EPS 9 - Medicare 101: Supplements vs. Advantage (and Why Part D Matters)

SPEAKER_00: 0:54

this is Jerry Williams and welcome to the Be Money Podcast, where we talk about all things related to money from a gay perspective. And today what I'm going to talk to you about is Medicare supplements. So the reason I'm going to talk to you about this is because I see commercials all the time on TV, run, or, you know, internet, they're everywhere, that they describe, you know, Medicare supplements offered by so-and-so insurance company, or they try to entice seniors to buy Medicare Advantage plans because there's all these additional benefits they can get. So now a lot of people, this may not even apply to you, right? Because you're thinking, well, I I'm not nearly at age 65 retired. I don't need anything like that. And okay, you don't, you know, but you're maybe your parents do. Maybe your grandparents do because knowledge is always power. And the more we know, the better decisions that we can make. And in this case, I think that a little primer about the difference between Medicare supplements and Medicare advantage is just going to be helpful. So at least you have, um, you know, a high level understanding of it and you can share that high level with with anybody else that you're trying to help, friend, neighbor, whatnot, parents. And that way, when this really comes down to the point that you need to buy a plan, that you at least have a better understanding about what you're getting and can ask better questions and just feel more comfortable all around. So with that being said, Medicare in and of itself, that's basically the health care that the federal government offers when you turn 65. And you qualify it generally as long as you worked what are essentially called 40 quarters and you've been paying your Medicare taxes all along. So for all intents and purposes, when you turn 65, you get automatically enrolled in Medicare Part A and then it generally doesn't cost you anything. Now, there is a second part to Medicare, which is Part B, and that's how the doctors get paid. So again, you just will pay your monthly premiums. And in this case, for 2022, the monthly premium for Medicare Part B is$170. Now, that just generally comes out of people's Social Security check. They don't even see it. So that is called Original Medicare. Now, Medicare really has four parts to it. And that breaks down to A, B, C, D. So like we just said, there's Medicare Part A, which is a premium for Medicare Part B. which covers the hospitals, Medicare Part B, which covers the doctors, and then there's Medicare Part C, which is Medicare Advantage, and then Part D, which are Medicare prescription drug plans. So if you have original Medicare that pays the 80% of doctor hospital visits, and then if you pick up a separate Medicare supplement policy, which you would buy from like an insurance company, and you would just pay that separate monthly premium, that generally picks up the 20% that... Original Medicare doesn't cover, which is also called a Medigap. So it picks up that gap, that 20%. But that's just for the doctor's hospital visits, okay? So you can go see the doctor for whatever reason. You know, you injure yourself, you're just not feeling well, what have you. Now, it does not cover drugs. So if you get prescribed something, you either pay for that out of pocket or most people will get a separate prescription drug plan. Now, oftentimes people think at this stage, age, well, why in the world would I get a prescription drug plan when I don't really need it? Maybe I don't take anything, or maybe I just take one or two things, and I have my good RX to pay for it, and it really doesn't cost me very much. That is all true, right? There's no reason to spend more money than you absolutely have to. However, there can be penalties that you could face if you do not pick up a plan when essentially you're supposed to. Now, you can sign up for Medicare essentially three months before you turn 65. And that's when you would take your Medicare Part A and B. And then you can choose, again, to go with a Medicare supplement policy or not. Same thing with with a prescription drug plan. If you're thinking in a reactive sense, that would be how you would view things and say, well, you know, again, I'm not going to take it unless I really need it. Well, I wonder if you really need it six months from now, right? And then in that case, you might have regret that you didn't take it when you needed it. And so really what you want to do is just get it from the get go and be done with it, even though you're paying more. And that way you can make sure you're covered and you have peace of mind. Now, okay, just because I said that, that doesn't assuage a lot of people who are like, no way. That doesn't make sense to me. I rarely go to the doctor. I'm in great health. I have longevity on my side and I don't take anything. I eat healthy and all that good stuff. So, okay. Well, maybe then a Medicare Advantage plan is a good option for you. Now, Medicare Advantage plans, what they are is a managed healthcare plan. So, it does cover Medicare Part A and B. It essentially has a Medigap policy in it so it covers that 20 percent that original medicare doesn't cover and often it will contain a prescription drug plan inside of it that doesn't always but many times it does so in this case when i say a managed health care plan you're probably thinking something like an hmo or a ppo those are things we're familiar with generally when we have health care prior to 65 but that's exactly what it is you you have a managed health care plan where you have your primary care physician and you will see him or her essentially for everything and then when you need to go to a specialist for whatever reason then you need a referral and generally you will go to a doctor within the network now that may not be who you really wanted to go see maybe someone said hey go see Dr. Bob he's fantastic well if Dr. Bob is not in the network then you're not going to be able to go see Dr. Bob Dr. Bob unless you pay for that separately or you can get them to put Dr. Bob in the network. But if Dr. Bob just isn't going to go that way and you need to see him sooner rather than later, then you're probably just going to pay for that out of your own pocket. So people who don't like that will typically be on original Medicare because they don't want anybody to tell them when and how they can go to the doctor and who they can see and all that good stuff. So it really kind of just depends. Now, Medicare Advantage plan their monthly premium can be anywhere from you know a hundred bucks or so or even a couple you know more than that or it can be a lot less than that you can even go all the way down to zero and that sounds strange right well how in the world are they going to offer me a medic you know health care plan at zero monthly premium i don't have to pay anything for it well number one there's always costs associated with going to these kind of managed health care plans you will always pay a co-payment. And there may be other costs that you have to pay along the way that, you know, it just depends on the plan. How much they cover, what they cover, and then you may be on the hook for part of it. As well, the federal government pays these private health care companies to offer these plans. You know, I don't know why they do what they do, how they do what they do. That's another discussion for another day with people who have, you Nevertheless, The federal government pays these private companies to offer their plans, and Medicare Advantage plans, again, are just all self-contained. They're kind of like the Club Med. You go to it, all your drinks are included and everything. So it's nice if you're healthy. It's very convenient if you're really tight on money and you don't want to spend any more than you have to. Then again, that's perfectly fine. Hey, I'm comfortable going with just a primary care physician. I only go maybe once a year for my annual checkup anyway, so Whoever they have, I'm totally comfortable with that. That sounds like you might be a great candidate for that type of plan. Go for it. Now, once you're in these plans, typically you're going to be in it for a while, and I'm talking about at least a year, because the government only offers what are called open enrollment periods, and that's typically towards the end of the year, and that's when you can switch. You can go from Medicare Supplement Plan to Medicare Advantage and Medicare Advantage to Original Medicare with a medicare supplement so you have to wait for those time frames to come along before you can make those decisions and if let's say you um were in a medicare advantage plan and something went wrong and you found out you know your cost your medic your medical costs were going to be fairly substantial well you know then you probably wish you were back on original medicare because again all that's really covered and you don't really have too much out of pocket. Now All that being said, there's just a lot of factors, but I think you kind of get the idea about how this really works. Now, when we're talking about the Medicare supplement plans, what that really means is that 20%, those Medigap plans, there's really eight of them. There's A, B, D, G, K, L, M, and N. There used to be Plan F, and there still is Plan F, and that used to be the most popular one because it essentially covered everything, including Thank you. Medicare Part B deductible. And now again in the government's infinite wisdom, they created some new legislation that said Medigap policies cannot cover that$233 Part B deductible. I have no idea why. I think their thought was, well, if we make people pay that$233 deductible, they may go to the doctor less and they may choose to go less often or reconsider why they're going and that could just, you know, not burden the government with, you know, unnecessary health care costs. I don't know if that really works or not. Again, another discussion for another day with people who are smarter than I am. But that's how that works. So I think, pardon me, I believe that right now Plan G is the most popular because it essentially covers the most. And if you go with that plan, I'm sure that anybody who sells these plans can tell you what the most popular one is. Similarly with the Medicare Advantage plan, they don't typically offer the whole range of Medicare Advantage plans. You have to kind of go with a company like Humana or AARP or UnitedHealthcare or you know, whomever Blue Cross Blue Shield, a lot of companies offer these and you can go and you can compare and all that stuff. And if you have the time, that's great. You don't really want to spend all that time. Just find yourself, you know, an insurance agent who sells these and, you know, go spend an hour or so with that person and then sign up and then be done with it and just go on about your life. So, That in and of itself is how Medicare, original Medicare with a Medicare supplement works and how a Medicare Advantage plan works. Now, the one thing that these either plans do not cover is long-term care. And what that means is if you can no longer perform two out of the six ADLs, and that means eating, bathing, dressing, toileting, continence, eating bathing dressing transferring incontinence I guess that's it so if you can't perform two out of those then really what you have to do is rely on someone to come in and help you and so meaning if I can no longer get from the bed to the toilet from the toilet to the shower then that transferring process means I need someone to help me so I'm going to have to rely on friends or family or hire someone to do that you know if I can no longer feed myself obviously that's That's a huge problem. Whether you can't cook for yourself or you can no longer feed yourself, again, a really huge problem. So these things mean that they impact your daily living and you might be on the slippery slope. So in that case, you can choose to receive care at home or you might have to go to an assisted living facility. We typically think of them as like retirement homes, et cetera, because, again, they do a lot of things for you. So... If you were to go into that type of facility or you need that type of care, long-term care is not paid for by either a Medicare Advantage or a Medicare Supplement nor Original Medicare. So you pay for that generally out of your own pocket, which can be rather expensive, or hopefully you have a long-term care plan that will help supplement or offset some of those personal costs so you reach into your pocket less. Now, the whole idea, of course, that when you reach retirement age that you've budgeted your money wisely and saved wisely all along and you have this pot of money that you can rely on when you need it. Now, okay, that's a good idea. Some people have that, some people don't. A long-term care plan generally is just helpful if you're kind of on the bubble there where you have some money but not a lot of money and you maybe have a spouse and you're worried about leaving that spouse destitute. If you need long-term care yourself So then a Medicare, pardon me, or a long-term care plan can be helpful because it steps in and covers some of those costs. That being said, these plans are not cheap and you have to have pretty good health to get one when you buy one. So like all things, like even life insurance, if you need it when you really need it, so like if you're on your deathbed and you want to pass money along to your heirs and you think, hey, I'm going to give them a$50,000 life insurance policy, well, I don't know who's going to offer you that because because if you're on your deathbed, that's not going to happen unless you find, you know, some kind of plan that takes all comers no matter what. But if you're in good health, then these plans are going to be helpful for you. Again, depending on your financial circumstances, if you're considered wealthy and you have a lot of money, you may not need these at all because you essentially self-insure and you could cover all these costs yourself. If you're on the opposite side and you have very little money, little money, and you don't have a lot of assets, then it could be generally unnecessary. Because let's say you have fewer than 15 or$30,000 to your name, then you're probably going to run through all your assets pretty quickly. And then you would probably qualify for Medicaid, which would pick up your long term care costs. Sometimes people try to qualify for long term care, or Medicaid to pay for their long term care, and they try to deplete all their assets by selling them. And that generally doesn't work because they have a, I believe it's a five-year reach back period. So, and long-term care, we'll go into a greater discussion about that because that's, again, a whole nother animal. Let's just stick with the Medicare supplements and healthcare because that's, again, what we're talking about today. So, circling back, we got original Medicare, A and B, covers 80% of your healthcare, Medicare supplement, picks up the 20, that Medigap policy, and then we have could be all wrapped together in various policies that G is probably the most likely one. And then you need a separate standalone prescription drug plan. And that depends on which plan you choose based on what prescriptions you choose. And you may not even know that, but if you take some stuff today, then they can help you narrow that down and find the plan that works for you. Medicare Advantage plans are really all self-contained. The ClubMed type plans that have coverage for A and B, they pick up up to 20% and then generally they have a prescription drug plan inside of it and they're also cheaper monthly because like I said they're being supplemented so it could be more cost effective in that sense but you do have that primary care physician you need referrals you have to see doctors within the network hospitals within the network and there is some cost sharing so that's really the two sides of this I think it's helpful to know because like i said at the beginning you have more information to work with and you can explain it a little bit better most people don't even need to look or think about this until they reach that age 65 and then it becomes significant to you because you need to sign up for health care and you qualify to sign up for health care so why not do it if it's offered to you you're going to take it because we all know the older you get things happen and then health care is just horrendously expensive and you don't want to leave anybody with these huge doctor bills that can't no can afford to pay and you have to deplete all your assets because really if you have these assets that you've worked hard for your house your retirement your IRAs etc you know you want to use those for you and your spouse and you want to maybe pass that along to your children right because that's a great way to keep the family in the home their ancestral home and you know have everybody else make their life a little bit easier because you've been able to you know help them out along the way without using all your money for unnecessary health care when you have the opportunity to take it. These are plans that you do not have to use, but most people do. So hopefully that was helpful. If you have any questions, of course, you can reach out to me, jerry at pinkmoneyonline.com, or you can go to our Instagram and Facebook pages. So everybody, you have a great day. I will look forward to speaking with you next time. Thank you.