Medicare Supplement Plans, A Closer Look with Tom Allen
Medicare Supplement Plans, A Closer Look Show Notes
If you’re approaching or just reached retirement age, you probably have questions about Medicare supplement coverage and Advantage plans. What you do at this critical point can be the difference between saving tens – or hundreds – of thousands of dollars on medical coverage, so it’s worth getting expert help as you make these decisions.
Returning to the podcast to discuss this complex issue is Tom Allen. We recorded two previous episodes about Medicare in Season One of The Guided Retirement Show, and we highly recommend that you listen to them before jumping into this one.
Today, Tom and I dive deep into the differences between Medicare supplement coverage options, how to avoid potentially devastating expenses when dealing with prescription drug costs, and how to find a plan that will cover any conditions you may have and keep you healthy for decades to come.
In this podcast interview, you’ll learn:
- The difference between Medicare supplement and Advantage plans.
- Why Medicare Part A and B is rarely sufficient coverage for most people – and why you may confidentially qualify for Medicaid.
- Why Medicare Part D has not yet been standardized – and what to look out for in Part D plans.
- How illness can make it difficult to change Medicare Advantage providers – and how to avoid getting locked into a plan that doesn’t cover conditions you may develop in the future.
- “Since things change in our prescription drug usage during the course of the year, it’s very, very wise for people to go back to Medicare.gov and reload the prescriptions that they’re taking and just see if there’s another carrier now that better fits their needs.” – Tom Allen
- Episode 6 – Understanding Medicare Options, Costs, and Coverage with Tom Allen
- Episode 7 – Understanding Medicare Options, Costs, and Coverage Pt. 2
[00:00:10] Dean Barber: Welcome to The Guided Retirement Show. I’m your host, Dean Barber, founder and CEO of Barber Financial Group. Isn’t it crazy that as we age and our cognitive abilities begin to decline, that things get so much more complicated? Welcome to the alphabet soup of Medicare. Joining us today, Tom Allen. He’s a repeat guest and we had Tom on Episode 1 of The Guided Retirement Show.
In fact, I think it was one of the most listened to episodes of Season 1. Tom broke down for us in Season 1 what Medicare is, how it works, how it was started. We talked about the different types of supplements that are out there, but we didn’t dive too deep into the supplements. Now on today’s episode of The Guided Retirement Show, we’re going to take a deep dive. We’re going to look at the difference between a Medicare supplement and a Medicare Advantage plan, who should do what, and a lot of rules that even though you may think, you know, you probably don’t.
And this is an episode that you’re definitely going to want to share with all of your friends and relatives. Look, everybody knows somebody who is either approaching Medicare age or is already of Medicare age and the decisions that you make or fail to make in this uber complex area can mean tens of thousands of dollars over your lifetime. Please enjoy my conversation today with Tom Allen.
[00:01:31] Dean Barber: Alright. Tom, welcome back to The Guided Retirement Show. You know, in Season 1 where you and I talked about the basics of Medicare and what people really need to know, I think we’ve laid a really, really good foundation for understanding Medicare and how it works and what it’s designed to do and what it’s not designed to do. And anybody that didn’t get a chance to listen to our two episodes in the first season of The Guided Retirement Show should really go back and listen to those first as just a baseline for Medicare. This is a complicated topic.
[00:02:06] Tom Allen: It is.
[00:02:07] Dean Barber: You live in it, you breathe it every day, and even before you started specializing in the Medicare and Medicare Supplement area, you spent decades in the health insurance arena. So, to you, this is second nature to the people that are listening here to The Guided Retirement Show. The things that you and I are talking about are sometimes they’re foreign and it doesn’t really, you know, it doesn’t really make a whole lot of sense to them.
And so, I’m one of those guys. I’m not Medicare age yet. So, I try to know as much as I possibly can about it because I’ve got a lot of clients that are there. But let’s go into the different types of Medicare Supplements because there’s what Medicare pays for and then there are the supplement plans or the Advantage plans that people can choose from. So, walk us through pros and cons. First, let’s start, Tom, with what’s the difference between the Medicare supplements that are out there and we’ll leave the Medicare Advantage plan to a later part in the conversation.
[00:03:10] Tom Allen: Well, Dean, if you’re eligible for Medicare, you actually have four choices. The first choice is to go with traditional Medicare A and B only and a lot of Americans are in that situation. And Medicare doesn’t cover everything. Medicare B pays 80%. So, just having traditional Medicare Part A and Part B is for most of us not enough. Now, there is a premium that we talked about in the earlier podcast for Medicare Part B. For some Americans, the premium is too much of a percentage of their social security check, and they simply cannot afford to go on Medicare Part B.
[00:03:52] Dean Barber: And again, Part B just for those people that maybe you didn’t catch the first…
[00:03:55] Tom Allen: The outpatient.
[00:03:56] Dean Barber: Yes, the outpatient.
[00:03:57] Tom Allen: The outpatient side. Part A is inpatient. So, for the people that can’t afford Medicare Part B premium, if they only have Medicare Part A and to kind of back up, Medicare Part A premiums are prepaid with the FICA contributions you and your employer had over the course of your working years.
[00:04:16] Dean Barber: So, that’s that 3.7% or whatever.
[00:04:20] Tom Allen: Yeah. And the point is that they won’t have an additional premium. They have prepaid their Medicare Part A premium, henceforth, there’s nothing coming out of their social security check. For the Part B premium, for many Americans, it’s just more of an expense that they can afford.
[00:04:36] Dean Barber: Well, what happens if they don’t have it, then they have nothing covered for the outpatient?
[00:04:40] Tom Allen: Essentially, that’s correct.
[00:04:41] Dean Barber: Unless you go out and buy a private insurance policy.
[00:04:43] Tom Allen: Unless you do and most of those people, if they can’t afford a Medicare Part B premium, they’re certainly not going to be able to afford a supplement coverage. But there are other programs, low-income subsidy, Medicaid. There are other safety nets that some of those people will qualify for. And I was talking to a lady who said, “Oh, I just can’t, I could never do that. I could never go on welfare,” and it’s a stigma from her childhood and so forth. And I explained to her that those programs exist specifically for people that find themselves in the circumstances they’re in. So, don’t hesitate to utilize it.
And it can be pretty confidential. So, you can have those programs, that safety net under you, and your next-door neighbor may never know unless you told them. So, you have your four choices. You have Medicare Part A, Medicare Part A and B. You can go to a Medicare Advantage plan if you have the Medicare Part B or you can go to a supplement plan if you have the Medicare Part B.
[00:05:45] Dean Barber: Okay. So, this is where it starts to get a little bit confusing to me. The Supplement Plans, there’s a number of different insurance companies out there that offer Medicare supplement plans. What’s the difference in the carriers?
[00:06:00] Tom Allen: Dean, again, kind of backing up slightly, when Lyndon Baines Johnson signed the Medicare Act in 1965, the insurance entity quickly recognized that Medicare didn’t cover everything. And so, they decided that they would come up with policies that would supplement Medicare or cover the gaps that Medicare didn’t cover, Medigap supplement tie-in plans. All three mean the same thing which is confusing in itself.
At that point in time, there were a couple thousand insurance companies selling health insurance in this country and they all came out with their four or five or six choices for their menu for you to select from. So, in 1966, a person retiring had their choice between 6,000 or 8,000 or maybe more choices.
[00:06:47] Dean Barber: It’s a little narrower than today.
[00:06:49] Tom Allen: Well, fortunately. And so, in that scenario, if a person purchased the best Medicare supplement plan available, it would have been accidental because there were just so many choices. So, the government stepped in and said, “We’re going to standardize the benefits. This is crazy. This group of people shouldn’t be this confused over all the choices with Medicare supplement plans.”
So, they standardized all the benefits and they listed them A through N, not one through whatever. Even though we have Medicare Part A, now we have a supplement choice A. We have Medicare Part B, we have a supplement plan choice B. So, if our intent was to make this a crazy difficult system to understand, well, then they get a gold star that day. But when the government stepped in and standardized the Medicare supplement plans, it mattered not what carrier, which carrier. If you purchased an F plan or a G plan, the benefits are exactly identical. Exactly.
But the government said, “We don’t care what you charge, whatever the market will bear.” So, premiums will vary from carrier to carrier from supplement provider to supplement insurance provider, but the benefits are identical. That had to happen.
[00:08:07] Dean Barber: Alright. So, how many different carriers are there today that a person could choose from?
[00:08:12] Tom Allen: Well, I say main street carriers in our marketplace, there’s probably half a dozen that are very good.
[00:08:19] Dean Barber: So, if I look at those half a dozen carriers and you’re used the F and the G, but if you buy the F plan or the G plan from any of those carriers, they’re going to be identical as far as your benefits across the board.
[00:08:32] Tom Allen: Exactly, correct. Yes.
[00:08:33] Dean Barber: Right. So, at that point in time, would it make sense to say, “Well, the only differentiator then is going to be premium?” Is that a smart way to look at it? Or are there some things that people need to watch out for if they think of it in that term?
[00:08:48] Tom Allen: Dean, there’s always a, “Yeah, but.” Yeah, but you need to consider the fact that premium is important. And if I look at the top, let’s say I look at the top six supplement carriers and I do my homework and I list all the premiums. The premiums are not going to be greatly different. There’s a fairly significant compression of premium from the main street carriers.
[00:09:08] Dean Barber: What are you talking about? Within 2% or 3% of each other or…?
[00:09:11] Tom Allen: Yeah. Maybe more than that, but not a significant one. It may be a $15, $18 a month difference in premium. If all things being equal, and I can save $18 a month times 12 months, isn’t that a good choice? The answer is maybe. By that, when you’re first to be eligible for a Medicare supplement plan, I mentioned you have to have Medicare Part A and Part B and you need to maintain Part B, but when you look at a supplement carrier, the benefits are the same and you look at the premium. But I guess the point I want to make is you have a six-month window of time from when you first became eligible for Medicare and went on Medicare to enroll in a Medicare supplement plan, to purchase a Medicare supplement plan without underwriting.
[00:09:56] Dean Barber: All right. So, that eligible period is the day you reach age 65 until six months after that? Or what’s your period there?
[00:10:04] Tom Allen: Well, the clock starts ticking on the effective date of your Medicare Part B.
[00:10:09] Dean Barber: Which is what?
[00:10:10] Tom Allen: Well, it can vary. Usually, when people age in, our term for turning 65, and they apply for Medicare Part A and Part B, the effective date would be the first of the month, generally speaking, when they turn 65 and the benefits are put in place.
[00:10:25] Dean Barber: So, you’re saying that just turning 65, Medicare doesn’t just turn on automatically Part A and Part B. Do you have a choice to delay Part B to later?
[00:10:35] Tom Allen: Sure. And many Americans are working past age 65 for a variety of reasons.
[00:10:40] Dean Barber: So, they don’t need the Part B yet.
[00:10:42] Tom Allen: They do not need the Part B yet. And remember that there’s a premium for Part B. And our government recognizes that if you’re under employer group coverage for you and your family, in most cases, the employer does not pay 100% of the premium. The employee is contributing some dollar amount to the premium. The government recognizes that having Medicare Part A, Part B, and group coverage is a duplication. So, the government wisely said, “Why would we ask you to pay 135.50, which is the base premium for a Medicare Part B currently, as well as contributing to your group health plan, when they’re duplicate services?”
[00:11:24] Dean Barber: So, Tom, that’s interesting because you’ve probably run into this before. I know I’ve seen it a lot of times where people are working past age 65 and for some reason, they’ve already turned on that Medicare Part B. Is it because that they didn’t get good counsel from the Medicare office when they signed up for their benefits? Is it because they just thought that they had to sign up for both? I mean, to me…
[00:11:55] Tom Allen: I think both of those are true, Dean, and I think it’s also a situation where people will if they can easily afford the additional premium, even though they’re contributing to their employer’s group health plan, they think, “Well, why not? Why not go ahead and put in place and have the coverage and I don’t have to worry about it down the road.” And the flaw in that is that when they receive Medicare Part B effective date when enforced, that started the six-month window of time that they would have no underwriting.
[00:12:26] Dean Barber: So, is there a point at which you have to start Part B or you’re not eligible for it anymore? In other words, let’s say there’s people today that are working into their 70s. So, like social security as an example, you’re eligible as early as age 62 but you’re going to take it at age 70.
[00:12:45] Tom Allen: Yes.
[00:12:46] Dean Barber: Right?
[00:12:47] Tom Allen: Because there’s no additional reason.
[00:12:48] Dean Barber: So, does the Medicare Part B work the same way? Is there a point in time at which you have to start or you lose your opportunity to get it?
[00:12:54] Tom Allen: There’s not a point in time when you have to start. Medicare doesn’t have a law stating that by this date you have to take Medicare Part B. If you’re continuing to work past age 70 and many people do and you have coverage through your employer, and which again is very common, there’s no reason to have Medicare Part B premium to face.
The point I want to make is if you choose to go ahead and take Medicare Part A and Part B and continue working, you will see that six-month window of time where you could go through no underwriting comes to a close. People have retired past 65, 67, 68, 72, whatever the case may be, they want to go on a supplement plan and they now face underwriting not realizing that they had a six-month window of time and they began the clock when they accepted Medicare Part B. Six months later, the no underwriting part goes away.
[00:13:52] Dean Barber: And so, let’s just paint a scenario, Tom. Somebody reached age 65. They continued to work and went in ahead and did what you just said. They signed up for part A or they sign up for part B. Now, they work another three or four or five years and all of a sudden, okay, now I’m going to retire. I’m losing my company-sponsored health plan. I want to go get now a Medicare supplement to supplement my part B because it only pays 80%.
[00:14:15] Tom Allen: That’s right.
[00:14:16] Dean Barber: But you’re saying they may not be able to get a supplement plan because they have to go through underwriting. So, if they’ve gotten some illness that precludes them from getting underwritten, they may not be able to get a supplement?
[00:14:27] Tom Allen: Dean, that’s right. And recognize that a supplement carrier is an insurance company. They look at the premium coming in, they look at the potential claims going out. In a sense, you stop becoming a breathing human being. You’ve now become a statistical analysis for that insurance company to decide. Is the premium going to be profitable for us based on the potential claims that we now recognize? It’s like a house with smoke coming out from under the eaves. Chances are there’s going to be a claim.
[00:14:58] Dean Barber: So, I guess an easy way to think about this is that you can qualify for a Medicare supplement for Part B without going through underwriting. So, with preexisting conditions, as long as you apply for that Medicare Supplement within six months of the time that you have applied for Medicare Part B.
[00:15:18] Tom Allen: When it goes into effect. That’s right. So, let’s go back.
[00:15:21] Dean Barber: I don’t know that that’s really common knowledge, Tom.
[00:15:23] Tom Allen: Well, I don’t think it is. And right now, we happen to be in the annual open enrollment period, October 15 through December 7. And you don’t really need a calendar to know that that’s occurring. You turn on the TV and nine out of 10 commercials are on a Medicare Advantage plan right now. And I’ve heard many of the commercials say, “This is the time when you can make a change in how you receive your Medicare coverage,” and that’s sort of correct. It is sort of correct in the fact that if you have a Medicare Advantage plan, and I think we’re going to chat about that shortly, or if you have a Medicare Part D, the prescription drug coverage, during that time period, you may freely move from carrier to carrier.
The exception under the Medicare Advantage plan is there is always going to be one underwriting question, do you have end-stage renal disease? And if you do, you’re not going to be able to make a change to another Medicare Advantage carrier.
[00:16:22] Dean Barber: Is there more than one Medicare Advantage carrier? Let’s not confuse. We’re going to get into the Medicare Advantage stuff here in a few minutes. So, let’s stick to the Medicare supplements and you’ve talked about Part A Part B, but that doesn’t cover prescription drugs.
[00:16:42] Tom Allen: Doesn’t cover prescription drugs. Medicare supplement plans do exactly what the name implies. They supplement Medicare. Medicare does not cover prescription drugs with very few exceptions, and most of those are what’s classified as Tier V usually administered in a hospital setting, occasionally in a clinic or physician setting. But when you think about the main street prescriptions that we take day in and day out, they’re not covered.
[00:17:12] Dean Barber: So, what does a person do then? How do they get their prescription drugs covered?
[00:17:16] Tom Allen: If they go the route of a Medicare supplement plan, they need to back that up with a Medicare Part D prescription drug plan.
[00:17:23] Dean Barber: Okay. Now, does the Medicare Part D prescription drug plan, does that carry an additional premium over the $135 a month of Medicare Part B?
[00:17:31] Tom Allen: Dean, it does but let me point out that the Medicare Part D does not come to you through Medicare. That is a private insurance policy. Not unlike a supplement plan where you would purchase that Part D carrier from a carrier, an insurance carrier, and there is a premium. I tell people from a budgetary standpoint when they’re looking into going into Medicare, they should budget about $25 a month for that premium for the Medicare Part D. And with the Medicare Part D, that does not imply that all their prescriptions are provided without an additional cost.
[00:18:07] Dean Barber: Alright. So, let me ask a question because this gets into something that’s I think super sensitive and that is what prescriptions are covered by what Part D supplement carriers are. Has this been standardized as well so every single Part D carrier has to provide the same prescription drug benefits? Or are some companies or some insurance companies providing different prescription drug benefits? In other words, they’ll cover some prescriptions, but they won’t cover others?
[00:18:36] Tom Allen: Dean, they have not been standardized.
[00:18:38] Dean Barber: So, this is critical.
[00:18:39] Tom Allen: It is critical. And unfortunately, it’s kind of a liquid landscape. The prescriptions I want to take next year may be different than the prescriptions I’m taking this year.
[00:18:47] Dean Barber: So, what if you get that preexisting condition where you’re starting now, you weren’t on a prescription drug and the prescription drug plan you had was fine. Now, all of a sudden you’re taking new prescriptions. Do I have to wait until open enrollment to go out and find a new prescription drug carrier? And if so, will they take me if I already have that preexisting condition?
[00:19:08] Tom Allen: Dean, the answer is yes. You have to wait until open enrollment period, October 15 through December 7, and the effective date will be January 1 of that following year. What I tell people to do when they’re picking out a Medicare Part D plan, the best advice I can give them is to go to Medicare.gov website, very friendly, created for our age group, and I can build a profile. I put my name, I put my gender, I put my zip code, and I can list all the prescriptions that I’m taking. Medicare.gov will give me a printout, if you will, of which plans most closely match my current prescriptions. And going back to what you asked, do all plans cover all prescriptions the same?
And the answer is no, they don’t. The example and we mentioned this in our earlier podcast. The example I use if there’s 41 prescriptions for high blood pressure. A Medicare Part D carrier does not need to provide all 41 but they have to provide a minimum standard which is designed by Medicare.
So, let’s say that there’s 30 of the 41 that they’re going to offer. Translate that, that means in that example, there’s 11 prescriptions that this particular carrier is not covering, although they’re providing 30 high blood pressure tablets. If you and your physician have gone through the process of picking out the prescription that gives you the least amount of side effects, the one that you and the doctor feel that you need to maintain, the first question I would ask is, does this new Part D carrier covered that specific brand name? By going to Medicare.gov, it’s going to tell me if they do or if they don’t.
[00:20:47] Dean Barber: Okay. So, let’s say that I’m a person that’s already on Medicare. I’ve got my Medicare Part D plan. I go on to Medicare.gov and they’re not going to cover this plan that my doctor says is the one that I need. What do I have to do? I’d wait for an open enrollment and then I go in and switch to a carrier that covers it? Can I do that?
[00:21:07] Tom Allen: Dean, you can. There’s no underwriting for the Medicare Part D. You are free to change from carrier to carrier each year during the annual open enrollment period.
[00:21:18] Dean Barber: So, it sounds to me like you could have a different carrier for your Medicare Part B supplement, and then a different carrier for Medicare Part D.
[00:21:26] Tom Allen: That’s correct.
[00:21:27] Dean Barber: So, it doesn’t have to be the same insurance company.
[00:21:28] Tom Allen: And sometimes it is. Generally speaking, it’s not. And since things change in our prescription drug usage during the course of the year, it’s very, very wise for people to go back to Medicare.gov and reload the prescriptions that they’re taking and just see if there’s another carrier now that better fits their needs.
[00:21:51] Dean Barber: Okay. Let’s take a quick break. This is The Guided Retirement Show. I’m Dean Barber. We’ll be right back.
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[00:23:14] Dean Barber: So, you’re saying that just turning 65, Medicare doesn’t just turn on automatically Part A and Part B. Do you have a choice to delay Part B to later?
[00:23:23] Tom Allen: Sure. And many Americans are working past age 65 for a variety of reasons.
[00:23:28] Dean Barber: So, they don’t need the Part B yet.
[00:23:30] Tom Allen: They do not need the Part B yet.
[00:23:45] Dean Barber: Welcome back. I’m Dean Barber, CEO of Barber Financial Group, and this is The Guided Retirement Show. You know, what’s so interesting to me, Tom, is in Season 1 of The Guided Retirement Show, I did an interview with a lady by the name of Brie Williams and she specializes in the cognitive impairment that people face as they age and how much more difficult it becomes to comprehend and make decisions and those types of things. It’s just a natural part of our aging process. And it just blows my mind that we can make something so complicated for somebody who’s in a stage of life where their abilities to comprehend and understand and take it all in are declining throughout their life.
And so, I think it’s critical. Here’s what I think. I think that if you have adult children, that the adult children need to be listening to The Guided Retirement Show here, and especially this podcast and the other ones that we did on Medicare Supplement so that they can help coach their parents.
[00:24:49] Tom Allen: Dean, I couldn’t agree more. And sometimes it’s friends, neighbors, church members. Sooner or later, we’re going to all recognize that we’re all in this together. We have to start looking out for the people that need more assistance. You can go to people, brokers and agents such as myself, and certainly, we’re happy to help them. Some people feel that their health care issues and the prescriptions they take is confidential. And they tend to be private about that, and I get it but the potential expense that are possibly going to have during the course of a year can be devastating. And I don’t say that lightly. Prescription drugs are almost the tail wagging the dog for many health issues that we have today.
There’s reports to say 50% of Medicare recipients that have a significant illness or issue that they’re dealing with, their prescription drug cost is devastating to them on an annual basis. And your point’s correct, it’s confusing, and if there’s a better answer to their problem, then I would encourage them through their children or through another source to each year re-evaluate their Part D carrier.
[00:26:07] Dean Barber: So, that profile that you said you can go on to Medicare.gov and establish, that’s something that somebody should do every year prior to the open enrollment period so that they can understand is there a better carrier out there, especially for that Medicare Part D. Now, we go back to the B plan, and if they’ve got what you call it, some kind of a condition that they can’t pass underwriting?
[00:26:29] Tom Allen: Well, if they have a health issue, that’s a significant health issue…
[00:26:33] Dean Barber: They’re not going to be able to go…
[00:26:35] Tom Allen: They’re not going to be able to make a change. So, let’s go back to something you said earlier. If all the benefits are exactly the same, and the only difference is premium, should you go with the least expensive premium? And I tell people, if they’re choosing between the four or five or six major insurance companies in this country that are offering Medicare supplement plans, they’re probably very safe than to go with one of the lesser premiums.
But if you’re looking at a company that has lower premium, but they’re just not that major of a carrier, I would ask you to take pause, because as we pointed out, they may be locked into that carrier forever, because they have now developed preexisting conditions that’s not going to allow them to make a change to a different carrier.
[00:27:26] Dean Barber: And can that carrier, can individual carriers raise their premiums for existing insurance holder? So, let’s say that you walked into a new so I want that carrier because they’re going to be $15 a month cheaper. And then all the sudden that wasn’t a major carrier and that carrier now starts jacking up their premiums. They’re going to trap anybody in that plan with a preexisting condition. Well, can they do that regardless of what the other insurance companies are doing?
[00:28:00] Tom Allen: I guess we’re trapped is a strong statement. The reality is there will be costs, there will be adjustments in premium as long as there’s medical inflation. And there is little enforced currently to provide a safety from medical inflation. But let’s take that the next step further. Let’s assume that you and I both have a G Medicare Supplement level coverage from Company A. And this year, you have $12 in claims, and this year, I have $886,000 in claims. Well, Dean, both of our increases will be exactly the same from that carrier next year. And you can certainly argue that that’s not fair to you. And I could argue, yes, but this may be the year you have $886,000 of claims.
[00:28:51] Dean Barber: I took better care of myself though.
[00:28:52] Tom Allen: Well, yes, and you’re younger. The increase will be, first of all, the carrier will have to go to the Department of Insurances of that state and mathematically demonstrate why they need a rate increase. And as long as there’s medical inflation, they’re probably going to be able to do that. But they’re not going to be able to you use your large claim against you.
[00:29:13] Dean Barber: But they could do it based on the claims of everybody that is in their insurance company, right?
[00:29:20] Tom Allen: The pool of claims, that’s right.
[00:29:21] Dean Barber: Yeah. And it doesn’t have to be the pool of claims with companies X, Y, and Z. It’s just their pool.
[00:29:28] Tom Allen: And in this example, it would be their pool of people that are in the plan G. All of us will receive exactly the same increase. And it’s important to point out, they cannot, in my example, they could not exit me from coverage. They could not cancel my policy because I had large, large claims. As long as I maintain Medicare Part B which is required and as long as I pay my monthly premium to them, they must continue on the risk without consideration to the amount of claims I’ve had.
[00:30:03] Dean Barber: Well, that makes sense but if you’ve had that many claims, there’s probably a pretty good possibility that something’s going on where you’re not going to be able to switch from one carrier to another.
[00:30:11] Tom Allen: Oh, I guarantee you. In that example, you’re going to be renewing with that carrier each year. And I guess that’s the point I was trying to make earlier. When you select your Medicare Supplement carrier, don’t let just the premium be your deciding factor. I always suggest people go with one of the top four, five, or six Medicare Supplement carriers. Always remember, a horse is easiest to ride the direction it’s already going. And many people make this one decision and for the Medicare supplement, that’s their decision that they’re going to live with and it may be simply because they have great comfort with that, their friends or neighbors or relatives have enjoyed coverage with that carrier.
But they may be with that carrier because they’ll never pass medical underwriting. Medical underwriting is the same as a medical audit. When you fill out the questionnaire on the page for medical questions, that supplement carrier is going to have an extremely informed ability to make a decision, “Are you insurable?” under their….
[00:31:21] Dean Barber: Their guidelines.
[00:31:22] Tom Allen: New guidelines. That’s right.
[00:31:23] Dean Barber: Okay. So, I think that pretty well explains the Medicare supplement plans, but there’s a different, what we’ll call a tie-in plan. It’s the Medicare Advantage plan. Now, you started to break that down in the podcasts that we did in Season 1 here of The Guided Retirement Show. This Medicare Advantage plan, I think if I’m correct, the idea behind that is that the government’s saying, “Look, we want to pay an insurance company to administer the claims.” And so, the government actually pays the insurance premium, if you will, for the Medicare Advantage plan. So, if I use a Medicare Advantage plan versus a Medicare supplement, I have no premium.
[00:32:15] Tom Allen: In most cases in our marketplace, it’s zero premium or an extremely low premium, a fraction of what you would be paying for a Medicare supplement.
[00:32:23] Dean Barber: So, if I’m looking at it a cost, why would everybody not just choose the Medicare Advantage plan? Are there advantages or disadvantages to the Medicare Advantage plan versus the Medicare Supplement?
[00:32:35] Tom Allen: Sure. Dean, yes, and there are things that you should consider. Well, a Medicare to contrast that with a Medicare supplement plan, any provider that accepts Medicare will be happy to receive the check from your Medicare Supplement carrier. With a Medicare Advantage plan, there’s two choices, one of which is an HMO-based Medicare Advantage plan. HMO meaning Health Maintenance Organization and that is a select contracted pool of providers that Medicare Advantage carrier has contracted with. So, you would pick a primary care physician who would act as your gatekeeper, certainly with your input. But when you needed to be referred to a specialist or needed to be hospitalized, recognize that you’re going to go into the pool or the panel of contracted providers that have contracted with that Medicare Advantage.
[00:33:35] Dean Barber: So, you may not be able to choose just any doctor that accepts Medicare. It’s got to be within that group that is approved by that Medicare Advantage provider.
[00:33:45] Tom Allen: If you wanted to be paid by them.
[00:33:47] Dean Barber: I mean, that’s the idea, right?
[00:33:48] Tom Allen: That’s the idea. And I say that with a smile. You could go out of the system if you chose to and if you had the financial wherewithal to do that, but you’d be paying 100% of that provider’s cost.
[00:34:02] Dean Barber: Right. So, let me just draw a scenario here. Something’s in my head. Now, so a lot of people when they’re retired, they like to travel, right?
[00:34:09] Tom Allen: Yes.
[00:34:10] Dean Barber: And I’ve got a primary care physician that’s in my hometown. I’m on vacation, and I’m on the opposite coast, and I have a stroke or I have a heart attack or something happens and I’m hospitalized and I need care. I’m unaware of what’s going on. My spouse is worried about me, making sure that I’m taking care of. I didn’t go back to my provider, my main doctor and say, “Hey, is this person improved? Are they in the pool? Are they not in the pool?” Is that a risk that that person could be put into a situation like that where that might not be covered?
[00:34:52] Tom Allen: Dean, it will be covered and to complicate your scenario and the next step, you have the heart attack. You’re sitting in the restaurant, you’re enjoying lunch with your spouse, and you have a heart attack. Believe me, the ambulance is not going to be concerned about are you in an HMO plan or who are your providers or what panel or what primary care physician. They’re going to take you to the closest provider of healthcare.
[00:35:18] Dean Barber: And because it’s inpatient, is that the difference?
[00:35:21] Tom Allen: No. There’s coverage. A Medicare Advantage HMO plan will provide coverage for emergency or urgent care needs wherever you’re at and they will cover it as if you were in the Kansas City area in the panel. So, you have the comfort of knowing if you have urgent or emergency care needs, you have that coverage. Now, they may at some point in time, move you back when you’re in stable condition and it makes sense medically and financially to bring you back to this area, which you probably would enjoy doing as well if the medical condition would allow it. They may want to bring you back to this market area for the additional services but the point is for the emergency care to stabilize, your emergency care, urgent care, you’re covered.
[00:36:10] Dean Barber: So, where’s the disadvantage then?
[00:36:12] Tom Allen: To the HMO plan?
[00:36:13] Dean Barber: Yeah.
[00:36:13] Tom Allen: Well, there’s an old study that shows that the American public about 17% of the American public is a perfect candidate for an HMO plan. The translation of that is they don’t know how to predict or to choose a provider. They know under an HMO program, the providers that are in that plan have gone through a criteria. They’re either board certified, board eligible, but the higher tier of physicians, and that’s been decided upon by other physicians. So, if I’m in an HMO plan and I need a cardiologist, I don’t have a cardiologist of choice and my next-door neighbor may recommend one, but that cardiologist may have graduated number last in his class. Under an HMO umbrella, you can be assured that the cardiologist that she’ll be referred to is a top tier, very highly respected cardiologist.
So, what I’m saying is 83% of the population wants to be able to cast the final vote. If I want to gas up the Chevy and drive to the Cleveland Clinic, I want to be able to do that. And I don’t want to be in an enclosed panel of providers and that’s really where the second choice under Medicare Advantage plan comes to light and that’s a PPO, a Preferred Provider Organization. And under a Preferred Provider Organization, PPO plan, you have in-network and you have out-of-network benefits. The in-network benefits are generally very superior. And the out-of-network benefits, by definition, is going to be a lesser level of coverage, but you still have coverage.
[00:37:57] Dean Barber: Now, and this out-of-network, you do have a different deductible on the out-of-network than the in-network? Or do you still have the same deductible that you’ve got to meet and then everything’s covered after that?
[00:38:08] Tom Allen: Generally speaking, it’s a percentage of the bill.
[00:38:12] Dean Barber: So, it can get to be a big number if you’re out-of-network.
[00:38:16] Tom Allen: Yes. It can get to be a big number but you wouldn’t choose probably to go to – if you were vacationing, you wouldn’t choose to have routine care. You would only probably if you were vacationing would be in an emergency urgent care situation.
[00:38:32] Dean Barber: So, it sounds to me like what you’re saying is that the Medicare Advantage plans are good, right?
[00:38:36] Tom Allen: Correct.
[00:38:36] Dean Barber: But if people want control and they want that final vote, they want to know that I’m going to choose what doctor I want to go to and as long as this doctor accepts Medicare, they’re going to accept my Medicare supplement plan, I’m good.
[00:38:49] Tom Allen: And that’s a positive for the supplement. In our marketplace, the two or three major Medicare Advantage plans, if you can find a provider that is not in that system in-network, you almost deserve a gold star. 11,000 people, over 11,000 people a day are going to turn 65 and we’re not at the peak. The peak will be over 12,000 a day. Most physicians are not living under their own shingle. They’re not a private…
[00:39:19] Dean Barber: Most of them are working for hospitals today.
[00:38:20] Tom Allen: They’re working for hospitals or groups of providers. And those groups and those hospitals do not want to lose their bite of the senior market.
[00:38:31] Dean Barber: They love Medicare.
[00:38:32] Tom Allen: Well, they love Medicare. They’re paid promptly. They’re not paid as much as they want, but they are going to, A, be paid and, B, they’re going to be paid promptly and they don’t want to see that market erode away. So, most providers, most hospital settings, most group settings are in most of the major Medicare Advantage plans. An exception may be where a doctor is, “I’m six or eight months or 10 months or 15 months away from retiring and I want to start winding down, I do not wish to add new patients,” that’s a perfect example of a provider that may choose not to participate. If that provider is key to you, that would help you decide which Medicare Advantage carrier you would like to go with.
I advise people, simply call your doctor’s office, ask for patient accounting, and ask which Medicare Advantage plans that specific doctor, not your office, but the doctor you’re seeing participates in. You may find that he’s in or she isn’t just one of the six. Well, that would help me to guide me on which plan I wanted to go with.
[00:40:36] Dean Barber: These are really critical decisions that people need to make. So, let’s go back and draw this picture. I chose an advantage plan. Now, I’m five years in and I develop an illness that my Medicare Advantage plan I don’t like the providers. I want to go just now get a supplement.
[00:40:58] Tom Allen: Dean, you may do so if you could pass underwriting.
[00:41:02] Dean Barber: Right, but if I’ve gotten sick, probably not going to be able to do that.
[00:41:05] Tom Allen: Probably not. You’re probably going to be able to stay in a Medicare Advantage plan from now on. Now, you can change plans during the annual open enrollment period but you are probably going to be pretty much locked into a Medicare Advantage plan and out of the Medicare supplement plan. And so, that’s an advantage to the supplement plan.
Recognize that and from a budget standpoint, I tell people when they’re going into Medicare for the major mainstream carriers, the higher tier levels of Medicare Supplements, the F or the G plan, and I have to point out that the F plan is going away January 1, 2020. For new enrollees, people that are eligible or already in an F plan may continue that. But if they go to a G level, which will be the next tier down, they may be under that coverage from now on, but they can change carriers if they can pass underwriting.
[00:42:04] Dean Barber: On the Medicare Advantage plans, do you have to pass underwriting to go to a new Medicare Advantage plan? Or since there’s no premium, is it just you can change advantage providers anytime you want?
[00:42:13] Tom Allen: One underwriting question, do you have end-stage renal disease? And I’ll point out if you’re in a Medicare Advantage plan and you develop end-stage renal disease, they will continue to cover you.
[00:42:25] Dean Barber: Right. You’re not going to get kicked out.
[00:42:26] Tom Allen: You won’t get kicked out, but you will not be able to go into another Medicare Advantage carrier.
[00:42:30] Dean Barber: So, it’s critical that you pick the right one.
[00:42:32] Tom Allen: Well, statistically, I don’t know how many people are going to develop end-stage renal disease. I know it’s a growing number because that’s one of the subsets of diabetes and that’s an increasing problem for the American public. But your point is accurate. When you are initially making these decisions, there’s a lot of things to consider besides my sister always use this carrier. That’s what I’m going to go with. Well, it may have been perfect for her and not perfect for you.
[00:43:01] Dean Barber: I don’t think that’s the way to make a decision.
[00:43:04] Tom Allen: Well, I agree. A lot of people make decisions without all the facts. And that’s really the purpose of this podcast is to try to provide them or drive them to more information.
[00:43:14] Dean Barber: So, Tom, you coach people pretty much daily through the ins and outs of choosing the right Medicare Supplement provider. The interesting thing is that from a financial perspective, it makes zero difference to you whether they use a Medicare Advantage plan HMO, a Medicare Advantage plan PPO, a Medicare supplement, you’re going to be paid the same no matter what they do. So, your job is to counsel people to help them understand the difference between all the different plans that are out there and help them make the right choice.
[00:43:48] Tom Allen: Dean, that’s right. And the only agenda I can have is their agenda.
[00:43:54] Dean Barber: Which is the way that it should be.
[00:43:56] Tom Allen: Well, it should be and I think the vast majority of people doing what I do take that very seriously. Sadly, I hear stories about people that interject their agenda into the equation as well.
[00:44:10] Dean Barber: I got a question. Why do I hear different people advertising different Medicare supplement companies as if there’s one that’s better than another? I mean, I hear that on the radio pretty much on a weekly basis. Somebody who’s advertising their Medicare Advantage, I’m not going to name insurance companies, but they’re advertising their Medicare supplement plan like it’s going to be doing something different or better than the other but you say it’s standardized and the only difference is premium.
[00:44:41] Tom Allen: That’s right.
[00:44:42] Dean Barber: So, why would a company even advertise that then?
[00:44:45] Tom Allen: Well, they’re trying to entice people to participate and purchase their product. It’s not like any other advertising you’re hearing on the radio. They’re trying to drive or move people into becoming their client, their customer, and they’ll receive the premium for that and that’s how they grow and recognize they have investors and shareholders and stockholders that are expecting an increase.
[00:45:05] Dean Barber: But the coverage is identical across the board, it would seem to me that my choice as a consumer is going to be pretty straightforward. Because that’s for my Medicare Part B supplement and then I got my Medicare Part D supplements. That’s my prescription drug. So, I might choose two different carriers because of the situation that I’m in and you say most of the time that’s what happens.
[00:45:31] Tom Allen: Majority of time that’s what happens. Not exclusively, but yes, that’s what happens. And because your prescription drug usage is going to change over the years, it’s not unlikely that you will change Medicare Part D carriers if you know that there’s other choices out there that may better fit your needs. There are people that selected a Medicare Part D carrier three or four years ago and they do not go on an annual basis. They do not go back to Medicare.gov and spend the 15 minutes to find out if there’s a better fit or…
[00:46:04] Dean Barber: Which should be just a normal exercise.
[00:46:06] Tom Allen: It should be a normal exercise. I encourage people to do it every year.
[00:46:10] Dean Barber: All right, Tom. This has been fascinating as usual. There’s so much to know here. And what I would encourage people to do is we got Tom’s contact information here in the show notes, GuidedRetirementShow.com/22. You can reach out to Tom, send him a quick email, however, you want to get in touch with him and talk to him about the position where he can help coach you through making sure that you’re making the right decisions when it comes to your Medicare Advantage plans or your Medicare supplement plans and understanding I’ll call it the alphabet soup of the Medicare world. And do me a favor, pass this podcast on to your friends and your relatives.
This is critical information that everybody needs to know. We’ve tried to put it together in The Guided Retirement Show here where you can listen at your leisure, you can stop, you can relisten. It’s awesome. So, share it with your friends because the more people that can be educated on this, I think the better off we’re all be. So, Tom, thank you so much for being here. Appreciate it.
[00:47:08] Tom Allen: It’s always a privilege. I get to come where the magic’s made.
[00:47:12] Dean Barber: That’s right. All right. There you have it, a lot more information and hopefully, you’re far more informed about the different types of Medicare supplements that are out there today. Whether it’s the drug plans, whether it’s the prescription drugs, whatever it is, I mean, it’s complicated. Look, there’s so much to learn here. We’ve got a great white paper, which you’ll find a link to in the show notes. It’s called Making Sense of Medicare. Also, in the show notes, you’ll find a link to our website. You can check out any upcoming live workshops that Tom Allen is presenting at. You can get your questions answered. All you got to do is click on here and get your questions answered.
That’s all in the show notes at GuidedRetirementShow.com/22. Tom Allen does some of these Medicare workshops in a format that you can just view from your computer. We do we call them webinars. I guess that’s what you’d call them where you’re sitting in the comfort of your home or your office and you’re listening to what Tom’s got to say about Medicare.
Listen, share this episode. People need to know all of the rules and intricacies as it pertains to them around health care and retirement. Tom’s the expert in this area. We’re happy to have him on. We’ll have him on more and more. And share this out with your friends and relatives and make sure to check us out on YouTube as well and subscribe to that YouTube channel. That way you can watch us do a show that’s sometimes more entertaining than just listening. Thanks for being here.
Investment advisory service is offered through Barber Financial Group, an SEC-registered investment advisor.
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Investment advisory services offered through Barber Financial Group, Inc., an SEC Registered Investment Adviser.
The views expressed represent the opinion of Barber Financial Group an SEC Registered Investment Advisor. Information provided is for illustrative purposes only and does not constitute investment, tax, or legal advice. Barber Financial Group does not accept any liability for the use of the information discussed. Consult with a qualified financial, legal, or tax professional prior to taking any action.