Navigating the intricacies of Medicare can feel like wading through an alphabet soup of confusion and misinformation.

To help you feel less overwhelmed, Zacc Call and Laura Hadley break down the different parts of Medicare and explain key points to keep in mind before enrolling — so you can make an informed decision based on your healthcare needs.

Zacc and Laura discuss:

• Why enrolling in Medicare at 65 isn't mandatory and delaying is an option
• The importance of timely Medicare enrollment to avoid penalties
• An overview of Medicare Parts A and B, Medicare Advantage, and Medigap
• Additional points to consider if you have a group coverage plan at work or an HSA
• And more

Read the full Transcript:

[00:00:00] Welcome to The Financial Call. We are financial advisors on a mission to guide you through the financial planning everyone should have. Whether you're doing it yourself or working with a financial advisor, these episodes will help you break down complicated financial topics into practical, actionable steps.

Our mission is to guide motivated people to become financially successful. Welcome back to The Financial Call. Zach and I are here today talking about Medicare insurance. So this is a really common question, common topic for people. Our last episode, we talked about healthcare coverage prior to age 65. So this is 65 on talking about the alphabet soup of Medicare.

It can get so complicated. We're not gonna dive into all of the details, but we're gonna let you know what you should know about Medicare. I wanna start off with the most common question we get regarding Medicare. I would say, Zach, maybe you'll have a different opinion here. You'll get bombarded with mailers [00:01:00] as you get close to, Zach's rolling his eyes.

He knows exactly what I'm coming to. You'll get bombarded with all these mailers as you're coming up to age 65 saying you need to get on Medicare or you're gonna have lifelong penalties. As long as you are covered under a group healthcare plan through your employer, you do not need to get on Medicare.

However, once you're gonna lose that healthcare coverage, you do need to get onto a Medicare plan from that point to avoid penalties. But as long as you're covered, even if you're still working at age 70, 75 and you're covered under that group healthcare plan, you'll not have penalties for not getting right on Medicare.

We've seen people hop on Medicare after they're 70 years old, maybe into their seventies because they just worked all the way until that age because they loved their job or whatever it may be. It might be worth exploring Medicare. You might find that it's cheaper or better coverage for you than your work plan, but you don't need to panic.

That is a marketing tactic and it works, and so it keeps working. So you're going to keep getting those mailers because people call. [00:02:00] All the time. We get that question all the time. The one thing to know too though, is that there are some group plans that don't qualify, but it's rare. I just know I need to say that. I haven't run into them.

They're really, really small employers. If you work for a company and there may be 2 or 3, 4, 5, 6 of you, it's probably worth looking into it to make sure that yours is qualifying group coverage. You may actually be one of those few people that truly does need to sign up if it's 65, and usually your employer will tell you like, Hey, you're coming up on 65.

You need to switch over to Medicare. I think it's under 20 employees. Something to keep in mind, but that's a good point. For most people, you don't have to worry about it. Yeah. Until 65. But as you're coming up on Medicare, there are a few different parts to Medicare. I'm gonna start off with the two main parts.

Part A, that is free if you're covered, if you've paid into Medicare during your working career. Or if your spouse has, you're also entitled to it. There's no cost to Medicare part A, and that covers basically your hospital stay. It's not [00:03:00] gonna cover your doctors or your care, but if you go into the hospital, it'll help to cover the hospital bill.

Again, you don't pay anything for that. So maybe if you're coming up on 65, you're still working, you wanna start Medicare Part A, just to have it as a supplement to your insurance, you can do that. No cost there. Something to be aware of if you are participating in an HSA. You cannot participate in an HSA and be on Medicare Part A.

So if you have a good HSA plan and you have good healthcare coverage, maybe don't enroll in part A for that. Just continue with your healthcare coverage. Your money inside your HSA is still yours. Don't think that you lose it. Some people get confused and think like, oh gosh, I've got all this money saved up and I'm gonna lose it once I get on Part A.

No, you just can't make new contributions. Right. That's it. Part B does have a cost to it. I know in 2023 is about $164 a month. That does go up a little bit each year. That does cover more of like your doctor's bills. [00:04:00] I'm gonna look it up because I can't remember either. Perfect. I think it's $174. That it's going up to in 2024.

Well done. Is that right? Well done. $174.70. Yeah. In 2024. And the Social Security Administration and Medicare, it's very intertwined. As you apply for Social Security, there's a spot within the Social Security application to apply for Medicare. If you apply for Social Security benefits, you get automatically put on Medicare Part A.

So, this is tricky if you, we go back to the HSA concept, if you have a really good HSA plan, especially if you're getting a match from your employer in your HSA, it may make sense for you to consider that, especially when you're thinking about your Social Security strategy, because if you decide to file for Social Security and you lose your match, that needs to be factored into the cost-benefit decision of Social Security filing.

Anyway, something to be aware of. But yes, part B is going to be about a $174-$175 a month for each person. Oh, another thing when you're on healthcare [00:05:00] at work or private plans before 65, it's all family based, you and your spouse and kids. And when you get on Medicare, it's you go your own way.

Totally individualized. So this is $174.70 per person. And of course, that number's gonna change. It's 2023, at the end of 2023. We're talking right now. But if you're listening to this later, the number's gonna always keep going up. I doubt that they'll bring it down ever. It'll likely climb a little bit each year.

It's so funny, they always announce the Social Security COLA with a ton of fanfare, and then in all that noise they kind of throw in fine print, your Part B is going up by this much, and it's usually quite a bit. Everyone always complains. Yeah, I got a nice cost of living adjustment on Social Security, but it went away to Medicare.

Right. So, part A and B are typically not enough. And this is where I think a lot of people get really confused because they think I'm gonna do an advantage plan, so I'm not gonna do part A and B, or I'm gonna do a supplemental plan, so I'm not gonna do part A and B, or [00:06:00] I'm not gonna do Medicare at all. I'm gonna do this other plan.

And it's if you don't sign up for part B and you eventually get on it later and you were supposed to be on it, so setting aside that whole group coverage thing, like if you were supposed to be on it, they will penalize you and give you a lifetime penalty. Your premiums will forever be more than they would have had you signed up on time.

So that's why it is a big deal that you do sign up on time, but part A and B don't cover enough for most people. I've yet to meet somebody who I was like, yeah, that makes sense. I could see why you wouldn't do anything besides part A and B. There's just too much risk as people get older of having major medical expenses and Part A covers hospital.

Part B covers doctors, but only up to certain percentages, and so there's unlimited potential cost if you don't have either one of two paths. So once you have A and B in place, there's a fork in the road. You can either go on to add a supplemental plan, another plan that hooks onto the A and the B and [00:07:00] fills in the gap.

And that's why they call it a Medigap or Medicare supplemental plan. You can add a supplemental plan and you can add a drug plan that's a Part D. The supplemental plans have all kinds of letters, but the letters are consistent, so if you find a G plan from one carrier and a G plan from another carrier, they have to be pretty consistent.

A G plan is dictated by the government as to what they can pay for and how they pay for it. So, you're going to find some minor differences between the carriers, but that's usually helpful for people to know that once they understand what the letter offers, then they have a good feel for what that plan is gonna be across carriers.

Let's just talk G Plan for a second. Last time I looked into this like in a ton of detail, it was around $200 and change for the annual deductible. In our last episode, we were talking about annual deductibles of $13,000 on private plans. So, the annual deductible is closer to $200 to [00:08:00] $300 a person. So you could basically pay this Part G supplemental plan and pay a premium that's probably between 120 to 200 and something dollars.

It's age-based and have pretty much everything covered from a medical standpoint. Add a drug plan for some more, and I would love to hop on that compared to what I'm on. Yeah. Would love that.

$200 deductible, right? I would love to be on Medicare. I would pick the Medicare plan at this point in my life based on what's available out there. So, I think some people are so afraid of Medicare, and I think that's probably a mistake for a lot of people. And that supplement plan can be fantastic for people who do have high medical costs each year.

Maybe if you have cancer or something that requires ongoing treatments, high medical costs, the cool thing if you hop onto a supplemental plan right as you're coming from a group health coverage plan, you don't have to go through underwriting, so it doesn't matter your health. You can qualify for [00:09:00] that supplement plan.

So that's something to think about, and you should meet with an expert as you're figuring out your Medicare to help you choose a plan, whether you should go with the supplement plan or an advantage, which we'll get to something to consider. Let's talk advantage for a second so people can have a frame of reference between the two.

An advantage plan oftentimes has zero premium, and a lot of people wonder how in the world can a carrier afford to take no money and still pay out on claims? They're not taking no money. The government basically steps in and subsidizes, they're paying the carrier for the carrier to take you off the government's hands, they talk about putting part A and B to sleep.

If you do an advantage plan, it puts a wrapper around everything and they basically say, great, this carrier is now in charge of everything for you. Instead of having a Medicare card and a supplemental card and a drug card, and you take all three cards when you get services and you apply them in that order typically, instead of that, you just have one advantage card.

You hand it over and you use services as they're needed, and the government is paying the carrier because the government doesn't have to service you anymore. And so, there's cost savings for them, and the carrier takes that money and they pull it together, and they're able to pay claims off of that.

Now, when you have an advantage plan, you may have a really, really low premium, maybe zero in many cases, but you pay as you go. So that could be also a really great option. You're paying that $174 and change Part B. Part A is no cost to you because you qualified through FICA withholdings throughout your career and you have no advantage plan premium.

You just basically are paying part B and then using the doctor as you go. So, this is a healthy person plan, and we actually see a lot of people who even use the doctor a fair amount still go with the advantage plans. Because they look at it and say, I'm gonna save a couple thousand dollars a year in premiums that I don't have to pay for that part G, for [00:11:00] example, and I'm not gonna use the doctor that much.

And so, they're okay with that. Like Zach mentioned before, with it being individual, maybe one spouse isn't healthy and they would choose a supplement plan. Higher premiums, lower deductible. One spouse is really healthy, chooses an advantage plan, no premiums, a little bit higher deductible and copays. You got it.

So something to be aware of. Each of you will look at it in a couple individually. You don't have to go the same path like Laura said. The cost of both plans and both options are really pretty decent. Yeah, so I look at it like, don't be afraid of Medicare. Once you get to 65, the paths are pretty established and it's going to work.

Bridging the gap to 65 can be complex. Once you get to 65, we kind of feel like you're not home free, but you're at least on the path that now we know it's gonna work. It's gonna work just fine. We can count on it. It's been consistent. And for those of you who are on Medicare and there still are problems like any [00:12:00] carrier.

And service concerns or claim concerns, and Medicare doesn't cover everything. So, there's some of you out there that have very unique medical conditions that are expensive and drug plans that may not cover prescriptions that are super expensive. So, I just wanna throw this out there. I'm not trying to be insensitive to the fact that I do think that people have troubles with Medicare and the carriers that support Medicare, but the overall feeling I get from clients is that once they get to Medicare, their stress level and worry about healthcare coverage decreases as opposed to pre-Medicare coverage. Yeah, absolutely.

And you can change your plan each year. There's an open enrollment period from October, I think it's October 15th to December 7th or so, and you can go in and check and see what changes are being made on your current plan. Make sure your drugs are still covered under your plan, and maybe you wanna change over from an advantage to a supplement or a supplement to an advantage.

But like I mentioned before, if you start off on an advantage plan and then wanna switch to a supplement plan and your health is poor, you're gonna have to go through underwriting and that can change the cost there as well. So, something to be aware of.

If you are retiring outside of that October to December timeframe, not a problem. It's a life event. So if you're gonna lose your group healthcare plan in March, or coverage in March, you can switch on to Medicare at that point. 90 days from retirement is really when you wanna sit down and talk to a Medicare expert, see which plan is best for you, get it all set up so you have that coverage ready to go when your healthcare coverage ends through work.

Some people like to plan a little bit earlier than that. You can't actually do anything prior to that. Just be aware. That's why Laura and I think in that three-month window is because let's say you're ready to go. You've made a decision and it's six months away, you're going to have to come back and actually put that into place when you are inside that window.

However, for some people, if you're doing retirement planning, you may need the [00:14:00] conversation just to understand what's going on for you so that you can make the retirement decision. So that's totally normal, and that happens all the time. So you may decide it's time to meet with a Medicare expert. And really look at the plans just to understand if you can pull the trigger and you're gonna pull the trigger on retirement six to 12 months from now.

We just put it in the calendar that 90 days before you actually need coverage, we hop in there and apply for it and make it happen. Erik Soderborg is over the 90 Days from Retirement podcast and YouTube channel. Erik does such a fantastic job of staying on top of this. So, if you're trying to figure out what are the current rates as of today, or I really want to understand the different plans better and the costs and pros and cons.

Erik uses whiteboard drawings. He does an incredible job on video. Laura and I hide from video. He does a really good job on video. He's had me on a couple times as a guest to talk about different topics, and it's always a good time. But Erik really runs a good YouTube channel, [00:15:00] and it primarily is all about Medicare.

It's called 90 Days From Retirement, so I would check his YouTube channel out. He gets hundreds of thousands of views on, I think the last one we looked at this morning had 800,000 views and it was the dark side of Medicare. Obviously, he did a good job with the title there and obviously people are worried about it.

Clicking on that, watching for it. Erik and his team, they have a whole fantastic team of Medicare experts, so if you need help, we can get you in contact with them. They're brokers so they can represent lots of different plans from the advantage side and the supplement side to really help you find the best plan for you.

Makes sense. Okay, so that is healthcare. So last episode was pre-65. This episode is post-age 65. Next episode, we're gonna dive into life insurance and help you understand the difference between term life insurance and permanent life insurance. And then we'll move on to when to get life insurance, when to drop it, long-term care and disability and property and casualty.

A lot of insurance topics here, and we're trying to keep these short because I just don't think people like it. [00:16:00] If I'm being honest, I don't think people want to talk about this, but we all have to talk about it at some point. So, all these episodes are a little bit shorter than our normal one. Stick with us, folks.

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