PODCAST EPISODE 243: Medicare – Unscrambling the Alphabet Soup

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0:09

Hello, and welcome to your business, your wealth. My name is Paul Adams and I can’t wait for you guys to hear what we have in store for you today, we are going to untangle the alphabet soup of Medicare. Now for some of you listening to this, you may be a long way from collecting Medicare. For some of you listen to this, you might be right around the corner. This is an episode to be valuable to almost anybody, especially those people, you know, who are nearing retirement needed to figure this out. In fact, I spoke to a longtime former colleague, who, when I told him we’re about to record this with an expert on Medicare, he said, Oh my gosh, I can’t wait for that episode to release. I’m right at the age, I need that. And there is somebody you know, who has that concern right now. And you’ll see, as David and Cory talk about this, that they’re going to cover some of the things that you don’t normally think about. And when you’ve been in a corporate role for so many years or running your own business, you’ve probably had it all handled by group health insurance coverage, and now you’re moving into this strange new market. So with that, I’m gonna hand it off to Corey Shepherd and David Preston to give you guys the key to untangling the alphabet soup.

1:21

Thank you, Paul. That’s a wonderful introduction that it was the first to not have some kind of comment about me to decipher or or that it wasn’t an interactive introduction like we normally have. David, it’s been a while. Great to Great to see you. Great to have you on your business, your wealth. How’s your summer going? So far? Ski Patrol happening right now is they’re

1:48

still in the mountains out here. But there’s a lot of rain and cold and it’s Northwest summer still hasn’t come yet. Really?

1:54

Right? Well, and you know, that was just a little bit of a background on you. I know you’ve you’ve done some, you know, high intensity winter sports and teaching people about life and death matters on the mountains. And then you help people take care of life and death matters in other parts of their their lives. So just for folks who don’t know you as well as, as we do. give folks a sense of your experience in this world called health insurance.

2:20

So you don’t want me talking about skiing?

2:23

You can talk about skiing, too.

2:27

That’s why I got into the insurance business. Do I have the flexibility? And I like so. Regarding insurance and everything. It’s a big wild world out there. You guys deal with certain parts of it? I deal with different parts of it. Today, the Medicare discussion, I do miss that you guys didn’t banter back and forth in the beginning of the conversation.

2:50

Yeah, so how long have you had a practice in an insurance?

2:55

I think you were probably lifers.

2:59

When I started alive, at all,

3:01

want to go that far back, but yeah, probably accurate. So I got into it quite a while ago. And it started off with life and disability, and then transitioned in, in the 90s, over to medical, never wanted to do medical, Medicare and kind of fell into it. And stick with a lot of contexts that community I’m in north of Seattle, it’s been very lucrative, and then fun to help people because it’s a lot of confusion. And the more the government gets involved, the more help people need.

3:32

And you’re and I know, like I’ve referred individuals to you to help go through the state exchange, because even you know, even though you can go on a state website, by yourself, you can also get the help of someone who knows what they’re doing. And it doesn’t change the experience of the individual and their coverage, you know, as far as health insurance, but you also do groups as well, I think businesses, how many employees? What’s your, what’s your spot?

3:59

Right? So sweet spot on the small group medical is under 20 lives, we’ve gotten bigger, I’ve got a team of people that do the over 15 over 100 that we spend a lot of time on the individual Medicare and the individual exchange. And interestingly, in some people may not know this, if in our state, if you work on the exchange on an individual basis, you’re paying basically in that premium is paid for a broker. So whether you use a broker price already in

4:29

there, already. Yeah, that’s great. So why not? Why not get that get that help? Well, David, let’s give people a sense of what it’s like to get some of that help from from you. You know, Paul mentioned the alphabet soup. And I think basically everyone listening today knows that these letters exist around Medicare different parts A, B, C, and D. Can you give everyone a brief intro like high level what each of those parts means?

4:59

Yeah, so We’ll start with a because that’s the first one. And that A is Medicare A Medicare Part A covers, Hospitals and Facilities. And I think Wait for me I need to, I need a way to remember things. So A is like the shape of a building or in a frame a building. So a covers facilities like hospitals, B, Part B covers the providers or a body, you have a body helping you. And that’s Medicare Part B, Medicare Part A doesn’t cost anything. As far as premium, Part B does cost something, and we have a slide will show in a little bit. Because there’s a sliding scale based how much you’ll pay 170 or more based on your income. And I know, you guys have some people that are going to pay a lot more than 170 for their Medicare Part B. So that’s something we need to consider when we’re looking at options about staying on a group plan coming on a Medicare plan, because sometimes it’s cheaper to stay on the route plan. So we need to look,

5:56

we’re definitely going to get back to that. So just to help some folks relate to it. Like right now everyone who’s working for a company has group insurance, or bought their own health insurance on the exchange, that is A and B together, essentially, because that’s hot hospitals and their their doctor. But when you go to Medicare, that’s splitting into two pieces that they’ve got to think about separately.

6:18

And when I say A and B to me, instantly, it’s an over 65 or of Medicare will equate it to.

6:27

But for all those people who are right on the edge of changing, like their life is gonna change a little bit and how they have to think about it. So A and B, and then C and D, tell us tell me about those. And we’ll talk about how they all fit together. So I’m

6:40

gonna jump to D. D came in in the early 2000s with the HSA program, and that’s the drug program. So that’s pretty easy to remember what the DA, yeah, I don’t have a good acronym for the C one. That’s the Medicare Advantage one. So maybe that’s the one you see on TV. Ads, that’s Medicare Advantage. The older style plans or Medicare supplements or Medigap plans, those are the ones have been around for a while that have their own alphabet soup go from A through K er, and I guess it is and often people would get a Plan G or a Plan F medicare supplement, and then they didn’t have drug coverage with those. So then the drug coverage, Plan D came out in the early 2000s. And then just a few years ago, the Medicare Advantage Plans came out that are all inclusive, and that’s really a tighter partnership between the federal government and private insurance companies. But it really works different. And there’s pluses and minuses to each.

7:37

Gotcha. So, folks, so it sounds like folks would never have A, B, C, and D all at once. Right? This C kind of replaces the other three if you go in that direction. Good good

7:53

comment. In order to get the supplement plans, Medigap OR Medicare advantage plan, you have to have a and b.

8:00

gotchas, you have to have them and then that tax on top, you can’t just see,

8:04

there are some exceptions, that almost everything I say there’s gonna be bullet or Asterix and exceptions to where things were from the government, we’re here to help kind of rules. And it could be a one page guide, it’s many page guide. So we’ve got the Part D is included in Medicare Advantage, most of the Medicare Advantage plans. But if you’re getting a Medicare Supplement, the more traditional plan, you’d have to go get your own Part D plan. That’s a separate guide.

8:34

So I’m 60 Thinking about this coming, I’m going to have to enroll in Medicare, when do when do I actually have to enroll? Or maybe there’s two questions. When do I actually have to? And maybe Is there a time I actually want to if that’s earlier, like what’s the strategy for getting into this system when it’s coming down the down the road at you?

8:55

Good question. Age 60 is probably too young to start thinking about it. Like I had a person call yesterday and they’re getting flooded with mail. I said, Oh, you’re about 64 and a half. He says, Yeah, I have. So six months before you turn 65 The Mailbox just starts getting stuffed in there. There is one piece that’s worth keeping I don’t have a screenshot of it’s called Medicare and meet with Medicare new, that is a guide worth looking at. But all the rest of the stuff they send you stuff it off to the side, it is time to start looking at you’ve got a three month window before the month of your birthday. So if your birthday is this month, you had three months prior to sign up for age 65. And you have three months after the sign up for 65.

9:40

So there’s a month window to send

9:44

out. Day. Thank you. That was great. That was fast. That’s the guy they’re amazing. So that that one is worth reading because that’s generic. So we’ve got to have

9:55

that for anyone can’t see. Yeah. Perfect. So what happens if you don’t enroll? Well, inside of that six month window, we have any penalties. Any problems?

10:10

The pat answer is it depends on your situation. Because if you’re on a group, I’ve got clients that are in their late 70s, on a group medical plan, they don’t have any Part A or Part, they don’t have any Medicare, or they may have had a Medicare Part A card sent to them. So a lot of depends, and when you say depends, at this age, sometimes people are thinking of something else, but we’ll just stick to, there’s a lot of options. We’ve got the pet, there are penalties, there can be penalties for not getting on a drug plan or not getting another Medicare Part B plan. However, the exception will be if you’re on a group plan, you don’t have the penalties. They won’t be any so. And sometimes the penalties for the drug plans are so small people like I don’t care, I’ll get I’ll get a drug plan when I need one. And I’ll just pay the penalty department. Yeah, Part B penalties a little bit more. So when you qualify, you should get out of Part D plan most of the time.

11:07

So but if someone is because people are working around longer, and you know, you know, unless you’ve been listening to our podcasts and talking to us for years, but before that, we’re not so you know, a lot of our clients are not so much thinking, Okay, I’m gonna hit 65 and quote, unquote, retire, don’t even like to use that word, we talk about financial independence. So some folks may keep working at least maybe if not as much as before, working in a job that is full time enough that they have some benefits past 65, for a lot of different reasons. So where do you see folks staying on there? Do most folks who still have a group plan? Does it make more sense to just stay on the group coverage? Or can Medicare? Like? I’m sure it depends, but what are some things that folks need to look at? To think about that decision?

11:56

You train? Well? Yeah. If you’re on a group plan, and you’re not paying the premium your employer is, why would you come off of that plan. Now, they may not pay for your spouse and or kids if you have kids on the plan, because of course, we can’t be an adult now till we’re 27 or 26. So adult doesn’t start till later. But some employer groups don’t pay for the spouse. So this past spouse, depending on their age, may want to peel off or look at individual or social Medicare plans. To again, a lot of variables there. So if you’re on your own self employed, just you but you want to keep doing business, it probably is best to get on a Medicare plan at age 65.

12:38

Okay, just yet versus paying for yourself on the on the exchange. So so

12:47

once you have your exchange, if you stay on prior, sometimes you can stay on, but you can’t get tax credits if you’re on there.

12:57

Got it. Wow. So are there. Have you seen any examples where folks are on a group plan where it might make more sense to go on a Medicare plan? If there’s some big exceptions to watch out for?

13:13

That’s a great softball question, not so much an exception. But if we’ve got a small group plan with five or six employees, and you got a bunch of people in their young 40s, and one person at 65, they’re pulling the average age up on that group. So if we can remove that person from the group plan, it can drop the premiums enough to where that employer could we call it a wink and a nod offer that employee will cover some of your stuff. So if they’ve got to pay $170 for their Medicare Part B and A Medicare plan, offered, it’s more lucrative for the business owner to do that than to keep that personal that group plan.

13:52

Now one of those the business owner themselves, because we have a lot of business owners listening, let’s say they’re 65, they’ve got a business that’s running great. The employers are running it, they’ve got no reason to retire or sell it. Can they take themselves off of the plan that they’re sponsoring on the Medicare if they’re the one pulling up the average?

14:11

Yes, they can’t do that. The reality is, and that’s another great question, thought they’re all of my employers that are in that category. Now. They’re working hard. And they really they’ve I call it, they’ve got their widget hat on. They’re just doing widgets, they’re making widgets, they’re doing their business. And they don’t want to change because this involves change. And often, mouse doesn’t want to change. It can be both ways. It can be husband or wife doesn’t matter. But they don’t want to make two people often have to change. So there’s a disruption there. And these are the like, no, just keep it the same unless we’ve got that older owner with a bunch of young people and that’s a huge financial difference. And they’re healthy. So they can see I’m fine. I don’t need it. I’ll just shift to a Medicare

14:55

payment. I want it right. Me it could be expensive. have to keep going as is if they’re if they’re the one older employee pulling up that that average, like, the benefits that they’re providing every other employee could be a lot, a lot more. So there’s something else that you mentioned about Part B that I think is really important to talk about. And it’s a thing that we’ve talked to our clients about who are heading 65 as these variable rates for that, for that based on your on your income. Can you talk a little bit about?

15:26

Yeah, so hold that, that screenshot up? It’s titled, it’s one of those links that I said, Take a peek at that and slide that over Medicare Part B. It’s a medicare.gov. Slide. Scroll down there. Right, that table right there. So I don’t know if you can make it a little bit bigger. But you can, if you can see, starts out at $170. On the right hand side, based on income you’ve seen on the left. Can you see that? Okay, Cory?

15:57

Yeah. And it’s, and the part that I always love to point out to folks is that’s looking at your last two years of of income. So you’re gonna almost always pay more the first couple years, then you will long term if you’re retiring to say, lower, lower income, like you’re, you’re gonna start higher. But this is one that well, what is your experience? Like when you’re explaining this to folks? How do they feel about these different tiers,

16:30

a lot of a lot of the calls I get up, not a lot of them are in the higher tiers, they’re in the lower two teams. But I’ve got I do have one dentist, he’s 69, he started a new practice four years ago, and he’s going gangbusters, he’s up in the highest realm there. So that’s why he stayed on his group plan, because he’s like, Well, I’m going to have to pay over $600 A month or whatever that number is five, six, I can’t see it. The lower right number and the add that to his Medicare Part B part and a supplement plan, and he was up there quite a bit. So he said, I’ll just stay on the group plan. I know how that works.

17:04

You know, we were we’ve also found this interacting with other parts of the planning on someone’s balance sheet is, say clients who are 65 have a lot of their assets in IRAs, pre tax accounts, and they’re facing a pretty high required minimum distribution at age 70. So we’re starting Roth conversions to move money across at a lower tax bracket. So they’re not getting bumped too much in there. It’s 72. But then they but then we look at Medicare. And we have to do this calculation of well, if you do too much, it’ll pop up your your Medicare, but by how much? And what’s the breakeven and yes, you’re gonna pay a little bit more in Medicare, but it’s still worth it. Because the net cost and the end the net savings, so there’s all kinds of it depends. And it’s a fun, you know, the government here, we’re here to help and we add this extra complexity, it’s a thing worth looking into. Yeah, absolutely. For free,

18:03

should be way more simple.

18:06

So, so we talked about penalties a little bit, let’s say, Okay, you mentioned Medicare Advantage, as seen on TV, see for see it on TV. So are these, in my experience, almost everything I see advertised on daytime TV is like, really high quality, no loopholes, like kind of the best of the

18:35

proper commercials.

18:36

I mean, it was thick in the 90s. But you know, yeah, it’s been a little while. So, yeah, what’s what how should folks filter or think about these ads? And what do they what should they pay attention to? When they’re on TV?

18:52

I think gotta what’s not being said, because each if it’s, I won’t say any company names, but you know, the big ones, and they’re on those ads, and they got a famous person often to help them and they’re the best one there is. And they

19:05

previously famous person, it’s someone who was famous 20 or 30 years

19:13

then he’ll name something. Right. So so they are just touting their plan, and probably what they’re saying is correct. But there’s other things are not saying like that plan doesn’t do some other things. The key differences, you just see Medicare Advantage plans, and you’ll start seeing open enrollments, October 7 for Medicare. So you’re gonna see a flurry in September, they’ll start up in September, after Labor Day will be start crushing those ads make you aware and that will go all the way through even into the new year because there’s an extra open enrollment after the first year. It’s like the definition of open enrollments will boggle your mind. So you’ve got the famous people doing that talking about it. The attractive thing to the Medicare Advantage My answer is many of them have a zero premium program to be on. I put my father in law and one was a big carrier that doesn’t advertise much on TV. But it’s been a great plan for claims have been covered great doctor networks really decent. But in general, they’re newer plans, and they networks tend to be smaller than if you just go the old fashioned medicare supplement Medigap plan, it’s any doctor in the United States as long as their contract with Medicare, they got to see. So it’s real simple, there’s not even a doctor. And you’re gonna pay a premium on those anywhere from 50 to $200 a month, and they’re less out of pocket for the older staff plants, if you get some big claims, your out of pocket costs are gonna be less, the newer plants are really attractive, they throw in little things like hearing the benefits and dental benefits, and some things like that. So they’re very attractive, a lot of sizzle. When the smoke settles, you want to if you got a $4,000 cancer claim, how’s it getting paid how much you have to cough up for the thing. So that’s where it can be tough, because you might be limited on how many doctors you can see or not be able to see a doctor you want to see. So a little bit more limiting there. And

21:09

it’s a little bit more like these high deductible health insurance plans that folks can be on now. Like if you’re, you kind of got to guess at utilization, to kind of think about how you’re going to do that. How do they get away with zero? Well, the way they get away with zero. Premium is a lot of restrictions. Like it’s got to come from somewhere

21:32

it’s up, it’s so skeptical, not quite that bad, but I get. So that’s why the marketing they are so that federal government’s given them $1 A chunk of money, then the insurance companies, they say, Go do your stuff. And you gotta have some basic things covered and all that. But they’re marketing hearts. So they’re bringing in the new the new people. And then one of the big rules about Medicare is you got to call them you like for clients. If you give me a lead to somebody Medicare, they’re supposed to call me. And a new rule Come on this is to note, there’s some rules on the on the docket now that it looks like for 2023 I’m gonna have to record every conversation and keep them for 10 years. So some guys are gone. I’m done. I’m not doing it anymore. Yeah, which will, which will accelerate possibly the failure of this, which there’s some people in DC that want that, because they want the Fed to take it all over? Over 65. And under 60 500%. insurance for everybody. Not that everything can be covered well, but that’s a whole nother

22:38

a whole other conversation that we don’t, don’t have time for. So one of the background of DC. So if someone if if someone listening gets a call marketing call from someone trying to sell them a advantage plan, then that person is already breaking the law. It’s kind of like it’s a Chicago at O’Hare Airport, there’s signs that say anyone asking if you need a ride shouldn’t be giving you one, right? Like you can’t solicit in the airport for like you got to go walk up to the taxi and ask for the ride. Same thing here. So if someone’s giving you that call, you already know they’re willing to operate outside the law in certain ways. And you may want to be very,

23:19

really good point. Yeah. And that’s why those ads you see the the number of the winning 100 number being flashed and repeated, repeated and stuff like that. Also, what we do is this called scope of appointment. So we actually have them site and this has been going on for a while beside a forum that says what we’re going to talk about. So we just haven’t checked all the boxes. So we could talk about any kind of Medicare. But it’s one of the things we got to regulation we got to do. It’s a pain in the rear. And it’s Medicare it’s has happened because of so many abuses and misuses to seniors by these marketing arms and call centers Relevee tons and tons of people calling in a room you know, a boiler room so to screen for guys like us, they’re doing a much broader brush. And we’re usually just taking introductions from folks like you or our clients are aging into Medicare. We’re not out there pumping Medicare 365 days a year. They trickle in. So big difference between the market and organizations.

24:22

Well, we’re, we’re, we’re run short on on time, this has been just a fire hose for people to drink from. What What have we not hit on? What if what what have I not asked about what do you want people to know what you want your own father in law that you mentioned, what do you want him to know? Before going into Medicare that we haven’t hit yet?

24:44

I think a couple of things would be it’s that you have to step up to the plate and start to understand some of this stuff. You don’t have to be an expert at all, but then have find somebody to call in your area and your state I’ve got I’m Washington State. I’ve got some guys that work in other states. But whatever state You’re in get someone that you can contact, if you don’t have a contact in a state, I can throw my National Association, I can help people out with that. But it’s good to have a conversation with a human being that’s not at a call center, that’s actually going to be doing year round. You know, not not every day of the year kind of thing. But just these call centers are just temporary. So I’d say, be willing to step up, get educated and get on a plan. I think what, yeah, there’s so many details, I don’t want to get into details. But if you wanted to, there’s going to be change. So don’t be afraid of the change, embrace the change and lean into it. And just accept that and go with the best. I guess one thing would be, you can make changes every year. So if you get into sub right now, like I’ve got somebody agent in September 1, we’ll start with a plan. They don’t like it, they can change for January 1 of next year. So there’s some flexibility.

25:53

Yeah. So it’s not that’s important to think about. It’s not one election for the rest of your, your life post 65. You’ve done. Right, right. That’s great. Well, David, thank you for taking the time to come on and hang out with us for while Paul, do you have any last questions or thoughts to take us out?

26:17

Not at all, this was phenomenal. I’m so glad David, you were able to come and be able to bring this expertise we know people end up with a lot of questions. And again, guys, this an episode like this is a good reason to subscribe to comment below. It really makes a difference for the people that aren’t going to get a chance to see this otherwise, people you will have never known or may never know and will never meet might get a chance to trip over a key piece of information that will change their financial life going forward. And David, I think you certainly delivered on that today. And from all of us here at sound financial group. We hope that this episode has been a contribution to you being able to design and build a good life

 

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