Gregory
Gurbikian Sep 17, 2019, 08:00am
As the debate heats up regarding “Medicare for
All,” it is important for baby boomers in the retired market to understand
their Medicare options. As an owner of a healthcare insurance agency with over
10 years of experience, I have provided expert support to thousands of
Medicare-eligible individuals. I have also trained hundreds of agents to help
simplify Medicare, ensuring that the right coverage is provided to each client.
What I have learned is that most retirees are extremely confused about their
Medicare options, and for good reason.
Traditional Medicare is what retirees have
paid into their entire lives through their payroll taxes known as FICA. FICA is
comprised of the following taxes: 6.2% Social Security tax; 1.45% Medicare tax.
The Medicare tax the baby boomer generation paid into was designed so that
Medicare would be their last insurance plan. More retirees today are selecting
an alternative plan to traditional Medicare, called Medicare Advantage, thinking
they are supplementing their Medicare card. This is in large part due to not
fully understanding the Medicare process and its options.
Medicare-eligible retirees typically only have
two options: They can either keep Medicare as their insurance and enjoy nationwide
coverage with no networks and no doctor referrals needed, or they can choose an
alternative plan called Medicare Advantage. For those who choose this option,
they will no longer receive their healthcare coverage from Medicare, but rather
a private insurance company. Medicare pays a fixed amount every month to the
companies offering these plans, thus reducing the government's exposure through
managed care with possible strict networks, referrals needed for specialists
and copays. Since 2011, all
plans have been required to limit beneficiaries’ out-of-pocket spending for
services covered under Medicare Parts A and B to no more than $6,700
(in-network) or $10,000 (in-network and out-of-network combined).
I have recently seen a surge in Medicare
Advantage marketing and sales due to the increased number of retirees entering
the Medicare-eligible market. These plans are sold as all-in-one plans that
cover hospital, medical and usually prescription coverage. The ease of use in
carrying just one card with little to no monthly premium for these plans can
seem attractive to someone who doesn’t understand that Medicare will no longer
be their primary insurance. Having personally talked to thousands of eligible
Medicare beneficiaries that have Medicare Advantage plans, most think the
Medicare Advantage plan is their supplement to Medicare. Many are surprised to
learn that the Medicare Advantage plan is not a supplement to Medicare, but
instead an alternative plan designed to privatize and manage an individual’s
healthcare.
It is important for retirees to be fully aware
of their options when they are new to Medicare or turning 65, as they only have
a limited six-month window in most states to get a guaranteed Medicare
Supplement plan with no medical questions. Once this window closes, that
individual may never qualify for a Medicare Supplement plan in their lifetime
due to health conditions. Although Medicare offers exceptional benefits, the
big downside to Medicare plans is that they only cover 80% of medical expenses.
That leaves a retiree owing the remaining 20% themselves without an
out-of-pocket spending limit to protect them. Medicare Advantage plans can be a
great option to limit the out-of-pocket exposure for those who can't afford a
Medicare Supplement or who missed the guaranteed issue period and do not
qualify for one due to health conditions.
Medicare Supplement plans, also referred to as
Medigap Supplement plans, are standardized plans, distinguished using letters,
designed to fill the gaps of Medicare. A Medigap plan retains Medicare as the
primary insurance. I often tell retirees to think of Medicare as the body and
the Medigap as the arm attached to it. The Medigap plan is accepted everywhere
Medicare is accepted and is portable if someone moves or is traveling. Medigap
Supplement plans are offered by private insurance companies and are
standardized to all offer the same coverage and benefits. The three most
popular standardized plans used to supplement Medicare are Plans F, G and N.
Since Medicare does not cover prescriptions, an individual would need a
stand-alone plan referred to as Part D. There is a separate monthly premium for
a Medigap Supplement or a Part D plan. Those who want to keep Medicare as their
primary insurance should consider a Medicare Supplement and a stand-alone Part
D to give them financial security to handle what Medicare will not cover. With
most retirees on a fixed income, I recommend to never just have Medicare as the
primary insurance without secondary insurance for additional protection.
The challenges that retirees face when they
are Medicare-eligible also include being inundated with marketing information
through the mail, over the phone and through the various forms of television
and social media. It can make what should be an exciting time for the retiree
stressful. I would strongly recommend to the retiree that they not try to
decipher it on their own, but talk to an expert who can simplify the process
from start to finish. There is a key question retirees should always ask
themselves before they make their final decision: Will the coverage I am
selecting be adequate no matter what my healthcare needs look like down the
road? If they have that mindset and are fully aware of the two options
available to them, it will help better prepare for this new chapter of their
life.
The information provided here is not
investment, tax or financial advice. You should consult with a licensed
professional for advice concerning your specific situation.
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