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I GREW UP IN ENGLAND, with health-care coverage provided by the National Health Service, so I’m extremely sympathetic to people calling for “Medicare for All.” Still, I do wonder whether they realize that Medicare is neither cheap nor simple. My medical costs in 2021 were more than $10,000, with half of that for a single drug. And it would have been even more without the $3,000 a year kicked in by my former employer.
Since I turned age 65, I’ve experienced three varieties of Medicare coverage, and I need to make another coverage decision soon. I thought HumbleDollar’s readers might have opinions about my choices—although it’s a gamble either way. To begin, here’s a brief outline of the parts and plans that comprise Medicare.
Medicare Part A is hospital coverage. It covers in-patient room, board and nursing care in a hospital, nursing home, skilled nursing facility, hospice and sometimes at home. One could argue that Part A is free since, if you’re eligible for Social Security, you don’t pay premiums for Part A. This is the only time where having a spouse affects your coverage: You can qualify based on your spouse’s earnings. But Part A really isn’t free. There’s a $1,600 deductible this year for each “hospital benefit period,” plus there are copays after 60 days in the hospital and after 20 days in a skilled nursing facility.
Medicare Part B covers outpatient services, such as doctor visits, preventive care, mental health care and certain prescription drugs. Most recipients pay a monthly premium of $164.90 for Part B in 2023. If your modified adjusted gross income, as of two years ago, was above $97,000 for a single filer or $194,000 for joint filers, you’ll pay more. These premium surcharges are known as IRMAA, short for income-related monthly adjustment amount, and they also apply to Part D.
On top of all this, there’s the $226 annual Part B deductible. The real wildcard, though, is the copays. Patients are responsible for at least 20% of the Medicare-approved cost of their care, with no annual maximum. Note that Part B does not cover dental, hearing aids or glasses.
Medicare supplement insurance, or Medigap plans, are policies sold by private insurance companies that are intended to cover the gaps—such as copays and deductibles—within regular Medicare. These policies come in bundled packages labeled A to N, although some bundles are no longer offered. Federal law specifies the minimum coverage for each plan, with some insurers or states adding extras.
Medicare Part D is Medicare’s prescription drug program, available since 2006. It has a maximum deductible of $505 this year, variable copays and no annual maximum. One of Medicare’s quirks is that you can only change your drug plan once a year, but the insurance company can change its formulary—its list of covered drugs—whenever it likes. Good luck figuring out in November what drugs you’ll need next August.
Medicare Part C is also known as Medicare Advantage. These private insurance plans bundle services to take the place of Medicare A and B, Medigap and usually Part D. The government pays more per person for those enrolled in these plans than it does for traditional Medicare, so these plans can offer additional benefits, such as some dental care or gym membership. Every plan is different and can change each year. You should compare plans during each year’s open enrollment period and then pick one for the year ahead.
My Medicare choices? When I took early retirement at age 53, an important consideration was the group retiree medical coverage offered by my soon-to-be ex-employer. At 65, when I had to sign up for Medicare A and B, I was able to keep my former employer’s plan as secondary coverage.
This happy state of affairs ended a few years later, when the company once again downgraded its support for former employees. It replaced its group coverage with a $3,000-a-year stipend. My employer’s prior health-care coverage was deemed “creditable,” which meant Medicare treated me as if I were age 65. Insurance companies had to accept me if I wanted a Medigap plan, and I wasn’t penalized for signing up for a drug plan after 65. Typically, if you delay, you pay a penalty in the form of higher lifetime premiums.
I used my employer’s $3,000 stipend to sign up for Medigap Plan F, plus a dental plan, a vision plan and a Part D drug plan. I was pleased with Plan F, which allowed me to see any doctor who accepted Medicare and required no deductibles or copays.
Congress eventually closed Plan F to new enrollees, thinking it too generous. Worried that the Plan F coverage pool was becoming smaller, older and sicker, I tried to switch to Plan G. That would have covered everything except my Part B deductible.
Unfortunately, I failed the medical underwriting, which meant I’d have to pay a significantly higher premium for Plan G. In some states, I wouldn’t have had a medical screening, but it’s the rule in mine. Later, I was able to switch from UnitedHealth Plan F to Humana Plan G when Humana temporarily suspended underwriting.
But then last year, my employer stopped paying the $3,000-a-year stipend and switched us to a group Medicare Advantage preferred provider organization. It’s a good plan. I pay zero additional premiums and my annual out-of-pocket maximum is capped at $750. I can see any doctor that accepts both Medicare and the plan, it has a generous drug plan and covers unlimited skilled nursing days.
Of course, there’s no guarantee the plan will stay so generous. If I opt to switch back to traditional Medicare before the end of the year, I can get a Medigap policy without medical underwriting. If I try to switch after this year, I’ll once again be subject to underwriting, which I would once again fail.
If I switch, my premiums next year will likely be at least $2,500—the cost of a Medigap policy, a Part D drug plan, and vision and dental coverage. It’s possible that my rheumatoid arthritis has gone into remission, so the money I’ve been spending on medication would cover the premiums. It’s also possible it hasn’t gone into remission, in which case my drug costs would be an additional $3,000 a year if I switch to traditional Medicare.
Right now, my Medicare Advantage plan charges $10.35 per prescription once I’ve spent enough on prescriptions for the year to reach the “catastrophic coverage” level. Meanwhile, the Part D plans available to me would charge 5% of the retail cost once I’m in catastrophic coverage. Rheumatoid arthritis drugs can easily retail for more than $6,000 a month. But if the $2,000 cap on Medicare drug costs included in last year’s Inflation Reduction Act actually goes into effect in 2025, that would sharply reduce my potential out-of-pocket cost.
For someone who grew up with the National Health Service, the cost and complexity of Medicare is confounding. I’ve left out a lot of details, and you’ll find plenty of potential pitfalls in the fine print. Also, some states have different and more generous rules.
I urge anyone who is turning 64 to read the latest edition of Medicare for Dummies and to arrange a consultation with a State Health Insurance Assistance Program counselor when deciding on Medicare coverage.
Which is better, traditional Medicare or Medicare Advantage? Offer your thoughts in HumbleDollar’s Voices section.
Kathy Wilhelm, who comments on HumbleDollar as mytimetotravel, is a former software engineer. She took early retirement so she could travel extensively. Born and educated in England, Kathy has lived in North Carolina since 1975. Her previous articles were Planning My Exit and Continuing Care.
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Great article! One additional thing to be aware of is when choosing a supplement policy there’s another important consideration that the buyer needs to be aware of when selecting a policy. That’s whether the policy being considered is “Community-Rated”, “Issue-Age-Rated”, or “Attained-Age-Rated”. Just make sure you know what you’re buying, and how the costs will change as you age. For example, a Plan G policy at 65 that’s “Attained-Age-Rated” will probably be relatively inexpensive at 65, but the cost will increase as you age (beyond normal inflation increases). So it may be cost prohibitive at 90. In my state all 3 types of policy are being sold and selection based solely on initial cost may be a poor choice for many people.
That’s a good point. When I signed up for my Plan F, all the policies available to me were Attained Age, which was annoying but beyond my control. When I switched to Plan G, I had to take Humana since it was waiving underwriting (its EOBs are much harder to decode than United Health’s).
I just checked medicare.gov to see what Plan Gs are currently available and of the 59 in my state there are very few that are not Attained Age and they are mostly the most expensive (given I am currently 75). Something called Old Surety is offering Issue Age for $128, which is reasonable, and United Health is offering Community Pricing for $140, $149 or $256. I suspect the $256, listed as Level 2, is what you pay if you fail underwriting.
I need to find out whether I have to go back to Humana ($146, Attained Age), or whether all companies have to take me during the year after I signed up for MA.
Selecting Original Medicare was a no brainer for me. I do not want to be restricted to network doctors, get approval from the insurance company for specialist referrals and be able to use my coverage anywhere in the country. Insurance companies push Advantage programs because they can maximize profits, deny/restrict claims and con people by using spokespeople like Joe Namath.
I dropped dental/vision coverage because of all the restrictions and limited benefits. The math just did not work out. Cheaper to self-insure.
Plan D coverage is good for generics. Also, I use Cost Plus and GoodRx because their pricing is much more attractive than paying the deductible and/or co-pay on some prescriptions.
“Most recipients pay a monthly premium of $164.90 for Part B in 2023.”
Author mentions the Income-Related Monthly Adjustment Amount (IRMAA) that will result in a higher monthly premium, but it is my understanding that the “hold harmless” provision is another reason.
The “hold harmless” provision for Part B premiums ensures that an individual’s Social Security payment, in nominal dollar terms, does not decline from year to year as the result of any increase in the Medicare premium dollar amount taken out of the recipient’s monthly benefit check.
From the Social Security website, “to qualify for the hold harmless provision, you must:
It used to be that one could be eligible for full retirement age (FRA) Social Security and Medicare benefits at the same time, i.e. turning age 65. That is no longer the case. For example someone born in 1958 will reach FRA in 2023, at age 66 and 8 months (there is an exception for people born on Jan. 1).
If an individual does not elect to receive their Social Security benefits early and is waiting until their FRA or later to start collecting Social Security, they would not be protected by the hold harmless provision, and won’t be until they meet the two qualifications listed above. In essence, for that time period where Medicare Part B premiums aren’t being deducted from a Social Security payment they will be paying for any Medicare premium increase (if there is one) attributable to themselves, and also, in a sense, subsidizing the increase that beneficiaries who are protected by the hold harmless provision would have experienced if that provision did not exist. (IRMAA recipients don’t qualify for the hold harmless provision either, and there may be other use cases not described here as well.)
https://blog.ssa.gov/how-the-hold-harmless-provision-protects-your-benefits/
Correct. If there is a Part B premium increase, but there is no COLA increase or it is smaller than the Part B increase, you do not pay the Part B increase. Since Part B premiums must cover 25% of the expected costs, other people, such as those receiving Medicare but not SS, have to cover the increase. This is just one of the many details in the fine print that I did not cover.
My former employer canceled the future retiree health plan in mid 2000.
When I finally turned 65, I received a package from my former employer’s benefits resource center, it indicated that I was eligible for the retiree medical and dental coverage: 1 Medicare Advantage PPO plan and 2 choices for dental plans.
After talking to the front desk lady of my dentist office, I decided to keep my current Aetna discount dental plan instead.
My premium for the Medicare Advantage PPO plan was $6.15/month if I join.
Why do my former employer let us enroll into the retirees health and dental plans?
I figure it is because they need new blood to join otherwise the plan will die eventually.
I also had bad experience with ACA insurance for 1 1/2 years. Some of my doctors did not accept ACA insurances at all. One doctor told me they did not cover the tier drugs she needed for her patients. I ended up picking a Silver HMO plan but was not happy with the high co-pay/referral with specialist visit.
Traditional Medicare with Supplemental plan + Part D was my pick. I prefer the freedom to choose. There is a note on the website of the Hospital for Special Surgery: If you are enrolled in a Medicare Managed Care/Advantage plan, the benefits and coverage at Hospital for Special Surgery may be limited
Thoughts on this situation? Turning 65 in September which triggers Medicare or penalties if delay. Two years ago sold investments so income pushes me to the hightest IRMAA level for parts B and D based on that. Last year’s income showed me destitute so I qualified and chose medicaid. I’ve always been healthy enough to rarely use medical services. What happens when I turn 65? Is there a synergy between medicare and medicaid?
You may be able to get the penalties reduced or removed – see: https://www.ssa.gov/medicare/lower-irmaa
If you qualify for Medicaid, “Medicare for Dummies” says that you would sign up for Medicare as primary and Medicaid would become secondary. There are more details on medicare.gov I suggest you visit a SHIIP counselor to get your situation clarified.
Everyone I know who has worked in the healthcare system (which includes my wife and a sister-in-law) cautions against Medicare Advantage. We all use a Medicare Supplement instead.
The downsides to Medicare Advantage are the same as for America’s general healthcare insurance overall: you are too-much at the mercy of who your Advantage provider contracts with for your care. This particular aspect undermines the overall freedoms that the full package of Medicare gives.
There’s no “free lunch.” With the full package of Medicare, including supplemental, you’ll need to choose your own mix of deductibles and coverage. (My family is amply provided for retirement, so we prefer high deductibles and lower premiums. As we age, we may regret that trade-off. But we’re lucky-enough to have ample resources to cover our healthcare needs, all the way to the end. Or so we hope.)
“Medicare for All” may not the the ultimate panacea that we hope for. But once all Americans, undivided, are on the same healthcare page, think how good a unified system can be!
Regards,
(($; -)}™
Gozo
Great article, Kathy, and great suggestions. For those choosing a Medicare Advantage plan, I’d suggest one additional step — if you have a chief provider of specialist care, ask them for a recommendation on which company and plan to pick. All of my specialist care is at UW Medicine in Seattle, so I went to their finance office and sat down with one of the people who help people pay their bills — and deal with insurers. He was very open about who they liked to deal with and who they didn’t, and they had a great working relationship with the company I was leaning towards anyway. So that helped a lot.
Thanks, Mike. That’s a very good idea.
When my husband reached retirement I began the process of finding Medicare coverage for him. Having worked on the IT side of healthcare, I was the partner most qualified to do the search. I wound up in tears more than once. I resorted to paying a consulting firm to help me sort it out. Best $500. I ever spent. They clarified the issues most important to his coverage – my husband takes a very expensive auto-immune drug and has the potential for complications – and explained coverage pitfalls we should avoid in the future.
The complexities of choosing healthcare coverage are really just insane. Not only are the “rules” and options overwhelmingly and unreasonably difficult and complex, they are different by state AND by county. Read carefully and note all of the many comments here, suggestions for resources and information and input. Then start looking into what hasn’t been discussed – donut hole anyone?
I reached Medicare eligibility last year and searched every option available to me. Based on 2 years of part-time employment at a local community college I am eligible for Public Employee Retirement Association (PERA) coverage in Colorado. And so is my husband!!! It is a Medicare Advantage plan without any of the restrictions I would have encountered with other Advantage plans. Their formulary covers my husband’s medications and we have no restrictions on which providers or facilities we choose. Our costs have been reduced from over $25,000. per year to around $10,000.
I can tell you about one catch to the plan – it is not listed as an option on the Medicare.gov site. If I had not been aware that my “part time job to keep me busy when the kids were young” offered this benefit, we would not have been so fortunate. A friend who works for PERA suggests that after retirement a couple of years driving a school bus or working the lunch room is more valuable than most people are aware.
Congratulations on finding the MA plan. My MA plan isn’t listed either, but although I am sure Medicare knows about the plan, I don’t see how it would know I was eligible for it. It would be too confusing if it listed all the private plans – as it is there are 46 MA plans available in my zip code and county. There are also 60 Medigap Plan G offerings and 24 Part D plans.
I would emphasize again that there is free advice available. In Colorado it would be the SHIP program. As I said, I left out a lot of details, the article was long enough as it was. However, stay tuned for more on Part D, which may be the most complex section of a complex program.
I’d highly recommend Marty Makary’s “The Price We Pay” which is a magnificent overview of the absurdities of our health care delivery system. The readers of HumbleDollar are brilliant, and the common theme of the struggles to understand the nuances of Medicare coverage speaks volumes regarding the complexity of the product. And as we age those challenges will only increase.
From a cost perspective, I have no confidence we will ever see any relief in our lifetimes. The big drivers of cost (insurance companies, pharmaceutical companies, large hospital systems, and let’s don’t forget big IT) have too much political power to see any significant change in the status quo. We’re fortunate that most of us can absorb considerable medical expenses, but so many Americans cannot and it’s unconscionable that an uninsured person can be bankrupted by a 3 day hospitalization. And of course the “coverage” from so many insurance plans is a farce, despite hefty premiums.
We all deserve much better.
Plan F was closed on the theory that no deductible encouraged overuse and disregard for costs. The same flawed logic is used to increase employer plan deductibles to unaffordable levels. The very idea that people needing healthcare can be turned into cost conscious consumers and shoppers is flawed just like the idea of free.
The deductible is only $226 this year and it was $147 in 2015 when the relevant act was passed. It’s hard to understand why anyone would think that was enough to affect people’s decisions on whether to seek care. And the difference in premiums between Plan F and Plan G was often more than the deductible making G a better deal.
Right on both counts.
The #1 comment in this article was “to arrange a consultation with a State Health Insurance Assistance Program counselor“. There is no way that an individual can keep up with all of the changes that happen each year….and I’m not a health care novice as one of my responsibilities at work for years was choosing what health care plan(s) we would offer employees. In my area (upstate NY) I found a company that’s #1 focus is Medicare consulting. A great resource. Although, friends that live in various places around the country have had trouble finding a similar resource.
I’d rather see Medicaid for all, not Medicare for all. It’s basic coverage, but it’s simpler and has done a better job keeping costs down. The people I work with who have it like it, because it actually covers them when they get sick and go to the doctor. Folks with ACA exchange plans generally dislike the high deductibles and co-pays.
The system could not function if all healthcare was reimbursed at Medicaid rates.
We should be careful before condemning our health care has having worse outcomes than other countries, especially related to insurance and costs.
There are many factors including lifestyles that are in the equation. The US is the most obese country in the world with very few minor exceptions. Go to Amsterdam and count the bikes – if you can count that high. Look at eating habits in other societies, etc.
We have traditional Medicare coverage with medigap coverage with AARP/United Healthcare. I’ve read too many negative stories about Medicare Advantage. Many offer no premiums and drug and vision coverage, but they can change at any time and their out of pocket can be much higher than original Medicare coverage. We are in excellent medical condition now and need little drug coverage, but as we all age, that can change. Medicare Advantage doctors can change at any time as well
It is the “change at any time ” (once a year, anyway) that is my concern with my ex-employer’s MA plan. Right now, it seems very good, but it is clear that the company regards retirees as an unfortunate expense, and I have no faith it will remain as good. Given my inability to pass medical underwriting I need to change back this year if I am going to change, and will have to hope my chosen drug plan will approve my RA medication.
very good article. Why is everything so complicated? Is it on purpose to keep people from making the right decision? I am a former CPA but I still have trouble with all the regulations surrounding Medicare
When my ex-employer dropped the group plan and gave us the stipend instead, friends and I spent several weeks reading up on our choices, meeting with SHIIP counselors and exchanging information before we made our decisions. We were all computer literate but we all found it needlessly complicated. One reason for avoiding MA plans is the need to review them every year, which would be problematic if you developed certain medical conditions.
Regulations? My wife and i have been using Medicare for nearly 19 years under a variety of circumstances in and out patient. Our spending has easily exceeded $500,000 in total paid by Medicare and supplement coverages.
Never once has there been a glitch or questions. Last year an assistant surgeon billed $5,000 which Medicare denied and then paid $350. I never paid a penny.
Health care providers tell me Medicare is the easiest of insurers to deal with – because they ask the fewest questions – a different kind of problem that will change in the years ahead.
Some new Medicare beneficiaries struggle with barriers to accessing information and making timely decision regarding coverage through Medicare Parts B and D, such as limited technological skills, age related changes in cognition or other conditions or isolation from family members or friends who might assist in research and decision making.
There is a bill in Congress to enact legislation to limit the duration and amount of
any late enrollment penalties applying to those receiving health coverage through Medicare part B or D. Currently these penalties go on in perpetuity.
See my comment above. The need to review Medicare Advantage and Part D plans every year could indeed be a problem for many retirees.
No doubt there are some, but the more challenged are older . Not many turning 65 these days are not computer reasonably literate.
The CMS website does a good job of explaining all aspects of Medicare and Part D if one takes the time.
Those penalties are there to protect from adverse selection since one can’t be turned down for Medicare. Think how some could game the system simply by delaying enrollment until the coverage is needed.
I would like to think the penalties are there to encourage people to enroll -not to deter those who might decide to enroll later.
My point was to give information about the new bill in congress.
I really enjoyed seeing your thought process on this. I think a lot of people are simply overwhelmed by all the variables and go with something touted by a personality pitchperson on TV. It’s interesting to me that as an employee you basically get your company’s plan (if they provide one) and that’s that. When you 65 the options for medical care (Medicare, Supplements, etc.) are overwhelming.
Thanks. Those TV commercials are really annoying, especially as I suspect that we are paying for them in the form of Medicare payments to the insurance companies.
My own feeling is that Advantage is a sucker bet. Just as with the good old days of getting private insurance, the companies are trying to make a profit. They do this by giving you less whenever possible. They lure you in by things like dental and health clubs. But you’ve already seen the problem crop up with your medigap policy, underwriting. Talk about the good old days, they are back. So when you find that you can’t see the doctor of your choice or the Advantage program is blocking a needed treatment, trying to go back to regular Medicare you will find yourself with a 20% copay or an absurd charge for medigap, just when you need it least. Advantage is only good if you can guarantee that you won’t fall into this hole. There’s only one way to guarantee this, die early.
This is a great article, which indicates a lot of study and research. Like others I thought that qualifying for Medicare was and uncomplicated one-size-fits-all program. I was surprised to find the complicated decisions to be made and associated cost impacts.
Thank you for mentioning Medicare For Dummies. In the year before I retired, I spent a lot time reading this book in order to be sure I knew what choices I would be required to make and, more importantly, how to make them. I would recommend every pre-retiree buy their own copy and begin to learn about the various Medicare choices they will be expected to make when they do retire. As several have noted, deciding what retirement health care choices to make will be one of the most important (and complex) choices you will make in your life.
Fellow Duck (and Kathy), amen. Medicare for Dummies was my favorite book for months. I found it in a doctor’s waiting room and ordered my own copy immediately off Amazon. Taught me everything I needed to know and made my choice pretty easy (Advantage policy).
Go Ducks!
I am really impressed with your thorough knowledge of this arcane world. We need to emulate the systems in place around the world that we like and not re-invent the wheel. The thing we have is convoluted and can change at the whim of the insurer or provider (with MA, which I have). And I am very pleased to not see one defense of our mess in these comments. That is probably because you commenters are experienced in this and not theorizing about the benefits of “markets”.
Medicare is EXTREMELY complicated.
Our solution was to find an insurance agent who specializes in Medicare Supplement plans.
His office contacts us at least once a year to make sure our plans meet out health care needs.
Yes, it is expensive.
But, unfortunately, it is all too easy to rack up unimaginably high medical costs at any time. Especially if your a Senior Citizen.
When you say “Medicare Supplement” do you mean Medicare Advantage, aka Part C, or Medigap? If it’s the former, I would urge you to do your own research.
Pretty bad system if it takes books and counselors to help make a decision about something as basics as insurance coverage in retirement. The answer is simple – no decisions needed.
Of course it’s a bad system, as is the pre-65 “system”. If you mean that the answer is Medicare A, B and D with Medigap G, I agree, if you can afford it, but the real answer is a radical simplification along the lines of any one of a number of European countries (several flavors to choose from). I have no expectation of that happening any time soon.
One factor is defining afford. Costs include premiums and out of pocket costs. So, a person could be in MA with no premium, but face high OOP or be forced to go out of network or like me pay the premiums and avoid all OOP costs except Part B deductible. From my point of view i am happy to pay premiums and lose money by not needing any health care.
I would say $3000 is pretty good. My former employer is only kicking in $1260. At least your Medigap policy should be fully covered.
It wasn’t bad while it lasted, but not as good as the retiree group health plan. And not what we were promised as employees back in the dark ages.
I second the recommendation for the “Medicare for Dummies” book. Regarding Medicare Advantage (Part C) — “I can see any doctor that accepts both Medicare and the plan.” To emphasize, the doctor has to be in the plan’s network and most doctors may not be depending on the Medicare Advantage plan. On the other hand most doctors will take Medicare Part B giving one a larger pool of doctors to choose from (including, probably, your current doctors). Also, referrals may be necessary to see specialists in Medicare Advantage plans but they are not necessary under Medicare Part B.
The doctors don’t have to be “in-network”, just accept the plan, which presumably means the pricing. All the doctors I was seeing are covered, plus I can see doctors in other parts of the country, which I believe is not the case with some MA plans. Supposedly I don’t need a referral to see a specialist either.
Another complication is how to obtain and use services from Medicare Advantage plans if you choose/need hospice care. Hospice care is through regular Medicare and provides full coverage for costs associated with your terminal condition. If you need care for a condition not associated with your terminal disease you must look to your Medicare Advantage Plan, staying within their list of approved providers, co-pays, deductibles. This is one situation where the simplicity of Medicare plus a G supplement could make life and death simpler.
Not that I’ll have to worry about it for many years, but this seems like a decision best made with a counselor as you suggest.
Insurance companies and big Pharma have a big say in how Medicare is structured, just like they recently did with the ACA. Simplification and costs reductions can be incorporated, but our elected children in DC will not challenge the swamp.
“IRMAA.. they also apply to Part D, whether you sign up for it or not.”
I believe that if you do not sign up for Part D you are not subject to the Part D IRMAA. I know of a few wealthy individuals who pay for IRMAA for Part B and choose not to have drug coverage as their premiums would be subject to IRMAA penalties. I remind them that if they do need expensive drugs they will have to wait to year-end to get the insurance and pay the extra premium for delaying. The penalty for delaying is less than the Part D penalty for them.
I expect for most of us the high priced Rx drugs are a matter of when than if. The basic notion of insurance is the shifting of risk when the potential cost of the outcome overwhelms the certainty of the higher part D premiums. I could afford to buy a new car if I had an accident and I do not have comprehensive & collision coverage. An annual Rx out of pocket of $70K could quickly result in very hard life decisions for me.
Thanks Kathy for sharing your experiences on Medicare.
I have chosen traditional Medicare, Medigap plan G and a preferred (no deductible) part D drug plan. Before I went on Medicare coverage my HDHP group plan made me eligible to contribute to a health savings account (HSA) which I would max out annually. Currently Medicare part B & D premiums can be reimbursed as a tax free qualified medical expense from your HSA. Medigap premiums are not a qualified expense for HSA reimbursement expenses.
You may be right. I know I pay it even though my drug coverage is included in my Medicare Advantage plan and I don’t have a Part D plan this year. As you say, if you don’t have drug coverage and you sign up for it later you will pay a penalty every year going forward, and the penalty will increase for each year you go without coverage. However, it would take a while to equal the highest Part D IRMAA premium, not so long in the lower brackets ($12.20/month in the lowest bracket this year vs $76.40 in the highest).
Correction – I checked and you are right. Another example of complexity. If you have an MA plan or some retiree plans that include drug coverage you would pay it even though you didn’t have a Part D plan, but if you do without drug coverage altogether you would not. That seems risky. Your drug costs could be very much higher than the surcharge. My RA drug costs over $70,000/year, but there are drugs that run very much higher still.
Yes it is “risky” but only for 1 year and remember those who are doing so are currently :not on expensive drugs and can “easily” afford the 1-year hit.
If they can easily afford an additional $70,000, or considerably more for cancer drugs, surely they can afford the IRMAA premium.
They can but think it is overpriced for the coverage. It is a certain expense versus a possible expense. Just because they can afford it doesn’t mean they want to pay exorbitant premiums.
Excellent article. Two points: First, Remember when you are on Medicare (A, B, or C), you can no longer contribute to Health Savings Accounts. If you don’t sign up when you turn 65, and you contribute to an HSA, be sure MC does not “back date” your start date by 6 months. Second, if your health and income permits, there is a Medicare Medical Savings Account option. A type of Plan C. There are not too many that I’m aware of that serve multiple states. You agree to a high deductible per year and the company puts some money into a Medicare MSA for future use. Probably best for younger and healthier folks.
Great article! My only suggestion would be to check for a newer version of the Medicare for dummies book. Things have changed since 2020.
I agree with using the medigap plan g policy, but I plan to opt for the plan G HD (high deductible) that allows for conversion to a regular plan G without medical underwriting. Not sure which companies offer that option, and since it may be changing before I actually apply, I’ll check and choose the appropriate company when it’s time to enroll.
Thanks! Unfortunately that seems to be the latest edition. You do need to read the info at medicare.gov as well. Maybe things will change for the better before you need to enroll, but I’m more worried that they will change for the worse.
Wonderful article! This is the best accurate summary I’ve seen. You have apparently read “Medicare for Geniuses” 😆 I’m currently very happy with my Medicare Advantage but also interested to research for the future how well those plans work in conjunction with a CCRC LifeCare Plan A community. Since you have also given us some great insights about that lifestyle, any thoughts to share? Thanks so much for your writing.
Glad you liked it! I’m afraid Richard is right, as Medicare Advantage plans aren’t standardized to the degree Medigap plans are. You would also need to ask the specific community you are considering (and make sure it takes Medicare, and, ideally, Medicaid).
The key is how YOUR plan works with a CCRC and the key to that is their provider network.
Whatever supplement insurance company you pick for your Medigap plan check to see how many “closed block of business.” (deadpool) policies the company has.
Deadpool / closed block of business, no longer sells policies to new customers, but service current policy holders. Without new and younger policyholders the yearly premiums could increase higher than other plans.
In most states you will be unable to change supplement insurance companies without medical underwriting. Some states have a birthday rule which will allow you change Medigap insurance companies around your birthday without medical underwriting.
I have read that one way around this is to switch to Medicare Advantage and then cancel it after one month- you can then get into a better Medigap without underwriting .
It is my understanding that you can only do that once.
Is deadpool pricing allowed in states that mandate community-rated pricing? And does a good source of deadpool information exist?
As someone who designed and managed health benefit plans from 1962 until I retired in 2010, who served on the BODs of several HMOs and who experienced the same change in employer retiree coverage in 2021 as you describe, I can assure that the US healthcare payment system is a horrendous, unnecessary and inexcusable mess.
Likely the worst is the incomprehensible Part D. Too many insurers, too many variables and too much risk since it is impossible to predict in advance what drug you may require in the future or how the insurers may change the formulary.
The safest choice is basic Medicare Parts A, B, and D with Plan G Medigap supplement coverage. Except for prescriptions, this will cover virtually all your out of pocket costs except the Part B deductible and provide for emergency care outside the US. But there is a tradeoff between premiums and OOP spending.
Medicare Advantage may sound attractive but there are many pitfalls. They use deductibles and co-pays, they use provider networks and they manage care far more than Medicare which isn’t necessarily bad, but can be annoying and get out of control. Keep in mind in addition to federal rules they are regulated by the states as well.
The amount of subsidies MA plans receive is being questioned more and more so if – when – that changes, their premiums are going up or benefits reduced.
Switching between Medigap and MA is possible but there is a risk in that underwriting can be applied after the initial enrollment and you can be denied or be required to pay higher premiums.
I am one of those now calling for a VERSION of Medicare 4A and as soon as Jonathan finishes editing my masterpiece you can read why I believe that is the only way.
If you think Medicare today is a mess, what about the rest of the payment system? Two of my sons are now struggling with multiple thousand dollars deductibles and out of network providers.
The problem is that many Americans think they can have 100% coverage for everything and have it “free” as well.
Excellent article however I think consideration of quality of and access to care is not given enough weight. As someone who also worked in healthcare as an administrator for many years, the one thing I always learned is that not all doctors are the same, and Medicare B with a Medigap plan allows for the most flexibility and choice. Also, if you travel, I am not sure how Medicare Advantage Plans work if you rely on a limited panel of providers. Why do Medicare Advantage Plans advertise so heavily with TV commercials and famous people peddling their plans? I chose a G Medigap plan, and grit my teeth when I pay the premiums which are far higher for me than when I was employed, but I remind myself that it is insurance. A catastrophic illness or prolonged hospitalizations could wipe out the financial benefits of the Medicare Advantage Plan.
Thanks for this fantastic post! You sum the sorry state of things up so well and so concisely.
John P. Greaney, who as far as I know started the very first website devoted to early retirement over 25 years ago, has four posts on his site devoted to these issues and his own careful research when he turned 65 a couple of years ago. Here’s the link to his gimlet-eyed discussion of Part D; the other posts are also well worth reading and can be found on the chronological index part of the site.
It really is cruel that grabbing the “brass ring” of Medicare coverage at age 65, far from being liberating, means having to remain vigilant and re-evaluate supplement plans every single year during the brief open enrollment windows. Real “Medicare for all” can only be had with an EU residency visa, sad to say.
https://retireearlyhomepage.com/medicare_partD_2021.html
A further problem with Part D is that Tier 5 drugs (such as the ones for rheumatoid arthritis) are usually “prior approval required”. It’s why I stayed with the same drug plan for years, and I was surprised that the drug coverage in my current MA plan doesn’t require it. However, if I switch back I will have to choose a Part D plan without knowing whether the approval will be forthcoming.
Will be interested to read the masterpiece. Don’t imagine I was happy with the pre-Medicare situation, either, although I, personally, always had good employee coverage.
Here! Hear! Medicare seems attractive from the <65 side of the fence (where I still am) because the rest of the U.S. Healthcare system is even more insane. There is no price transparency and therefore nothing like the oft-touted “free market”. The U.S. has the by far the highest medical prices in the world and easily the worst medical outcome in the developed world in terms of morbidity and mortality per capita. Part D is a real conundrum. Fortunately, my employer’s current policy is to medical insurance at the same price as I am now paying. If circumstance and the other half agree we might further control our prices by living outside the U.S. for at least 6 months of the year and buying as much of our medical services as possible outside the U.S. But apparently, if I ever decide I/we need Medicare D, that decision will come back to bite.
And what other business could survive with a total lack of price transparency?