173: Making Sense of Medicare with Danielle Roberts

[INTERVIEW]

Casey Weade: Danielle, welcome to the podcast.

Danielle Roberts: Hello, thank you for having me.

Casey Weade: Well, Danielle, it is awesome to have another Medicare expert here with us and one with a pretty cool book out there, 10 Costly Medicare Mistakes You Can’t Afford to Make, and boy, have I seen some costly mistakes that people have made with Medicare over the years. So, it’s very true and right now, it is open enrollment as we record this and we are ourselves getting inundated with Medicare questions. So, a pretty fun time of the year, but this is a pretty busy time of the year for you.

Danielle Roberts: Yes, of course. And it’s busy in the sense that people know that something’s going on. They see the name of commercials on television and their mailbox is full of solicitations but a lot of them don’t know exactly what they’re supposed to be doing this time of year. So, it’s a time that can lead to a lot of confusion and I’m sure we’ll have the opportunity to help clear some of that up for people today.

Casey Weade: Yeah. This is an overwhelming time frame. You can just get inundated with phone calls and mail and email and social media ads, digital ads, and you just don’t know who to turn to and sometimes it just shuts down. And you start to question, do I really need to look at this every year? Is this really important? Are they just trying to sell me something? My first question for you has to do with the complexity of Medicare. Is it really that complex? Is it really that complex that we shouldn’t do it ourselves? We need an advisor. What is the level of complexity with Medicare, really? And why is it so complex?

Danielle Roberts: It’s astonishingly complex for people and we get a lot of folks that come in new when they’re beginning to learn about Medicare, who feel almost despair over the mountain of material that they have to absorb. And I think also all of that telemarketing and the mail in your mailbox, it further complicates that issue because you start looking at things that are really putting the cart before the horse. You don’t need to learn about Medicare Advantage plans or Medicare supplements until you first understand how your original Medicare benefits work. I think the reason also that people find it so confusing is during your working life, your employer chooses your health insurance plan for you. You might have an option between a high deductible and a low deductible or an HMO and a PPO but you have one or two choices and then you get Medicare, which has four parts, 10 supplements, and literally thousands of drug plans or private insurance options. And so, people who’ve never had to choose their own health insurance before get thrown into this national piece of a program and are just drowning in all of the details. So, for you and I, having worked at these products for a while, not so confusing, but in the beginning, it’s a little bit of a hill to climb.

Casey Weade: Well, I think there’s also another benefit that you and I have, and that is that we’ve been self-employed. I find that self-employed individuals that have always paid for their care. They’re a little bit more comfortable with continuing to pay for it and making those decisions when the time comes. But as you said, if you’ve only ever had one or two options, it hasn’t been complex enough for you to really give it a second thought but then you get to be 65 and you get kind of overwhelmed or if you’re 60, it’s even scarier as you have all these options to evaluate as well. Do you think that the complexity is beneficial, though?

Danielle Roberts: To a certain extent, the way that Medicare designed things sort of modeled after the old Blue Cross and Blue Shield style plans with hospital insurance and outpatient insurance. The complexity is overwhelming at first. But on the back end of it, once you learn to determine which types of services go under one part or another, it becomes easier. I think mostly what complicates it once you do your initial learning and plan choices are all the various election periods. There’s multiple periods throughout the year that are called open enrollment of one form or another, and that leaves people uncertain. So, do I need to sign up for Medicare a second time? Do I need to re-sign-up for my supplement plan? Does my drug plan change? If I don’t do anything, can I just keep the one I have? Those are all the things that they’re wondering about and, of course, going online and trying to get answers for.

Casey Weade: Yeah. There’s benefits to complexity sometimes. I believe the financial planning process, it could be incredibly simple. You just throw everything into one account, put it in an index fund, and draw 4% out a year adjusted for inflation. However, there’s a lot of risks and discomfort that that creates in your life as well. If you make it a little bit more complex, if you know what you’re doing and you have a process that you’re following, then you can check those boxes to actually create a greater degree of security in your life. I think that’s what can be done with the complexities of Medicare, too, if you have the right guidance. I know your team has a process that you follow when you walk somebody through the Medicare assessment. Can you give us a high-level overview of what that process looks like and why it is important to have a process?

Danielle Roberts: Yeah. So, with Medicare, you have two classic routes that you can go for your coverage. You can keep that coverage through the federal government and that’s the system that you’ve paid into all your working years so that you can have these benefits later in life and you can get them from the federal government itself where your bills actually go to Medicare and they process those invoices from your providers and pay their portion and then send the remainder on. Or you could be someone coming in and you’re in the middle of treating for a serious chronic illness. Maybe you have emphysema or insulin-dependent diabetes. You might have Parkinson’s disease or be treated for cancer. And so, the government doesn’t know until you get there how much you’re actually going to cost them in terms of claims. And the basis of that health can play a big role in determining which route that you want to go because you’re going to have providers that you need to see if you’re undergoing some health treatment or you could be someone that doesn’t even have a primary care doctor because you go to the doctor so little. So, that’s a lot of the initial conversation is getting a feel for that Medicare beneficiary and what those medical usage needs are so that you can then later help them identify a product or a pathway that’s going to suit them best over the years.

Casey Weade: You know, your book, 10 Costly Medicare Mistakes You Can’t Afford to Make, I want to get into each one of these. However, there’s one that I would expect to see in here and maybe what’s in this book is kind of the result of not following this. So, I feel like one of the costly Medicare mistakes would be not following a process in choosing your Medicare plan in the first place. Can you give us an example of what may happen to someone if they don’t follow this process where they may end up or maybe someone you’ve met before?

Danielle Roberts: Sure. So, what happens a lot of times is people choose the thing that is the least expensive and they don’t know the rules that go with that. So, maybe you are someone who didn’t know that Medicare costs anything. You haven’t worked with a financial planner and you weren’t planning on having any money that you were going to spend in retirement on your health insurance. And now you get to Medicare age and you find out that everything isn’t free and there’s going to be some costs associated with that. And so, you look for the covers that’s the least expensive and there’s all too many opportunities to enroll in that without ever understanding that product. So, if you decide that you hear about a plan on a TV commercial or on a flyer in your mailbox, and it tells you that the coverage costs absolutely nothing and that includes dental and vision and hearing and the moon and the stars and everything else, you might enroll in that plan and never even know that you needed to check to see if your doctor is in the network. If the doctor isn’t in the network, it may be a little while before you can get out of that plan to be able to return to original Medicare and see the doctor.

You might find that your original Medicare would have covered all the doctors you need but this plan that you enrolled in, your primary care doctor can’t refer you to your endocrinologist. Now, you’re stuck and you can’t see the doctor that’s really probably the most important one. You might also choose a plan that you didn’t know you needed to check the formulary because when we enroll in insurance under 64, the formulary is just built-in and we don’t have to shop drug formularies. Well, with Medicare, different Part D drug plans have different drugs on them. So, if you just sign up for one and you never check to see that it covers your $600 diabetes Solostar Pen, your insulin, that could be devastating because now you’ve got a drug that you’re going to pay out-of-pocket for. Those are some of the mistakes that people make early on and not following a process with a broker to determine, “Hey, what is the coverage that I get from the federal government? What’s the part that I need to plan to provide for myself?” And of those choices, which one is going to be the best for me based on these things that I can tell you about myself? And so, not following the process in that regard can get you into a lot of trouble.

Casey Weade: Now, wait. Did you say Medicare is not free?

Danielle Roberts: Medicare is not free. Yeah. That leads to mistake number one, which seems surprising, right? You would think that most people would know that but I can tell you from years and years of operating a Medicare business and getting emails from people all over the country, the people that communicate with us in our private Facebook group, many people are completely flabbergasted to find out that those taxes that you paid all your working life don’t pay for Medicare in its entirety. There’s portions that you have to pay for. And that can be something that I’ve seen make people decide to work a few years longer. So, I have seen people come into our office and say, “I didn’t know this. Let me go home and think about it,” and then they’ll come back and say, “You know, I’m going to stick it out at my corporate job here for another three years because I didn’t put enough money away for this and now I’m concerned that I’m not going to have enough money for retirement.”

Casey Weade: I’m going to continue to play a little dumb here. My question here would be, what is the – maybe you don’t have the numbers at your fingertips, but do you find that on average someone’s paying more or less than they did on their employer plan? Because on many employer plans, you do have some expense there. You find quite often it’s actually the same expense as you step into retirement. Are there any averages or statistics you could share there?

Danielle Roberts: Sure. So, a lot of times when you’re working for an employer, the employer is covering a portion of the insurance and you’re covering a portion. So, you have a payroll deduction that’s coming out and people forget that. They’re used to doing it and it comes out of their paycheck. So, they almost forget that they’re paying anything for their health insurance. Then when you come to Medicare, you have your Part A, which is paid for by all the years that you paid into taxes, the FICA taxes but you have to pay for Parts B and D, and that may be more than what you feel like you’ve been spending on health insurance before this if you had a large employer that was contributing a lot of money toward your benefit-cost to them. So, sometimes we’ll find people coming out of a corporate environment where the insurance was provided and they’re only paying 10% of the cost. That person might find that Medicare costs more. But on the flip side of that, Medicare also has a lot lower deductibles and a lot less out-of-pocket than a lot of those plans.

So, it tends to even out a little bit but all the same. If you have been in that situation or if you were on an Affordable Care Act plan and you’re getting a subsidy from the federal government, that makes your insurance $50 a month, going into Medicare and paying $148.50 for Part B might seem like a big jump to you and you may not want to go on to Medicare. We run into both situations, although I would say most people find that Medicare ultimately is cheaper and better coverage because once you build in the fact that those deductibles are so much lower than what you might have had on a corporate plan, in many circumstances, the people end up really seeing the value of that coverage.

Casey Weade: Now, if someone’s listening and they’re 60, 62, maybe three, five years out from age 65 or they’re not quite ready to retire, but they would like to build a retirement plan, how would you guide them on projecting what their out-of-pocket costs will be when they get to retirement, when they get on Medicare? So, premium cost, out-of-pocket cost, how should that be built into a retirement strategy?

Danielle Roberts: Yeah. If you’re a few years out, we tell people just to figure out what the cost would be if you were joining Medicare today. So, we know that it’s going to go up a little bit each year. Health care inflates and so Medicare’s rates go up over time. But if you’re three to five years out, you could ballpark it by talking to a broker or getting some quotes to find out what would it cost you for Medicare and the supplemental coverage you need and the drug coverage you need today. Then you need to take that times your life expectancy and you have to have that for both you and your spouse. So, there was a study published a few years back that said the average 65-year-old couple is going to need around $300,000 for the cost of health care during retirement. That’s a lot of money and if you haven’t built that into your plan, you may be somebody that does need to spend a few more years socking away money, or perhaps you have a high deductible health plan at work and you can contribute money into an HSA, which will give you some medical dollars to spend during retirement. All of those things can be helpful.

But really, I often say that I wish there was a class at age 50 that people had to take so that they could find out that Medicare isn’t free, it doesn’t cover 100 percent of everything, and have a longer horizon so that they can really work with a financial planner to maximize that amount of money. You want to go into retirement with a nest egg for your medical because there is going to be medical expenses during retirement. And if you’ve got that money set aside and you’re already thinking of that as medical money, you tend to be less overwhelmed by all the details and risk of Medicare.

Casey Weade: I think one of the things you said is something many people overlook, that in this industry, in the financial industry, there’s a lot of free advice out there. Yeah, you can call somebody like you. You can call somebody like us and get financial advice. You can call and get health care advice from you. You can do that at no cost and that is a great way to start projecting those costs. You mentioned that $300,000 number. I’ve seen that number anywhere from $300,000 to $500,000 for costs for health care and for a 65-year-old couple. What are your thoughts on those numbers? That was number two on your list is expecting Medicare to cover 100% of your health care costs. What do you think of these numbers and that $300,000, $500,000 range? Is that realistic? What does that mean to you?

Danielle Roberts: Given the life expectancies that we have today, I do think they are pretty realistic because you’re going to spend several hundred dollars on the cost of Medicare itself, plus your supplemental coverage, plus deductibles and co-pays, and then Medicare doesn’t cover things that we’re used to having covered by our employer coverage. So, dental, vision, and hearing, any routine dental, vision, and hearing needs are also not covered by Medicare. And so, this is going to be an expense that you’re going to pay for out-of-pocket either in cash for those things or in a standalone insurance plan that’s going to help pay for them. Hearing aids and eyeglasses, these things are not cheap and we’re in a time in our life when we need them more than any other. So, that is also money that needs to be built into your plan. And probably the biggest thing is long-term care. So, a lot of people don’t realize that Medicare does not pay for long-term care. So, when you reach that point in your lifetime and you need help with the activities of daily living and you move into a facility, I’ve got a girlfriend that just did this with her husband’s father, it’s thousands of dollars a month to live in a place like that. And if you’re in there for a few years, that alone can be several hundred thousand dollars.

So, I think that that cost picture is pretty accurate and, in some circumstances, might even be on the low side. So, although there are some things you can do to control costs with Medicare, there are also going to be unexpected things that come at you. You may need long-term care before you had anticipated needing that. You might have a crown or a root canal a few times that it’s going to set you back a few thousand dollars and you really should plan for those possibilities.

Casey Weade: Well, you mentioned dental, vision, hearing. That was something, especially for my mom, I think vision and dental have been, you know, she’s had some issues there trying to find a good plan. As you said, they’re just not covered by Medicare, Medicare supplements. What would your guidance be? Should individuals have coverage for those areas? And if so, where do they find the best solution?

Danielle Roberts: So, if you’re someone that is living on Social Security and maybe a little bit more, something like a root canal is going to be a much bigger deal in your financial picture than it is for somebody that has some money set aside. So, the first thing you need to look at is what kind of money do you have in a pool or in a rainy day fund that you can spend on things like that? If you’re coming into Medicare and you’ve got $30,000 to $50,000 set aside in an HSA, you’re probably going to be able to private pay for your dental, vision, and hearing needs for a number of years at least. But if you don’t have any of that and you find out now that 10% of your Social Security check is eaten up by your Medicare Part B premium and that’s before you add in the cost of supplemental and drug coverage, then that potential risk of having something routine that you need to pay for and then a complication, like we said, 50% of the cost of a crown, a root canal, even if you had insurance, that could set you back quite a bit.

So, those are people who have less put away. I really feel like they do need to have some sort of standalone dental, vision, and hearing coverage. There’s products available like that in the market. Our agency has one that you can see any dentist and we’ll cover a lot of those expenses for you. You can also look at some of the Medicare Advantage plans and I’m sure we’ll get into some of this. But some of those plans can include a little bit of routine dental, vision, and hearing. It’s not very robust coverage but it’s going to be something. And maybe you’re going into retirement and you’re pretty healthy in those areas. Maybe you’re okay with that little bit of coverage and you don’t need to purchase something separately. A lot of it’s going to depend, again, on your usage and what kind of money you have set aside for those expenses, if any at all.

Casey Weade: Now, when we talk about this, let’s use Fidelity’s $300,000 number. So, Fidelity says a couple age 65, they’ll have about $300,000 on average and out-of-pocket costs for health care during retirement, not including long-term care. Now, we’re talking about an average here, right? So, there are some individuals that go in and they’re a 65-year-old couple and they’re in just extremely poor health. Then there’s a 65-year-old couple that’s in extremely good health. Would that couple that’s in great health predict a lower number than the one that’s in really poor health? Or should that not be a consideration?

Danielle Roberts: It’s possible but again, we never know when something’s going to come out of left field. And I’ve seen that many times in my career where if someone comes into Medicare very healthy and a few years later, there’s the diagnosis that’s financially going to impact their life for the rest of their life. They have cancer and now they need to travel to MD Anderson and they’ve got to get lodging there and they want to see the best specialists in the world, and that costs money to do all of those things. And so, even if you’re really healthy, we never know what tomorrow’s going to bring. Maybe you won’t spend as much as someone coming in, in very poor health, but that person in poor health may not have the life expectancy that you do. And so, you have to plan for the long-term. And there are numbers that you can really do good estimates with Medicare because these plans have very predictable spending. When you buy a Medigap plan or Medicare Advantage plan, there’s limits on these things. And so, you can build a picture of what might happen in a worst-case scenario and then work backwards from that number to figure out what’s a good target for you.

Casey Weade: Well, your number three here is missing your initial enrollment period as one of the most costly Medicare mistakes you can’t afford to make. I have two questions. I have one that came from our Weekend Reading subscriber. We have one from Neil Johnson here that for those of you that have signed up for Weekend Reading, at RetireWithPurpose.com, you get invited to ask our guests your questions. Then we have another one that came from our Facebook Live crew. So, if you like our Facebook page at Howard Bailey, you get the same opportunity. I’m not sure which one to ask, but they’re all around, I believe this same number three, missing your initial enrollment period. At least I think we can get there. Karen Parsons from our Facebook audience said, “I started Medicare and a supplement in September when I turned 65. Will I need to make decisions again now and have the new premiums?”

Danielle Roberts: Very common question. So, with a Medicare supplement, that is not going to change for you at this point. The annual election period in the fall has nothing to do with your Medicare supplement, also called a Medigap plan so you don’t need to do anything with that coverage. That coverage is guaranteed renewable. You don’t have to re-sign up for it. On your policy anniversary each year, you’re probably going to have a rate increase. That’s a good time to reach out to your broker to shop it. Maybe you can switch to another carrier that has a less expensive premium. So, you don’t have to do anything there but what you will need to do in the fall is shop your Part D drug plan, because that drug plan that you have now, you may love it and it may cover everything you need right now, but it’s changing for next year. These plans can change their premiums, co-pays, deductibles, drug tiers, pharmacy networks, and drug formulary from year-to-year, and they do. So, in September, you’ll get a notice from your carrier. It’s called an annual notice of change and it’s going to line out what’s changing from year 2020 to 2021 one on your plan.

First you want to look at, is the premium increasing? Then you want to look and see, is the deductible increasing? Are all of your drugs still on the formulary? What if you took a $400 medication and you didn’t review this? Then you wouldn’t know that now you’re going to have to pay $400 a month for this medicine next year because your plan no longer covers it and you miss your annual election period, which is your opportunity to change. So, even if you like your coverage, you definitely need to review your drug plan in the fall and just make sure that nothing is changing that would be earth-shattering to you. And also, maybe you miss an opportunity for a plan that would give you just as good of coverage for a cheaper premium or lesser co-pays on some of your meds. So, we often see when we run these for folks that they could save several hundred dollars a year by switching to another carrier but if they don’t ever open that packet or on their own analysis during the annual election period, they may miss that opportunity for savings. So, while that plan will auto-renew if you do nothing, just know that it might not auto-renew in the same format that you’re used to right now.

Casey Weade: So, how often should we be reviewing each of these different types of coverage? We’ve got Medicare Advantage, we have Medicare supplements, we have Part D. It sounds like Part D is a priority. What about supplements and advantage?

Danielle Roberts: So, the annual election period in the fall will be for reviewing your Part D plan or your Medicare Advantage plan, and that’s because most Medicare Advantage plans include a Part D drug plan. So, there’s things changing on that plan but advantage plans can also change their core benefits from year-to-year. So, you could see that a premium or a copay changes, you could find a different deductible. They may charge higher for the hospital stay next year. Your doctor may drop off the network. Those things can all change. So, that’s why we have this period from October 15 to December 7 every year to make a change because when you get your packet in September telling you what’s changing, that could come from either your part D or Medicare Advantage carrier, and that will let you know if you need to make a change during the annual election period. If you do that, the new coverage will kick in on January 1 and replace the old coverage that you have. So, those two plans, your time for reviewing them is always going to be in the fall.

Your Medicare supplement with most insurance companies and most states, that is going to renew automatically, but you will have some sort of rate increase that happens throughout the year. With most carriers, it happens on the policy anniversary. I can think of one or two carriers where there might be more than one rate increase per year and it might be at any time. It may not be on the anniversary. So, let’s say that you signed up like Karen, I think you mentioned, that has September 1 effective date. She’s not going to have to worry about that coverage until next September. And she’ll get a letter in the mail from her Medicare supplement saying, “Hey, our premium is going up 3% next year or 5%. If that premium increase is minimal, probably you’re not going to hassle with changing it kind of like when you get your auto quote every year. I look at mine and I see how much is changing. Do I need to call my broker? No, I’m okay with paying this for another year. But maybe after two years of that, I might say, “Well, I had 3% rate increase last year and a 7% rate increase this year. Now, let’s go ahead and shop this.”

And so, you’ll do that. The best time to do it is just when you get that carrier letter telling you the rate increase, that’s a good time to call your broker and see is anyone else offering that same Medigap plan for less and can you pass the underwriting necessary to switch to that plan?

Casey Weade: So, a couple of important things that you said there. So, this really relates to number 10 on your list, failing to review your coverage annually. Are all supplement plans of the same letter, the same?

Danielle Roberts: So, Medicare supplements have 10 different letters. They run A, B, C, D, E, F, G, K, L, M, N. There’s some missing in there because they’ve been retired. If you purchase a plan of the same letter from one carrier to the next, those basic benefits are going to be the same. So, in 2020, Plan G is a very popular plan. It covers all of the gaps in Medicare except for the Part B deductible. If you got a plan G quote from Blue Cross Blue Shield and Aetna and Cigna, you would know that all three of those are going to have exactly the same benefits that you can compare based on price and you can compare based on the financial stability of the carrier. You can look at those carrier ratings. At our agency, we also like to look at the rate increase histories. So, if they’ve been in business for five years in that county or that state, what kind of rate increase histories have there been? And we give that information to our clients so they can make a good decision, but they’ll be 30 different insurance companies offering these plans where you live.

The good thing is if you know you can compare apples-to-apples like a Plan G to a Plan G, then you are usually going to be looking at the top two or three with the lowest price and determining from there which one feels good to you.

Casey Weade: And those prices can vary quite widely. Can you give us an idea of kind of the price variation that you see with a plan with similar benefits? And I feel like this kind of leads into the importance of having an independent Medicare rep.

Danielle Roberts: So, the pricing can vary by a number of factors. The good thing is the insurance company sets the rate and your agent or broker cannot change that rate. So, if you find a plan that you want with a certain insurance company, you’re going to get the same quote for that plan from the insurance company as you would for that plan through a broker. The rate is going to be the same, but where it can differ is based on your age, your gender, your zip code, your eligibility for any household discounts, your tobacco usage. These are things that carriers will base their rates on in a lot of states and you may find that your quote as a 65-year-old male costs more than your wife’s quote as a 65-year-old female, and these are all things that are built into the actuarial numbers. You’ll also find that in the Midwest and here in Texas where we live, you can get into a Medicare supplement at age 65 for a pretty good price, maybe a female turning 65, nonsmoker around $100 a month. That buys you coverage where you have a $198 deductible and then everything else is covered at 100% on all A and B services.

I would buy that coverage if I had it available to me. It’s great. But you could buy that same plan in Florida or New York and you will find that it costs a lot more than that because the cost of healthcare in those areas are different and you may also have open enrollment rules that are different. All these things affect the price. So, when you’re working with a broker, we have software that is pretty high tech where I can punch in your details, “Do you smoke? How old are you? What’s your gender? I can see if you and your wife are applying at the same time. Maybe you can qualify for a discount,” and then I can run all the carriers in your area and you will find a wide range of premiums. There’ll be a few that are really competitive at the top and they’ll be in a carrier offering the exact same plan for twice that. And it might be because that other carrier that’s expensive is no longer bringing in a whole lot of new business and those rates have increased over time. So, you’re always going to be looking at the few that are going to be the least expensive. And then your broker is going to know some of the details and be able to give you sort of the pros and cons of each of those carriers within that.

Casey Weade: In your book, you mentioned the benefits of working with an independent Medicare agency. So, are their captive agents? What does a non-independent versus an independent agency look like? What are the pros and cons?

Danielle Roberts: Yeah. So, let’s just say you like XYZ Insurance Company and you can call them and have an appointment with a broker that works for them and they’re going to present you the products that come from XYZ Insurance Company. They’re not going to say, “Hey, ABC Insurance Company next door offers the same plan for $5 less a month.” That’s not what they do. So, if you have a captive agent, they can only sell one company’s plans. Then you’re going to need to have meetings with several of those types of agents, which takes more time and effort. If you work with a broker that represents multiple plans like we do, then we can present all of those options to you upfront and you’re going to find that that allows for a little bit less bias. We’re not going to be trying to sell you just this one company because that company pays our paycheck. Instead, we can say, “Here’s a smorgasbord of carriers. Tell me X, Y, and Z about yourself. All right. Based on that information, let’s look at these plans. They look like they might be a good fit,” and that conversation flows from there. We’re able to ask questions back and forth to determine which of those plans might be good for you.

Casey Weade: It’s much like working with an independent financial advisor who’s doing the work with an independent that has all the products and tools at their disposal and doesn’t just represent one insurance company or one securities company or something along those lines. It makes a lot of sense. I wonder and maybe you can answer this question, but if we look over time, you’ve been doing this for 15 years, well, at least you’ve been running this company for the last 15 years and I’m wondering, have you been seeing any trends? Are there trends? Is Medicare Advantage going out of style? More people are going to traditional Medicare when it comes to Medicare supplements? Are there any trends there? Are there some carriers that have better pricing this year consistently? Can you share any historical trends and trends that you’re seeing today?

Danielle Roberts: Yeah. There are quite a few trends and I can share with you some of the ones that will be the most important for you to know. So, in terms of the two routes that we talked about, the trend over the last few years is that the number of people that enroll into the Medicare Advantage route is growing. So, it’s been statistically every year more and more Americans are choosing to enroll in that coverage as opposed to the original Medicare and that’s because when you have original Medicare and you add on a Medicare supplement, that coverage has a higher premium than most Medicare Advantage plans but that coverage is usually going to be more comprehensive and predictable with a lot less spending on the back end. Not everybody can afford $100 a month for a supplement, or if you’re in Florida, $200 and something a month for a supplement. So, Medicare Advantage plans, they are often a lot less expensive and that’s because they are going to provide your coverage through a network.

So, they contract with a network of doctors and hospitals who lower the rates that they deliver the service to you from. In regards of that contract, that means that the carrier is spending less money to deliver the health care to you. It’s also an insurance company which is in business to make money so they can do things like prior authorizations to make sure that the care that a doctor is recommending is really medically necessary, et cetera. So, those Medicare Advantage plans, they get paid by Medicare to take on your personal health risk. And so, let’s say they get paid $1,000 a month or more, which is pretty accurate. If they can deliver your care for $800 a month, then they’re making a profit. So, they’re going to offer those plans as cheaply as possible to get you to enroll so that they can get paid by Medicare. And so, we will see these plans out here with Medicare Advantage companies. Often in urban areas, you’ll find quite a few that have what we call a zero premium.

So, when you enroll in a zero-premium Medicare Advantage, you’re paying nothing at all for the plan. You still pay for Part B, but you have nothing coming out-of-pocket for the plan itself, and plans that are free are always going to be trending. So, as everything in life gets more expensive, including health care, you’ll find more and more seniors every year that are taking a look at Medicare Advantage and opting into that coverage because they like the fact of the lower premiums.

Casey Weade: Well, there’s always a tradeoff, right? And one of those tradeoffs that you mentioned was just the networks in general. What if you are going to relocate in retirement? Maybe you think you’re going to move at some point in retirement. Maybe it’s within the first year. Maybe the time frame matters that you say, yes, I’m definitely moving or, hey, I may move at some point in retirement. Could you address that in general?

Danielle Roberts: Now, that’s a really common thing, right? A lot of us have plans to move and maybe we’re going to go near family or I know someday I’d like to live near the mountains and Texas here is pretty flat. So, you have this goal for someday and that does need to figure into your consideration. So, for example, if I was going to be moving from Texas to Florida, I would need to be planning for the fact that my coverage down there, if I want Medigap, is going to be a lot more expensive. A Medicare Advantage plan is going to be less expensive. If you have a Medigap plan, you can use any of the doctors nationwide that accept Medicare. There’s over a million providers. So, if you travel a lot, that’s going to be great coverage because you can use it in California and Maine and everywhere in between. That coverage is going to be good anywhere. And a Medigap plan that you add on to that is the same. You can use it anywhere in the nation. With an advantage plan, they’re going to be based on the county in which you live and it may be a network that expands just that one county or maybe a couple of counties, or it could be even as big as statewide, but it’s not national in most cases.

So, if you have an advantage plan and you move, you’re going to lose access to that plan. You’ll be given a special election period to switch to a different Medicare Advantage plan in the new area but the benefits might be better or worse. And so, if you have some idea about that going into Medicare, you can make some decisions relative to that. Maybe you start with a Medigap plan because you know you plan to move in a year or two and you just want to get through without anything in your coverage being affected. And then once you settle in the new area, you could look around at the advantage plans and see if you like them before you give up that Medigap coverage. Or perhaps when you call your broker that you’re moving in two months, well, the broker could look at quotes in both states and help you find a carrier that’s going to be easy to take with you with Medigap and be competitively priced in both areas. So, those are all things that you can plan for.

Casey Weade: Well, I think this is a relevant transition here to a question we had from another Weekend Reading subscriber. Kelly Preston asked, “Is it true if you switch from original Medicare to Medicare Advantage and you want to switch back at some point that you run the risk of being uninsurable when trying to get a new gap policy?”

Danielle Roberts: Yes, that’s correct. So, it’s very easy to go from Medigap to Medicare Advantage because Advantage plans have no health questions as of 2021 and you can drop your Medigap plan to enroll in an Advantage plan during an annual election period and you’re good to go with that coverage. However, it’s harder to go from a Medicare Advantage plan back to a Medigap plan. You can always go back to original Medicare. That’s not a problem. But the Medigap company in most states is now going to be able to ask health questions and they can turn you down for that coverage. So, let’s say you join Medicare in June. You’ve got a six-month window from your Part B effective date to pick any Medigap plan you want with no health questions asked. Once that expires, that window is gone and for most people, it’s gone forever. You won’t have another opportunity. So, now if you want to switch from one Medigap plan to another, there may be underwriting, so when you rate shop each year, that could happen. You may find you develop a new health condition and you’re stuck on the Medigap plan you have because you’re not healthy enough to switch.

Or you may find that if you do a Medicare Advantage plan and you’re on that plan for a few years and then you develop a health condition that starts to cost some money, Medicare Advantage plans are pay-as-you-go for health care. So, you may be spending a lot of specialist copays. You may have some hospital spending. And so, the premiums are cheaper but that backend spending is more. You might say, “I want to go back to this Medigap plan that I used to have. I should have stuck with that.” And now maybe those health conditions that are causing you to spend so much money on your Medicare Advantage plan will prevent you from getting back into the Medigap plan that you want. So, it’s always important if you go into a Medicare Advantage plan just know that that’s a possibility. There’s lots of people that switch for Medicare Advantage back to original Medicare every year and pass the underwriting just fine to get a Medigap plan. But if you develop a certain health condition that’s chronic or something like that, you may not be able to get the Medigap plan depending on where you live. So, those are all things to think about before you make that enrollment choice.

Casey Weade: Yeah. Wow. We’re getting a lot of questions on enrollment periods. Obviously, where we’re in one so that’s probably why. I want to wrap up the enrollment period questions with one more from Neil Johnson. “Backtracking a little bit here, I am currently on Obamacare and will turn 65 in September 2021. Do I have to turn on my Medicare on the month I turn 65 or should I complete 2021 on Obamacare then turn on Medicare in January 2022?”

Danielle Roberts: Okay. So, you have a choice. With your Medicare, you have a seven-month window that starts three months before your 65th birthday, goes through that birthday month, and then goes for three months after. You could wait all the way to the end of that seven-month period to enroll in Medicare and that will be fine. You don’t have any late penalties with Medicare as long as you enroll in that window. So, in your scenario, let’s say, on your ACA plan, you had met your deductible for the year and now all of your health care was costing you nothing. You might want to stay on that coverage through the end of December and then enroll in Medicare because that’s within your window. However, you wouldn’t want to stay on the ACA plan any longer than that because the Affordable Care Act plans were never meant to replace Medicare. So, when you turn 65, you do need to move to Medicare within that seven-month window because otherwise, if you didn’t know that and you kept your Affordable Care Act plan, down the road when you decide to go to Medicare, now you’re going to owe a late penalty. You have to wait for a certain enrollment period. There could be a delay before your Medicare coverage begins.

And if you’re getting a subsidy from that ACA plan and they find out that you didn’t enroll in Medicare when you could have, which likely they will, they can come back and collect all the subsidy dollars that they gave you since you turned 65 because you should have enrolled in Medicare. Those subsidy dollars weren’t yours to claim anymore once you turn 65.

Casey Weade: Can you elaborate on these penalties?

Danielle Roberts: Yes. So, original Medicare Part A and B, you have that seven-month window to sign up. Most people pay nothing for Part A because you paid FICA taxes while you’re working and so it’s very rare that you would run into a late penalty for Part A because Part A is a zero premium once you turn 65 and enroll if you’ve got those taxes. But Part B has a premium. It’s 148.50 in 2021 and it could be higher than that based on your income. And if you don’t enroll in Part B when you’re first eligible and you don’t have any other creditable coverage for that like large group employer health insurance because you’re working past 65, then when you do enroll in Medicare later, there’s a 10% late penalty for every 12-month period that you could have been enrolled in Part B but that you weren’t. So, recently, we had a caller. This has probably been six or eight months ago now. He was 72 and he’d been very healthy and he never enrolled in Medicare.

And now he started to have some health conditions so he went down to Social Security to sign up for Part B and he had a 70% late penalty. So, that’s 70% on top of that Part B premium that he will pay every month for the rest of his life because he didn’t know he needed to sign up for Part B when he first was eligible. That penalty can really grow over time because the premiums for Medicare go up a little bit each year. So, you’re paying that 10% on a higher premium from year-to-year. You don’t want to miss your Medicare enrollment window.

Casey Weade: Yeah. The magic of compound interest can work against you when it comes to Medicare.

Danielle Roberts: Yeah.

Casey Weade: So, let’s transition into Part D a little bit more. And I think we can do this via a question at least from a good starting point. We have a question from Doug Fields. “I’m on Medicare. I have a supplement. I didn’t elect to get a drug plan supplement because I could get my regular medicine prescriptions using the Kroger plan cheaper than I could with a supplemental plan. The plan’s cost is $36 a year. This year, I am wondering with COVID if I should reconsider and get a drug plan.”

Danielle Roberts: Yes. So, in the Medicare Mistakes book, Chapter 4, the mistake is missing or skipping Part D coverage. I actually just did a YouTube video on this because this is a really common question because we have these discount programs like Kroger, there’s SingleCare, there’s NeedyMeds, there’s GoodRx. That’s probably the most popular one that we hear about. That plan is not insurance. And so, they do work well for generic medications and inexpensive medications. But if you have a health condition developed and you need a brand name drug, those discount cards have a lot less impact on those expensive medications. So, Part D is true insurance meaning that it’s going to cover some of those generic medications but it’s also going to insure some pretty big boy medications on their formulary. There will be drugs in Tier 4 and 5. There’ll be drugs in there that treat things like cancer and depression and diabetes and COPD and heart problems and not all of these medications are generic.

So, if you run into a scenario where you develop a new health condition and you need a medicine like that, you could find yourself unable to pay for it. Now, not only can you not get into a drug plan until the next annual election period, but when you do, there’s a late penalty for Part D as well that’s cumulative and grows. The longer you wait to enroll in Part D, the more the penalty is going to be. And just like with Part B, you pay it forever. So, an example I’ll give you is we had a client that came in with her son. She was really healthy. She bought a Medicare supplement. I couldn’t convince her to buy a Part D drug plan and if I recall correctly, it was around $15 a month at that time, the plan that I had suggested. She said, “I don’t take any medications,” was very proud of that, as well she should be, and she didn’t want to spend that money. So, every year when we renewed her Medicare supplement, I would remind her about that Part D drug plan and she didn’t want to do it.

So, then one year she called in September and she had been diagnosed with cancer and the doctor had prescribed an oral chemotherapy medicine that was $5,600 per month. And so, that was a medication that she absolutely had to start taking and she said, “I understand now why you’ve been telling me all these years I should have signed up for that drug plan. I’m going to have to pay this out-of-pocket, aren’t I?” Yes. So, she spent $20,000 plus over a period of four months for that medicine until I could get her into a drug plan to start in January. What if she had been sick in February and I couldn’t get her into the drug plan until the next January? She, fortunately, had enough money to pay the $20,000 but who wants to do that? It’s better just to buy the cheapest drug plan in your state and in 2021, there are plans I think around as low as $7 in most states. Just enroll in the least expensive one that you can find if you’re not taking meds or if the ones you take you want to get them through Kroger or GoodRx. That’s fine because I can guarantee you there is going to be some brand name drugs on that formulary that your Part D plan will cover much more effectively than a discount plan ever will.

Casey Weade: Can you tell us about the Part D donut hole and with the past to that and then what do you see as the future?

Danielle Roberts: Yeah. So, when Congress created Part D and rolled it out in 2006, they had to have a way to get you on board with trying to manage and control your drug costs because this affects the cost of Medicare overall and therefore the taxpayers. So, if they had just had no donut hole, everybody would get the brand name drug prescribed by their doctor, the doctor has a pharmaceutical rep encouraging him to prescribe the brand name, and this would cost you and Medicare a lot of money. So, they needed you to be able to think about saying, “Hey, is there a generic for this drug?” So, by building a donut hole in the middle of the drug plan, this is the way that Congress keeps you involved in managing the cost of your prescriptions because if you say to your doctor, well, I can’t afford that medicine, is there a generic? He’s going to be more likely to prescribe a generic.

So, the donut hole happens when in an average year, if the total spending on your drugs between what you pay and the insurance company pays hits a certain limit, which I believe is 4130 for next year, 2021, 4,130, then you fall into the donut hole. Back in 2006 when you fall into the donut hole and then you paid 100% of the cost of your drugs. The ACA legislation changed that. Now, today, when you go into the donut hole, you pay 25% of the cost of your drugs. So, maybe before the donut hole, you have a drug that you’ve been paying a $20 copay on but the retail cost of the drug is $200. When you get to the coverage gap, you’re going to pay 25% of that 200 so that copay that you pay is going to jump. And so, this encourages people to try to keep the total spending of their drugs under that limit so they don’t fall into the donut hole, but the good news is that donut hole isn’t nearly as bad as it used to be. You’re not spending 100% of the cost of the drug. The insurance company is still footing 75% of that bill between themselves and a manufacturer discount. But still, if you had a drug that was a copay and then it jumped up to 25%, you might see an increase in what you’re spending on that drug for the rest of that year.

Casey Weade: So, diving right into number nine, Asking Your Doctor’s Office The Wrong Questions, is this where you’re going with that? What are good questions that we should be asking our doctor? And what are the bad questions that we seem to ask?

Danielle Roberts: Sure. So, of course, when you’re working with your doctor’s office, any time that he can help you with controlling your medication costs, he or she, that’s good. So, don’t be afraid to take your formulary with you to the doctor’s office. And when he’s prescribing something, you can look it up right there and say, “Okay. This is a tier 2. It’s going to cost me $10,” or, “It’s a tier 4. It’s going to cost me $70.” And all drug plans have at least two meds in every therapeutic class. So, there’s going to be a couple of medications on that formulary to treat this health condition that you have and the doctor can work with you and try to keep those costs low. That’s always a good strategy. The other questions you need to ask your doctor are upfront when you’re first enrolling in Medicare. Because if you just go in and say, “Hey, I’m getting Medicare. Do you take Blue Cross?” the doctor might say yes or his office staff says yes and maybe that means they take Blue Cross Medigap plans because they take original Medicare. And remember, with the original Medicare, you can enroll in any Medigap plan and will be accepted nationwide by your providers no matter which carrier you choose.

He might not mean the Blue Cross Blue Shield HMO Medicare Advantage plan. So, if you asked the wrong question, you might join a plan thinking your doctor is in that network but you didn’t ask the question the right way. So, in the book, I go through the proper questions to ask, and that is, “Do you accept original Medicare?” He says yes. He or she says yes, and you can use any Medigap plan. The next question is, “Do you participate in any Medicare Advantage plans?” And then they will say, “Well, yeah, we take three or four different companies,” they’ll tell you. Well, each of those companies might have an HMO and a PPO, and those networks are different. So, you really got to drill down and say, “Okay. So, you take Blue Cross Medicare Advantage. Are you in the network for the HMO? What about the PPO?” That’s how specific your questions have to get. And then even then, don’t take your doctor’s office word for it.

Before you enroll in that advantage plan, go to that carrier’s directory online, search for the names of your providers, not just your doctors, but the hospitals that you want to use. Make sure they’re all in the network. You want to do both of those things. Asking the doctor helps you narrow down whether original Medicare or a Medicare Advantage plan are options for you. He might say, “I don’t take any Advantage plans,” and now you know if I want to keep this doctor, I’m going to be going the Medicare supplement route. That’s what we’re doing is narrowing down our choices and determining which way we’re going to go. But on the back end of that, there’s lots of things that could follow up if you enrolled in the wrong Advantage plan. So, if they do take Advantage plans, you want to know specifically which ones and then verify that information on the company’s directory so that you don’t find yourself locked into an Advantage plan in January when the doctor doesn’t participate.

Casey Weade: Yeah. I can’t tell you how many times I’ve seen that. That’s so important to contact. You know, when it comes to dental coverage, you get a dental policy to supplement your Medicare and then, yet your dentist doesn’t accept that care. And now you have to run around trying to find somebody that’ll accept, that you have to go to a different physician. Well, hey, things are coming to a close for us here. I’ve got a couple more questions, though. And one, it might sound political in nature, but it’s not, okay? So, I want to ask a question about your thoughts on Medicare for all. The reason I want to ask you is because I think when we listen to the talking heads or we listen to our neighbor or friend or advisor, whoever it is, you’re quite often they’re not speaking from a place of experience and education. They don’t understand Medicare well enough or the issue well enough to really be able to take a hard line and say, “Hey, this is going to work. This isn’t going to work.” Is Medicare for all something that could work? What are your thoughts on it?

Danielle Roberts: So, the thing we see people get most wrong about Medicare for all is that Medicare for all is not at all like Medicare today. So, the Medicare program that we have right now is a much-beloved national program. It solved massive problems that we had with older people not having any coverage after they retired back in the 60s and before that. So, having Medicare the way it is today, you pay for some of it while you’re working and then there’s premiums and copays and deductibles as you go along and you use those benefits. And because you’re paying some money into that system, that also funds all the health care provider’s lifestyles. We want in America to have really good health care. Right now, it is a very capitalist system the way that it is. Medicare for all is not an expansion of the way Medicare is today.

Medicare for all is just another name for single-payer national health care, which means the government is funding the benefits and it sounds great on the surface. You don’t pay anything for it. In Bernie’s plan at least, we don’t pay anything. There’s no co-pays. There’s no nothing. Well, as a nation right now, we can’t even provide Medicare for free for 60 million people. The concern that I have is how do you go to something like Medicare for all for 300 million people and then also say you pay nothing for any of it, no deductibles, no co-pays, no whatever. What happens then is that doctors earn less and it makes me concerned that the innovation would be less. And so, those are some of the valid concerns but the big thing you need to know is that if we just had Medicare the way it was today and we made that available for everyone, I actually think that program would work really well. We would have a program that people pay something into but the government has some. I think a lot of people would be willing to pay a little bit higher taxes for a program like that.

But the concern is with Medicare for all being a single-payer system, do we get into a situation like in Canada where sometimes you have to wait to get a test that you need because it’s not deemed to be important enough? My husband is Canadian. My mother-in-law had a tumor on her spine. It was bothering her for a number of years and they wouldn’t send her for an MRI. She finally came to the States and paid cash for an MRI. When they found the tumor, then she was rushed into surgery in Calgary and she had her tests and, fortunately, it was benign. But just imagine, had that tumor been malignant, over those few years that she’d waited, she would have been in a situation to be in a lot worse position with aggressive cancer that was in a later stage. I think that’s what you hear people being concerned about is if you don’t pay anything for that health care at all, are we going to end up with health care like that?

Casey Weade: Well, there are also concerns about the funding of Medicare, Social Security for that, right? There’s a lot of concerns of will Medicare, Social Security be able to survive? How do you address the concern of someone saying, “Well, is Medicare still going to be here in 10 years or 20 years?”

Danielle Roberts: I do think it will be and it is a valid concern. Especially after COVID and the stimulus and all the people that were off work that weren’t paying those FICA taxes into Medicare during this year, I think we’ll see that when they reevaluate when everything is going to go insolvent, it’s going to be sooner than we had previously thought. And so, for Medicare Part A, that’s just in a couple of years, I think 2026 is when it would be unable to pay 100% of the benefits anymore. However, I don’t think that will ever happen because it’s political suicide for anyone in Congress to let Medicare or Social Security fail. And we usually find that at the last minute, Congress find some way to punt the ball a little further down the road and make sure that at least for a few more years that it’s kept solvent. You know, it may mean that someday we do have to pay a little more for taxes. I think taxes will go up as we have more people aging into these programs and the programs spend more of our capital as a nation.

But it’s better to have a program that’s working for many, many people and pay something for it than to maybe have a program that you don’t pay anything for and we’re not sure how we’re going to afford it as a nation or what kind of care is going to be delivered. That’s my personal opinion. I have many clients on one side or the other of this whole argument, and I love having it. But I don’t think we’ll see Medicare go away the way that it is today. In terms of at least what we have now, I don’t think that we’ll see that go away unless we were to replace it with single-payer health care.

Casey Weade: Yeah. I think sometimes we forget or we just don’t recognize that we’ve seen insolvency issues in the system before and they have been solved. But as you said, it’s usually at the 11th hour. So, hey, you talk about Medicare being complex, well, you’ve definitely proven the point here but you’ve offered us some great information and it’s been really helpful for all I know. I can tell our Facebook audience is thanking you for everything that you’ve provided here. I want to follow up just one final philosophical question about retirement for you. What does retire with purpose mean to you?

Danielle Roberts: You know, I’ve seen so many people retire over the years and I noticed a trend that people who have a plan for retirement are the people that tend to be more active and healthy during retirement. So, I don’t think we should look at retirement as just kind of the end of our days where you ride off into the sunset. Have a plan for your retirement. Some of the most interesting stories that we have from some of our clients are the ones that start an encore career or build a business after they retire. We’ve got one client who’s a full-time Santa Claus and he travels all over the nation for Santa Claus events. And what a great, exciting thing that is. What a purpose to have to go around the nation and bring joy to people everywhere that you go. So, what is the purpose of your retirement? What’s your plan for that? Nobody wants to retire and just sit in front of the TV watching Price is Right reruns, right? We want to have something where we can add value to the world. So, look around you and ask yourself, where can you add value, not just for yourself and your family, for the people around you?

Casey Weade: Yeah. The Price is Right reruns, that was a big chunk of my childhood spending over at…

Danielle Roberts: Me too. Bob Barker.

Casey Weade: …my grandfather Howard’s house, Howard and Christine. We’d sit in the living room and it was The Price is Right, Jeopardy, and then we had watched The Simpsons. I recall they were in that order but I just remember that being a huge part of my childhood. I loved it. However, it didn’t lead to the healthiest lifestyle for old grandpa there.

Danielle Roberts: I’ll bet not.

Casey Weade: That’s great. You know, you have a book and I want to offer it up to our audience. We partnered up to offer up your book, the 10 Costly Medicare Mistakes You Can’t Afford to Make. We’ve got a box of these books in our office. We’re going to send them out until they’re all gone. So, if you’d like to claim your complimentary copy of the book, we’ve hit on many of the points here, if you want to dove deeper, all you have to do is head on over to iTunes or grab your iPhone, wherever you’re listening. Go to RetireWithPurpose.com. There’s a Leave a Review button right there on the page. Leave us an honest review. That’s how we get recognized. Leave us an honest review and then send us an email [email protected] with your iTunes username. We’ll match that up and we will send you out a copy as long as they are here in the office before we run out. Danielle, thank you so much for joining us. It’s been a blast.

Danielle Roberts: My pleasure. Thanks for having me.

[END]