“I know everything that I need to know about Medicare.” -No one
“I’m all set.” -Too many
Maximize Your Medicare: Understanding Medicare, Protecting Your Health, And Minimizing Costs
(2019 Edition)
© 2018 by Jae W. Oh, MBA, CFPà¶à¯, CLU® ChFC®. All rights reserved. No part of this book may be reproduced in any written, electronic, recording, or photocopying form without written permission of the author or the publisher. Print Format Publisher: GH2 Publishing Group, LLC e-book Format Publisher: GH2 Publishing Group, LLC Library of Congress Cataloging in Publication Data Oh, Jae W. Maximize Your Medicare (2019 Edition): Understanding Medicare, Protecting Your Health, and Minimizing Costs / Jae W. Oh, CFP®, CLU® ChFC® Library of Congress Control Number: 2018967792 ISBN-13: 978-0-9967987-8-5 ISBN-10: 0-9967987-8-1 eISBN-13: 1. Medicare –Popular—works Notes: Includes Index and bibliographical references 10 9 8 7 6 5 4 3 2 1 DISCLAIMER: All statements in this book are solely the informed opinion of the author. The advice in this book cannot DQG GRHV QRW UHSUHVHQW ÀQDQFLDO RU LQYHVWPHQW DGYLFH 6XFK DGYLFH UHTXLUHV D GHHS XQGHUVWDQGLQJ RI D SHUVRQ·V VSHFLÀF FLUcumstances. Rather, this book provides examples of situations that are designed to provoke further inquiry by readers to help them understand how to best make Medicare work for them. Although the author has made every effort to provide accurate facts regarding Medicare, including the regulations that govern it, the author accepts no responsibility for any errors or omisVLRQV 7KH RSLQLRQV VWDWHG LQ WKLV ERRN DUH QRW DIÀOLDWHG ZLWK nor endorsed by, the Centers for Medicare and Medicaid Services (CMS). Printed in the United States of America.
Net Proceeds will be contributed to the Great Humanity Healthcare Foundation (www.greathumanityhf.org)
Contents Preface Chapter 1.Enrollment Chapter 2.Medicare Part A Chapter 3.Medicare Part B Chapter 4.Medicare Part D Chapter 5.Medicare Advantage Chapter 6.Medigap Chapter 7.Working Beyond 65 Chapter 8.Retiree Group Plans Chapter 9.Special Considerations Chapter 10.Related Topics Experts’ Addenda Acknowledgements Bibliography Glossary Index
1 13 25 37 49 65 87 119 127 147 169 189 199 201 205 215
Preface Medicare is Vital Medicare is the cornerstone of retirement planning in the United States. It is no understatement to state that Medicare is now more important than Social Security, because the cost of healthcare as a person gets older can threaten any lifetime savings or income that a person can have available. Unlike Social Security, Medicare’s rights and options are entirely under the consumer’s control. Understood correctly, a person will be able to control his total healthcare costs as he becomes older, the time when it is most likely he requires medical care.1 If Medicare is mishandled or neglected, he may face unexpected costs, with little or no idea of how high your costs will be, or how long that situation will last. Penalties for mishandling enrollment for Medicare Part B and Part D never expire. Ever. Fear of unknown costs can lead people to avoid getting medical attention: we all know someone that has chosen this regrettable path. Worse, avoiding needed medical attention can lead to even higher costs in the future. If that person does not have adequate insurance, and does not have the resources to pay, then the doctor, hospital, or healthcare provider is left with unpaid bills. Those unpaid bills need to be paid by someone, and that someone is the
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insured, who must compensate for the losses, in the form of higher prices. As a result, the vicious cycle of higher healthcare costs accelerates. Maximize Your Medicare is written so that you can understand the rules that govern Medicare. More importantly, Maximize Your Medicare will help you understand the ripple effects of the choices that you are making. Admittedly, these ripple effects of your choices may be unseen today. Nevertheless, the fact that the future is unknown is not a reason for being uninformed about Medicare. That would be similar to ignoring hurricane forecasts, even if ultimately, the hurricane swerves harmlessly away from your home. People wrongly state “insurance isn’t worth it, I never received what I paid into it.â€? Insurance is an option, one whose value is the safety of knowing that if the event occurs (like a hurricane), then the costs will be limited. There is a long list of excuses for not fully understanding Medicare. • • • •
Complicated enrollment dates Confusing jargon TV Advertisements and mail Phone calls
The reality is that the commercials and advertisements are factually accurate, but the explanations are either absent, or incomplete. Medicare and You2 WKH RIĂ€FLDO manual published by the U.S. Government, is also LQVXIĂ€FLHQW IRU WKLV VDPH UHDVRQ 3 Critically, the jargon of Medicare looks the same as the language used in other health insurance, but it can work differently from health insurance before someone turns 65 years old. Maximize Your Medicare is a guide to help you clarify the confusion, so that you can understand what
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Why is Medicare So Complicated? In the U.S., there are over 59,000,000 people that are enrolled in Medicare, and every day, approximately 10,000 turn 65 years old. Every single day. Improvements in medical knowledge and technology have resulted in longer life expectancy, of the largest generation in American history. The bottom line is that in a country as large as ours, with people from different backgrounds, it will be virtually LPSRVVLEOH WR ÀQG D VLPSOH HDV\ VROXWLRQ 7KLV LV QRW JRLQJ DZD\ :KLOH HOHFWHG RIÀFLDOV PD\ DWWHPSW WR VD\ that a political party is to blame, demographic facts overwhelm politically-motivated messages. On top of WKLV WUDGLWLRQDO UHWLUHH KHDOWK LQVXUDQFH EHQHÀWV KDYH weakened, or have entirely disappeared. There is very little that the Medicare-eligible population can do about these dynamics. This book is not written to complain about the how or ZK\ WKH 0HGLFDUH V\VWHP LV GLIÀFXOW ,W LV ZULWWHQ VR WKDW WKH EHQHÀFLDU\ FDQ JHW WKH PRVW VXLWDEOH FRYHUDJH JLYHQ KHU FRPSOLFDWHG ÀQDQFLDO DQG KHDOWK IDFWV DORQJ ZLWK KHU personal priorities. In reality, all participants in the healthcare system face a very complicated set of factors. Physicians, pharmaceuticals, hospitals, equipment makers, insurance carriers: this is only a partial list. All parties are facing D FRPSOLFDWHG VHW RI UXOHV DQG ÀQDQFLDO SUHVVXUHV 7KH FKDOOHQJH EHQHÀFLDULHV \RX DUH OHIW WR ´IHQG IRU \RXUVHOIµ in this maze.
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7KH EULJKW VLGH LV WKDW \RX FDQ ÀQG D VROXWLRQ WKDW ÀWV \RXU LQGLYLGXDO KHDOWK DQG ÀQDQFLDO VLWXDWLRQ 7KH enrollment rules are overwhelmingly in your favor. Insurance companies do not have discretion (except in the case of applying for Medigap after 65.5 years old, and the absence of a Special Enrollment Period): they are required WR VWULFWO\ IROORZ WKH UXOHV ,Q DGGLWLRQ WKHUH LV ÀHUFH competition among insurance carriers, which can succeed only if they win your business.
Medicare is the Best for Consumers The idea that Medicare is expensive is usually the result of a person being unaware of the actual cost of health insurance. Health insurance for a 64 year-old, ZLWK EHQHĂ€WV WKDW UHVHPEOH DQ\WKLQJ FORVH WR RULJLQDO Medicare, with either a Medicare Advantage plan (described in Chapter 5) or Medigap policy (described in Chapter 6), would cost well over $1,200 a month. In addition, that pre-Medicare health insurance policy would have a deductible (easily more than $1,000 a year) and copays. The out-of-pocket maximums would also be far higher under individual health insurance. Under Medicare, your premiums will very likely decline, and the quality of your coverage will very likely improve. For most people, original Medicare, Medicare Part B costs $135.50 for new enrollees. The average standalone prescription drug plan will cost an average of $33.19 per month in 2019. Additionally, a 65-year old can purchase a policy, with no network, no deductible, and no concept of annual out-of-pocket maximum (because coinsurance will be $0 after satisfying the Part B deductible), for approximately $150 a month.4 The two premiums (Medicare Part B and
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0HGLJDS GHĂ€QH \RXU HQWLUH PHGLFDO FRVW QRW LQFOXGLQJ prescriptions). In short, equivalent coverage is available under Medicare for much less than the cost of health insurance before a person becomes eligible for Medicare. The total cost difference can be thousands of dollars a year ZKHQ D SHUVRQ EHFRPHV D 0HGLFDUH EHQHĂ€FLDU\ Some may say “Currently, I only pay $300 a month.â€? That is because someone else (an employer or the younger employees in the group) is subsidizing you. It has nothing to do with Medicare. It is very convenient to attempt to identify one “culprit.â€? In this case, Medicare is not to EODPH ,Q DGGLWLRQ WKRVH EHQHĂ€WV SURJUDPV LQFOXGH FRVW sharing details (deductibles, copays, coinsurance), which are weakening over time. These are not aggressive estimates. They are reallife, market-relevant numbers. If anything, Medicare EHQHĂ€FLDULHV VKRXOG ZDQW 0HGLFDUH WR VWD\ LQ LWV H[LVWLQJ state, and to not weaken further from here. When you think about the fact that Medicare can change, and largely for the worse, then you can understand the number #1 recommendation of this book: Get the best coverage that you can reasonably afford, while you can, because your choices are probably going to worsen, due to your increasing age, declining health, and changing Medicare system. All three of the factors (age, health, changing Medicare system) are beyond your control. The only question is when, not if, these changes will affect your healthcare costs. Financial planning requires the understanding, and the acceptance, of risk. This is not a necessarily negative, because the rules and options, if properly understood, are almost entirely in the
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consumer’s favor. If given a blank slate, no carrier would RIIHU WKH VDPH W\SH RI HQUROOPHQW DQG HOLJLELOLW\ ÁH[LELOLW\ that Medicare regulations require. The perspective represented in Maximize Your Medicare is clear: the consumer has the prerogative to accept risk because consequences (which can be beyond your control) have dictated that to him/her, but that is entirely different from accepting risk that a person did not intend. This book reveals some of the most important risks you may be taking, risks that you didn’t know you were WDNLQJ <RX FDQ ÀQG UHFRPPHQGDWLRQV WKDW FDQ KHOS DYRLG unintended risks. There is the age-old cliché that says that “you hope for the best and plan for the worst.” Medical insurance under original Medicare, when combined with a Medigap policy (also known as Medicare supplemental insurance, a Medicare supplement), allows you to do this. You can largely protect against the most likely expense you will encounter as you naturally age, the most likely expense to cause you and your spouse/family worry, and the PRVW OLNHO\ VRXUFH RI ÀQDQFLDO GLVWUHVV WR \RX DQG \RXU extended family.
The End of the Individual Mandate Beginning on January 1, 2019, there is no tax penalty for not having individual health insurance for those that are below the age of 65. This may greatly affect the way that people consider Medicare. The simple reason is cost. For those who are already retired and will turn 65 in the very near future, short-term, medical coverage may be available in your state. These policies will almost FHUWDLQO\ EH QRQ FRPSOLDQW ZLWK WKH GHÀQLWLRQV RI (VVHQWLDO +HDOWK %HQHÀWV (+% ZKLFK DUH SDUW RI WKH
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$IIRUGDEOH &DUH $FW $&$ 7KH\ ZLOO QRW ÀW WKH FULWHULD VHW E\ WKH $&$ LQ ZKLFK FDVH PDQ\ RI WKH EHQHÀWV that must accompany the ACA will not be included. For example, the annual, cost-free checkup would not be available. Nevertheless, this type of coverage may be worth the risk for some, who merely want to have coverage for inpatient hospitalization. For those who are not retired, but are considering retirement, this is also important. For example, one reason that an employee may be delaying retirement is because he may have wanted to avoid the tax penalty for not insuring his spouse. If that spouse is very healthy, and the cost of individual health insurance is not affordable, then certain people can decide to self-insure, another way of saying that the household is accepting the risk. Short-term medical coverage certainly exists for at least 6 months, and in 2019, it is being proposed that this coverage can last the entire calendar year.
Medicare Must Change (YHU\ \HDU VLQFH WKH ÀUVW HGLWLRQ RI WKLV ERRN 0HGLFDUH KDV FKDQJHG )RU QHZ 0HGLFDUH EHQHÀFLDULHV WKRVH ÀUVW enrolling in Part B, the premium will increase from $134.00 to $135.50 a month. Those who earn more than $85,000 a year ($170,000 for married couples) will face higher surcharges, as anticipated by previous editions of this book. This has been made more complicated by the fact that IRMAA IRU 3DUW % KDV ÀYH WLHUV RI SUHPLXPV while Part D has six separate tiers. The bottom line here is that as the population of Medicare-eligible increases, the costs to the Medicare system are also increasing, which is being made more extreme by the fact that people live longer now than they have in the past. While the changes may seem minor, that
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does not mean that anyone should expect the situation WR UHPDLQ VWDEOH 'HPRJUDSKLF DQG Ă€VFDO FKDOOHQJHV ZLOO invariably, remain. Maximize Your Medicare has and will continue to change. The website http://www.maximizeyourmedicare. com FRQWDLQV D IUHH ZHHNO\ 1HZVOHWWHU OLQNV WR RIĂ€FLDO government-issued documents, the Maximize Your Medicare Podcast, corrections and additional examples of “This Happens.â€? All facts considered, 2019 will be a very good year for 0HGLFDUH EHQHĂ€FLDULHV 8SRQ H[DPLQDWLRQ RI WKH 0HGLFDUH Advantage plans and Part D plans announced for 2019, it is very clear that Medicare Advantage has improved substantially. Carriers (insurance companies) have used the allowance granted by the CMS (Centers for Medicare and Medicaid Services) in very creative ways, to help ORZHU WKH Ă€QDQFLDO FRVWV WR SROLF\KROGHUV \RX 1D\VD\HUV who have sharply criticized Medicare Advantage, have been forced to reverse course.5 If anything, competition among carriers is intensifying, which means that consumers can save money by examining which plan is best. While some may consider more selections to be bad, the fact of the matter is that it is evidence that competition has increased. That trend is unlikely to reverse.
This Book is Unlike Others 7KH ÀUVW VWHS WR XQGHUVWDQGLQJ 0HGLFDUH LV WR SURSHUO\ enroll in original Medicare. The second step is to establish an approach, an understanding of how to think, when considering the wide range of options available. While this book cannot predict your personal outcome, it does reveal the motivations and logic of the other stakeholders, such as insurance companies, insurance agents, and employers.
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,W ZLOO DOORZ \RX WR XQGHUVWDQG WKDW ´ÀQGLQJ VRPHRQH HOVH to blameâ€? is the result of ignorance and convenience. However, simple, everyday logic will likely point to a logical reason, we do not presume the “other guyâ€? is incompetent. What you select will depend on the complicated FRPELQDWLRQ RI \RXU PHGLFDO VLWXDWLRQ Ă€QDQFLDO UHVRXUFHV family situation, and in the end, your mental outlook. This book may convince you that your situation is too complicated to decide for yourself. This book will help you develop the reasoning so that you can judge whether or not the advice you are receive, whether or not the information you hear at the coffee shop is credible. The book contains many examples of real-life situations. They are called “This Happens.â€? Here is a quick sample:
This Happens.6 Mr. Brown is retired from a large employer and covered E\ KLV HPSOR\HU VSRQVRUHG UHWLUHH KHDOWK EHQHĂ€WV SODQ +H FRQWLQXHV WR VWD\ FRYHUHG E\ KLV UHWLUHH KHDOWK EHQHĂ€WV plan, for himself and his spouse, even though the cost of coverage is $600 a month, and has coverage that is inferior to original Medicare, in combination with either a) a Medicare Advantage plan or b) a Medigap plan and stand-alone prescription drug plan (Part D). This Happens.
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Ultimately, this book wants to help you avoid this oftrepeated conversation: A. “Why didn’t you tell me?” B. “You didn’t ask.” A. “Well, I didn’t know where to start to ask.” This book will point out factors which should be used in making a decision. While the situations presented cannot possibly be exactly like yours, they are meant with one message in mind: you are not alone, and there is always a way to choose amongst a seemingly dizzying number of options. Maximize Your Medicare sets out to help you do just that.
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Notes 1 Out-of-Pocket Spending in the Last Five Years of Life, Amy S. Kelley, Kathleen McGarry, Sean Fahle, Samuel M. Marshall and Qingling Du, et al. Journal of General Internal Medicine, Online First™, 4 September 2012 2 Centers for Medicare & Medicaid Services, 2018, Medicare and You, https://www.medicare.gov/pubs/pdf/10050-Medicareand-You.pdf 3 That does not mean that advertisements regarding Medicare options are untrue. Every piece of mail, all pages of Medicare sales presentations are explicitly approved by the CMS. You can see evience of this when you look at the bottom of every page, there will be the letters “CMS” or “Approved” with some indiscernable code. 4 Medigap premiums usually vary by your age, and the location in which you live. A more complete explanation of this will follow in Chapter 6. 5 If you look on YouTube, there are many videos about Medigap, there are very few on Medicare Advantage. In addition, other books call Medicare Advantage a scheme to enrich carriers. The authors of those books have simply not met real, everyday people. 6 There are many more examples in the free Maximize Your Medicare Newsletter. http://www.maximizeyourmedicare.com