One of the first training films, for business, I saw was called, “The Care and Feeding of Monkeys.” I loved that movie. I wish I could find a copy of it. Problems in the office were represented by chimpanzees. As workers complained to their co-workers, the chimpanzees jumped off their back onto the other worker.
While people gave their problems to someone else, they did not give them “monkey food.” By the time the problem got to someone who was able to solve the critical problem, he had to try to keep all the other monkeys alive.
Some people, like to cause problems, just because they can. I was taught differently. I was taught not to point out a problem unless I was willing to offer a solution.
In a previous post, “Common Mistakes People Make When They Transition To Medicare,” I mentioned some problems that people have. In this post, I want to share solutions.
Previously I pointed out that your coverage with original Medicare is not the same as what you had when you were working. It is likely that the health insurance you had before you enrolled in Medicare had a “stop-loss.” That is a fancy way to say there was a limit on how much you had to pay before the insurance company would pay all your medical bills.
(If you have a hard time finding the term “stop-loss” in your old policy, try looking for the term “maximum out-of-pocket.” They are the same thing.)
Medicare B does not have a “stop-loss” or “maximum out-of-pocket.” The average American will spend about $240,000 on health care during retirement. If all of those expenses are for out-patient doctor’s fees, Medicare B will pay $192,000. You will pay $48,000 from your retirement savings.
If you want to eliminate the potential problem completely, you can purchase a Medigap plan. It would pay that $ 48,000 for you.
As long as you are able to pass medical underwriting, you are able to pick which insurance company you want to administer your Medigap for you. However, once your health gets bad enough that you can no longer pass medical underwriting, you need to stick with the insurance company you have.
If you have a pre-existing condition when you turn 65 and retire, you have a special window of opportunity. If you apply for Medigap during the 7 months that start 3 months before the month of your 65th birthday, insurance companies have no choice but to approve your application. You are within your Initial Enrollment Period. During that time you qualify for guaranteed issue.
If you do not secure a Medigap plan during your Initial Enrollment Period, you will be required to pass medical underwriting if you elect to apply for Medigap in the future. The only exceptions are for those people who qualify for a Special Election period.
If you elect to delay your Medicare B enrollment past your 65th birthday because you have group health insurance through your employer, that is not a problem. Just be aware that when you do retire or lose your group coverage for any reason, you do not have the full 7 month Initial Enrollment in which to secure a guaranteed issue Medigap plan. You qualify for a Special Enrollment Period for only 63 days. If you have a pre-existing health condition that would prevent you from medically qualifying for Medigap, you will need to submit your application within 63 days of the Medicare B effective date on your Medicare card.
As I discussed previously, Medicare Advantage was authorized in 1997 and was originally called Medicare Choice. It allows you to disenroll from the Medicare system and get your health insurance through a private health insurance company.
Perhaps the biggest difference that I see is the one that is generally not talked about. Advantage plans have a “stop-loss.” Medicare B does not. That means that you are better able to budget your medical expenditures with Advantage. You know that if the worst were to happen to you during the year, your liability for medical bills would be limited.
If you rely on Medicare B, without a Medicare Supplement, and the worst were to happen, your personal liability is limitless. Medicare B will pay about 80% of your Medicare approved medical bills. You are liable for the other 20% of Medicare approved medical bills plus any “Excess Fees” your doctor may charge if he does not accept Medicare.
Also, on the positive side of the ledger, the premiums for Advantage plans are often lower than for Medigap. You will still have to pay Medicare your Medicare B premium each month. However, when you enroll in a Medicare Advantage plan, that premium you are paying to Medicare is sent to your health insurance company. The money that the insurance companies get from Medicare will be used to pay your medical bills.
Not everything with Medicare Advantage is sunshine and roses. There are also some negatives. Most Advantage plans have networks of medical providers. Unless the treatment you get is declared an emergency from your insurance company, it will not pay you a dime if you obtain medical treatment from a doctor or hospital that is not in the network.
Some plans have a PPO option. If you accidentally use a medical provider that is not in the network, your Advantage plan will still pay something towards your medical bills, however, you will be disappointed by the amount it will pay.
Before you rely on Medicare Advantage for your health care during retirement, make certain you have stopped traveling. If you live in Michigan during the summer but migrate down to Texas during the winter, you will be out of your network for 6 months. If you get sick during that time, the odds are that your Medicare Advantage plan will not pay your medical bills as you thought.
One of the most common complaints I get is with seniors who tell me that their insurance company did not pay their hospital claim. Every time I have had this complaint, I have found that the problem is not with the insurance company. The problem was caused by the senior himself. He used a medical provider who was not in the plan’s network.
Medicare Advantage plans can be a wonderful alternative to original Medicare + Medicare Supplement. As long as you under understand the limitations of the plan and find them acceptable, Medicare Advantage may be right for you. Just be prepared for a huge disappointment if you forget and use a medical provider that is not in the plan’s network.
Again, as I previously pointed out, Medicare does not pay for prescription drugs. If you want insurance help with that, you will need to enroll in a Medicare D (Prescription Drug Plan).
Medicare D comes in a couple of different forms. When it is part of your Medicare Advantage plan, it is called an MAPD plan. That means that the same insurance company who administers your other health insurance also administers your prescription plan. You will only be able to get your prescriptions filled at the pharmacies that are approved by your plan.
When you have a supplement to original Medicare, your Medicare D plan will be called, Medicare D (PDP). You also may hear it refered to as a “stand-alone” plan. Most of those plans also require you to purchase your prescription drugs through approved pharmacies.
Both MAPD and Medicare D (PDP) plans will have a list of drugs that they cover. That list is called a “formulary.” Every Medicare D plan is required to cover a basic list of drugs that is determined by the Centers for Medicare and Medicaid Services (CMS). Insurance companies are free to cover drugs that are not on that list. That is why you will find differences between plans.
Just like Medicare Advantage, you will have deadlines when you retire. The first is called your Initial Enrollment Period (IEP). If you retire at age 65, you will have 6 months in which to secure a Medicare D plan. If you delay getting Medicare B until later, you will only have 90 days after your Medicare B effective date in which to get a Medicare D plan.
If you miss your IEP, your next chance to enroll in Medicare D will be the Annual Enrollment Period (AEP). The AEP will typically be a six-week window in the last quarter of the year. During the AEP, you will be able to switch between Medicare D plans if the need arises.
It is generally recommended that you enroll in Medicare D during your IEP. If you do not do so and elect to join Medicare D during a future AEP, you may do so. However, Medicare will charge you an extra penalty of 1% of the national average premium for Medicare D for each month that you could have been enrolled but elected not. That penalty is charged in addition to your basic premium. The penalty applies for your entire life. In theory, you could still be paying a penalty at age 85 for a decision you made when you were 65.
Some Medigap plans used to offer prescription drug benefits. They have been phased out in the years since Medicare D was authorized in 2005. If you have one of the older Medigap plan J and have seen your premium increase more than you want, it is because your insurance company is not allowed to just cancel your insurance. The only thing that they can do is to continue to raise your premiums and hope that you can take the hint to change to a Medigap plan F with a Medicare D.