enroll as usual, with one caveat: your employer plan may offer a supplement plan that goes beyond what Medicare offers. If your employer does offer a supplement, then you should compare it to buying a Medigap policy to see which is best. This might be a good time to note that if you are thinking about retiring before age 65—before Medicare kicks in—you need to do some shopping and planning for healthcare options. We often encounter scenarios where people are surprised to find how expensive health insurance is when you have to purchase it yourself. If you leave an employer plan but are not yet eligible for Medicare, you may have a window of time when your coverage cost is quite a bit higher than you are accustomed to. COBRA is a temporary option (more expensive than employer coverage). Healthcare.gov is a good place to begin your research about the insurance marketplace: https://www.healthcare.gov/ see-plans/#/. A web search using the phrase “cost of health insurance on exchanges” will provide you with a lot of articles and resources. Health Savings Accounts and Part A Many employers today use high-deductible health plans. To help with the cost of the deductible, they typically offer a Health Savings Account (HSA) as well. It is important to note the distinction between an HSA which allows you to carry money forward indefinitely, and a FSA (“Flexible Spending Account”). An FSA provides similar tax benefits, but the money must be used within one plan year, or is subject 5: Navigating the Maze of Medicare 153 to forfeiture. Given that big difference, it’s important for you to be sure of the type of plan your employer offers (talk to HR to be certain). We are big fans of Health Savings Accounts. They allow employees who participate in high-deductible plans to defer some of their salary, pretax, to pay for qualified healthcare expenses. If you are still employed and your employer offers an HSA, it may be in your best interest to fund it to the maximum allowable level for as long as you can. An HSA is a tax-free slush fund that you can use to pay for things like medical, dental, and vision expenses. Unlike other tax-advantaged accounts, you get a tax deduction for your contributions, and the money comes out tax-free for qualified expenses. Deduction on the way in, tax-free on the way out . . . win-win. (Be aware that taxes and penalties apply if you pull money out for non-medical purposes.) If you contribute annually to a Health Savings Account, then you may want to consider delaying taking Medicare Part A. Why? If you are enrolled in Part A, then you cannot contribute to your HSA any longer, per IRS rules. Note that if you are taking Social Security at age 65, then you are automatically enrolled in Medicare Part A, which means no more HSA contributions for you. Our best advice here is to call your HSA provider directly to review your specific situation. Getting Help With Medicare, we think it is important to start by gaining a basic understanding of the program, and to gather your personal medical data, but after that it might be a good idea to seek some help. As referenced earlier, Medicare itself has a 24-hour toll-free hotline: Winning at Retirement 154 1-800-MEDICARE (1-800-633-4227). They can answer questions, and help you with the Plan Finder system. If you or your spouse is still working, you might check with your company HR department. Some companies contract with providers such as Health Advocate that help employees nearing retirement to shop for a plan. You can consult with your State Health Insurance Assistance Program (SHIP), a free counseling service that will have a wealth of information about the plans available where you live. Visit https:// www.shiptacenter.org/ for contact information for your state’s program. You can receive guidance from SHIP representatives in person or over the phone. There are paid Medicare consultants that for a fee—typically measured in hundreds of dollars—will walk you through the search process. This might be a good choice if you don’t mind paying a bit to offload much of the work. Finally, you can seek out an insurance broker who will help you shop for plans. As opposed to dealing with a representative from an insurance company who can sell only their own employer’s plans, brokers will have relationships with a number of different insurers (although likely not all available providers) and can help you shop among the ones they represent. Brokers can be very knowledgeable guides, but be aware that they may have a conflict of interest in that their compensation could be higher if you choose a more expensive plan. One way to find a broker is on the website of the National Association of Health Underwriters: https://forms.nahu.org/consumer/findagent2.cfm. Enter your zip code and a radius—say, 10 miles if you are near a major metro area—check 5: Navigating the Maze of Medicare 155 the box for your state, and select “Medicare” from the list of services at the bottom of the page. Finally, click “Find NAHU Members” and hopefully a few options will pop up. The Loss of Mike Foley: A cautionary Medicare story from Pat While Kristin and I were writing the original edition of this book, my father and our business partner, Mike Foley, passed away from a heart attack. My dad was a larger-than-life personality, renowned in the financial industry and among all who knew him for his warmth and humor. What followed, in addition to being a personal tragedy, was a stark lesson in what happens when a loved one dies. First you need to plan a funeral, and in our case a rip-roaring Irish wake. Thankfully, all of us siblings (I am one of five) and our wonderful in-laws rallied together to make the arrangements. But that was only the beginning of the challenges we would face in the months that followed. Turns out no one was sure where the most recent copy of his will was located. We also weren’t sure how many insurance policies there were. We didn’t have access codes to get into online accounts. These are issues that point up the need for a family organizer, which we will describe in Chapter 8: Your Legacy. All this was eventually resolved, but then we ran headlong into a Medicare saga. If you work for a company that has more than 20 employees and you lose healthcare coverage (through separation of service or death), Winning at Retirement 156 there is the option of moving onto something called COBRA. It is a temporary extension of the coverage provided under the company plan. There is an increase in cost because you become responsible for the part of the payment that used to be covered by the employer, but it may still be less expensive than Medicare. In my mom’s case, she and my dad had already paid their deductibles for the year (they carry over when you elect COBRA), and the monthly payments were going to be cheaper than Medicare. So she made the election. But something ended up slipping through the cracks, and it became a major problem. As was so common in my parents’ generation, my dad handled all the finances. As advisors, Kristin and I encounter this often with older clients. The husband passes away, and the wife—in the midst of incredible grief—suddenly finds herself in the unfamiliar position of being responsible for the household finances. That is exactly what happened to my mom. My brother and sisters and I helped set up her bills on autopay, and were otherwise trying to transition her into financial independence. She assumed that her COBRA insurance coverage was set up for autopay. We were handling bills as they came through to her in the mail. But the bill for her COBRA coverage happened to arrive while she away visiting family. As a result, her bill went past 30 days without being paid, and she lost her health insurance. Worse, she was told she would not be eligible for Medicare until the following year. It is with no small sense of shame that I, a professional financial advisor, recount the story of my recently widowed mother losing her health insurance. How could we, how could I, have allowed this to 5: Navigating the Maze of Medicare 157 happen? The answer is: chaos. The loss of a loved one is an inherently chaotic situation. What ensued was a lesson in dealing with a giant healthcare conglomerate (the company that provided her COBRA coverage) and the even larger government agencies that administer the Social Security and Medicare systems. I will summarize the whole experience by saying that such organizations are neither flexible nor fun to deal with. In the end it all worked out. My mom finally had her problem solved by someone in the Scranton (Penn.) office of the Social Security Administration. Scranton is a smallish city about 90 minutes north of Philadelphia. (Many will know it as the setting for the TV show “The Office.”) There is a bit of a time-machine sense to a place like Scranton, where things feel—comfortably—a few years behind. This is where our family is from; my mom grew up in the area as the second oldest of nine kids. As a result of her COBRA being canceled, my mom was deemed to have been without any healthcare coverage for a period of months, and she had racked up considerable medical bills. After months of struggling to straighten things out, and countless phone calls to her healthcare provider and to the government, we ended up scheduling a visit to the Social Security office in Scranton so she could submit some paperwork. In a seeming miracle, the woman she met with in that office was able to straighten out the entire mess, securing Medicare coverage for my mom retroactive to her loss of COBRA. There are a couple of lessons to be had in this story. One that Kristin and I already knew from prior experience with clients, and which we referenced earlier in the book, is that the level of assistance Winning at Retirement 158 you get at local Social Security offices varies from place to pace. In fact, it can vary based on the individual government employee you randomly end up working with. You might get a friendly and experienced person who will be a terrific guide through the complexity of the system. You might get someone surly and unhelpful. So if you are struggling with an issue and aren’t getting the help you need, consider trying again with a different person or a different office. The other lesson is not as clear cut, and you should bear in mind I am largely basing this on a sample size of one. But it seems to me, given that you can get help from a Social Security office anywhere, that you might be better off finding one in a small town rather than a big city. Admittedly, I am basing this on a stereotype—which is that people in small towns tend to be nicer. But maybe, as well, people working in a small-town Social Security office aren’t quite as busy and harried as in a big-city office. In any case, if you live in a big city and are hitting a wall in terms of getting help . . . consider setting an appointment a little farther afield. Be Proactive About Medicare! Every aspect of American healthcare is in flux. By the time you read this, some of the information we’ve provided may already be out of date. For example, for a long time the most popular supplement plan was Medigap part F, but as of 2020, Part F (and the somewhat similar Plan C) is no longer available. That said, some things tend to remain steady when it comes to Medicare: 5: Navigating the Maze of Medicare 159 Endnotes 1 Medical Bankruptcy in the United States, 2007: Results of a National Study. https://www.ncbi.nlm.nih.gov/pubmed/19501347 2 How Much Is Enough? Out-of-Pocket Spending Among Medicare Beneficia- ries: A Chartbook,” Henry J. Kaiser Family Foundation (July 2014) 3 You can access content of the handbook electronically at https://www.medi- care.gov/medicare-and-you/medicare-and-you.html 1) Start planning early (around your 64th birthday), so you are prepared for open enrollment. Remember that delaying can cost you. 2) Begin with a detailed health assessment so you are armed with the necessary information to make a good decision. 3) Lean on Medicare.gov and the most recent version of the Medicare & You handbook as primary resources. Beyond that, consider seeking assistance from the experts we described earlier. Healthcare expenses are a big burden for retirees, so make sure you put in the effort to maximize your Medicare results while containing costs as best you can. We will revisit Medicare planning steps again at the end of the book when we walk you through the building of an action plan we call “The Retirement Happiness Map.” In the meantime, let’s talk about how to take care of yourself in an effort to increase retirement enjoyment while minimizing your healthcare needs. Winning at Retirement 160 4 There Is No Shortage of Doctors Willing to Take Medicare Patients. https:// www.forbes.com/sites/howardgleckman/2013/12/18/there-is-no-shortage- of-doctors-willing-take-medicare-patients/#7868bd444816 5 Get What’s Yours for Medicare: Maximize Your Coverage, Minimize Your Costs by Phillip Moeller, pg. 96. ISBN-13: 978-1501124006. 6 Less Intense Post-acute Care, Better Outcomes for Enrollees in Medicare Advantage Than Those in Fee-For-Service. https://www.healthaffairs.org/ doi/abs/10.1377/hlthaff.2016.1027 7 https://www.ssa.gov/pubs/EN-05-10536.pdf 8 https://www.commonwealthfund.org/publications/issue-briefs/2017/oct/ paying-prescription-drugs-around-world-why-us-outlier 9 Get What’s Yours for Medicare: Maximize Your Coverage, Minimize Your Costs by Phil- lip Moeller, pg. 119. ISBN-13: 978-1501124006 10 Medicare for Dummies by Patricia Barry, pg. 199. ISBN-13: 978- 1119348870 11 Source: https://www.medicare.gov/supplement-other-insurance/com- pare-medigap/compare-medigap.html 12 Medicare for Dummies, 2nd Edition by Patricia Barry. ISBN-13: 978- 1119348870