By James Wallace Harris, Monday, June 13, 2016
I have many friends like me who were born in 1951, and we’re all needing to sign up for Medicare this year. I’ve promised several of them I’d search the web for the best advice. Medicare is amazingly complicated, and can still be quite costly. Make the wrong decision, and you’ll pay. I provide these links with no warranty of accuracy. This page was created to help my friends and I find out more about Medicare, but if they’re helpful to you too, then great.
Of course, the first place to visit is Medicare.gov, but you actually sign up through Social Security. I’ve got to say, this site is information overload. They also publish Medicare & You 2016 as a pdf booklet. Plus Medicare.gov offers a whole series of publications, some in ebook format. And Medicare even offers a blog. Here is Medicare’s intro video:
My Medicare Matters from the National Council on Aging is a friendlier introduction to Medicare, but still intimidating.
Of course, everyone wants to know what Consumer Reports says.
This video gives a simple intro that’s the first step on a long journey.
This information came from UnitedHealthcare, so I don’t know what their vested interests are, but they have a site Medicare Made Clear, and a series of additional videos that explain more about Medicare on YouTube.
Medicare B & D vs. Medicare C (Medicare Advantage)
One thing that came up in the intro videos was the concept of Medicare Advantage. It seems very tempting because it combines several options into one plan. However, after watching this video I assumed it wasn’t for me. I don’t like insurance programs that limit choice of doctors and hospitals, but then I watched the second video.
Now I’m even more confused. “Medigap Vs. Medicare Advantage: Which is Better?” helps some. Probably if you live in a retirement community near good in-network support, and you don’t travel, Medicare Advantage might be a good deal. My fear is something catastrophic would happen to me, and I’d end up with monster medical bills I couldn’t pay without emptying my retirement savings.
It appears that Medicare Advantage often promotes preventative healthcare practices, and they will make sure you stay on top of your medical problems. That might outweigh the problems of working within a network.
Steve Vernon from CBS Money Watch writes, “Should you buy Medigap or Medicare Advantage plan?” Vernon offers additional links and essays on this topic, but I’m still just as confused and undecided. It seems your choice is between choosing parts B & D and spending around $150 a month, and choosing part C and paying lower monthly fees but with co-pays. Some plans have no monthly fees at all. Medicare Advantage sometimes includes dental and prescription drugs all rolled into one plan, but you’re restricted to which doctors and hospitals you can use.
Consumer Reports also has a page about “Medigap vs. Medicare Advantage.” It offers a nice comparison chart.
I then checked the entry on Wikipedia for Medicare Advantage. Evidently it’s a political issue to allow folks to find alternatives to Medicare. Medicare Advantage are private plans that are required to offer the same benefits as Medicare. By law, you can’t buy both. Medicare Advantage plans are more like HMOs or PPOs. If you enroll in a Medicare Advantage program, it collects money from the government’s Medicare program. Which explains why going to an out-of-network healthcare provider might cost you 100%. I highly recommend reading the Wikipedia entry several times. This statement is telling:
There is some evidence that sicker people and people with higher medical expenditures are more likely to disenroll from Medicare Advantage plans and go into Original Medicare instead, which could be due to the more restricted networks of health providers or to the benefit design of the plans. The federal government makes risk adjusted payments to private plans to avoid this, but it is unclear how effective that policy is.
In other words, if you’re healthy, don’t go to doctors often, and have good in-network support, Medicare Advantage might save you a good deal on monthly costs. Which explains why the advisor in the first video picked it for her father.
Medicare Part D
Part D is drug coverage. You can buy Part D from a private insurance program in regular Medicare, or you can get drug coverage in a Medicare Advantage plan. Consumer Reports offers “How to find the best Medicare drug plan.” There are penalties for not signing up right away, but they are low enough to consider delaying participation – see the skepticism section below.
What makes things really confusing are supplemental plans. These are insurance plans to cover costs Medicare doesn’t, including the infamous “donut hole.” More on the donut hole can be found at Wikipedia.
David Belk claims paying for supplemental insurance is basically giving your money away. He says supplement insurance doesn’t cover what a lot of people think it does. However, I’m skeptical of his skepticism.
This just adds to my decision agony. I want to avoid any chance of being stuck with a gigantic medical bill. I hear about that in the news more and more. Belk claims insurance companies are playing into that fear. Belk says insurance companies are mostly insuring against minor costs, not major ones. And they don’t cover what Medicare won’t cover. David Belk is a MD that maintains the website True Cost of Health-Care. He even claims that opting out of Part D might be a good option if you buy low-cost generic drugs out-of-pocket. Check GoodRx.com for drug pricing.
I was all ready to load up on supplemental insurance plans until I saw this video. Now I’m not so sure. However, there are penalties for delaying joining Part B & D. So for those folks who are willing to bet they will always be healthy, they can delay buying Part B & D, but they need to know about the penalties.
Mistakes to Avoid
The penalty for not signing up for Part B on time is stiff – one that lasts the rest of your life.
The penalties for not signing up for Part B & D can be add up to a lot. But there are exceptions. It appears if you are still working and have good insurance coverage you’ll be excepted. Watch out though, how long you go between ending private insurance and starting Medicare is important.
My guess is people trying to keep their monthly costs down will pick a low-cost Medicare Advantage plan, which is a Medicare approved alternative to signing up for Part B & D. These folks will have to go to network doctors, but they may get better preventative medical care. And if Wikipedia is right, these people will eventually switch to traditional Medicare when they get older and sicker, because traditional Medicare covers more.
I thought my monthly bill for health insurance would go down when I joined Medicare, but that won’t be true. The insurance I now get through work is an extremely good retirement perk. If I spring for Medigap insurance, I could end up doubling my existing monthly healthcare bill. However, I have friends that buy their own health insurance and they will save a lot of money.
It’s critical for people to sign up for Medicare promptly. Delay will cause penalties that could continue for the rest of their life. Life would be far simpler if we had a single-payer system. The freedom of options requires both extensive study and risk. There are many private companies offering a variety of options to avoid potential medical expenses. If you have a very small fixed income, you’ll have to navigate these waters very carefully. However, it also appears you can easily overpay searching for peace of mind. None of us know how long we will live, or what kind of healthcare burdens we will face. If we make a mistake in these decisions we could end up spending more each month from our fixed budget, or incur risks to our shrinking nest eggs.