How to Help Clients Avoid Costly Medicare Mistakes

That’s true for all forms of Medicare. The big fork in the road is this: Within six months of going on original Medicare, you have guaranteed access rights to a Medigap plan, which means you can’t be [denied coverage] based on your age or a preexisting condition.

But after six months, those rights go away.

And where does it get really sticky?

A lot of people try Medicare Advantage, which means they can no longer have Medigap. But after a while, they might say, “I don’t like this plan. I want to try original Medicare with a Medigap plan.”

At this point, Medigap insurers have the ability to underwrite these people and charge them a lot more based on preexisting conditions — they could even decline to offer them coverage.

What are other major differences between original Medicare and Medicare Advantage plans?

With Medicare Advantage, you must use health care providers in the plan’s network, and there are usually some pretty stringent prior authorization requirements before you can get the care.

Surveys indicate that up to maybe one-eighth of requested care is denied improperly by Advantage Plans because they have those very [strict] gatekeepers — who make mistakes.

With original Medicare, you can use any health care provider in the country who accepts Medicare, and you don’t need prior approval. If a procedure is covered, you can get it, and Medicare is going to pay for it.

But what are some other advantages to Advantage plans?

If you don’t need much health care, there’s no question that Medicare Advantage plans are a cheaper way to enroll in Medicare. You still have to pay the Part B premium, but you may not have to pay much more than that.

Advantage plans also offer what I call catastrophic protection against medical expenses. There’s a maximum out-of-pocket, which next year will be a little more than $8,000. That’s your worst-case out-of-pocket. It doesn’t include drugs, however; that’s a separate out-of-pocket [expense].

Please contrast that with Medicare supplemental plans.

With those, you may have a much lower maximum out-of-pocket because they cover most of your health care needs.

With Advantage plans, even if you’re healthy, you could be in an auto accident or have some untoward health event, and the plans will still give you some upside protection on your maximum out-of-pocket.

You’ve said that Advantage beneficiaries are “less likely” to enter the highest-quality hospitals or high-quality nursing homes. Please explain.

True. However, it’s not such a degree of difference that you’d say, “Whoa!” But to me, it’s a yellow light.

If people are interested in a Medicare Advantage plan, they should do their homework to determine whether their care will be adversely affected.

Is the dismaying so-called donut hole (Part D coverage gap) regarding drug expenses becoming any smaller?

I don’t think it’s getting much smaller.

The donut hole is the portion of Part D where your insurance coverage for branded and generic drugs stops for a period of several thousand dollars in expenses. Then it picks up again, at which point you’ll be in the catastrophic phase.

Any hot news about Medicare?

Next year Part B premiums are lower, which is great because there’s an 8.7% increase in Social Security’s cost-of-living adjustment.

Most years, that COLA is eaten up by higher Medicare premiums, but next year it’s going the other way.

Even if the net benefit maybe doesn’t fully keep up with inflation, it comes darn close.

What’s up with IRMAA — the income-related monthly adjustment amount?

Those are the high-income surcharges that are paid by about 7% to 8% of Medicare beneficiaries, and they are much lower next year than they were in the past.

More importantly, the brackets at which they trigger are much higher because of health care cost inflation. Those brackets get adjusted upward every year.

Now you have lower premiums and bigger brackets, which means that more affluent people will avoid the highest tier of those high-income premiums.

What’s essential for workers to know about COBRA — the Consolidated Omnibus Budget Reconciliation Act — in relation to Medicare?

When a person leaves their job, they can get transitional health insurance under COBRA. It basically allows them to continue with their employer health insurance for up to 18 months.

Sometimes a consumer will try to time their Medicare decision so that they can save a month’s premium. They want their coverage to start three seconds after they turn 65!

Trying to time it so that your COBRA covers you till the day you get your Medicare so you don’t have unnecessary charges is a dangerous game to play.

People should make sure their Medicare is in place before their COBRA ceases to be their primary coverage, or else they [could] have a period where they don’t have primary insurance coverage through either COBRA or Medicare.

I urge people to be aware that COBRA is going to cease providing primary coverage when you turn 65 if you’re going on Medicare at that point.

How important is the Inflation Reduction Act — which became law on Aug. 16 — when it comes to Medicare?

It will begin to substantially reduce drug costs for Medicare beneficiaries. In 2025, you’ll pay no more than $2,000 a year for drugs. This is particularly helpful for people who have more expensive drug needs.

Also by law, Medicare will have the right to negotiate the prices of a limited number of drugs. If drug companies raise their prices by more than the general rate of inflation, they’ll be penalized and have to pay stiff penalties.

Financial advisors should know the terms of the Inflation Reduction Act and when the various trigger points occur.

Changes could happen every year beginning next year.