Navigating the Medicare world is confusing and challenging.
As a result, many retirees make Medicare decisions without clearly understanding the long-term implications.
Long-term implications that, in worst-case scenarios, can put a retirement plan in jeopardy.
To help you avoid making costly Medicare mistakes, I’m sharing three (3) big pitfalls to avoid in this episode.
If you want to brush up on your Medicare knowledge before turning 65—or you’re looking to change your current Medicare plan—you’ll enjoy today’s episode.
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- IRMAA 2024 Brackets (and How to Avoid IRMAA)
- Medigap Open Enrollment + What Are Guaranteed Rights
- Anthem: Evidence of Coverage Document
- Explore Your Medicare Plan Options
- Medicare Part B Standard Premiums Increasing
- Medicare Part D Premiums (2024):
- Medicare Advocacy Organizations:
3 Big Medicare Pitfalls to Avoid (In 2024)
Taylor Schulte: Medicare Part B standard monthly premiums are set to increase by roughly 6% in 2024, jumping from $164.90/month to $174.70/month. The annual deductible will also increase by $14, from $226 to $240.
On the other hand, some big news headlines have been floating around, sharing that the average Medicare Part D premiums, nationwide, are set to decrease slightly by about $1 per month in 2024.
However, Medicare Part D, which covers prescription drugs, varies widely by your chosen plan and your state of residence. And those headlines are hiding some dramatic increases in Part D premiums in several states with very large retiree populations (states like California, Texas, New York, Florida, and Pennsylvania). For "high-end" plans in those states, the average Medicare Part D premium increase in 2024 is projected to be around 40%.
Also, as many listeners are all too familiar with, Part B and Part D premiums can be much higher than the standard premium if your modified adjusted gross income exceeds the IRMAA surcharge thresholds. IRMAA is that pesky surcharge that affects Medicare members who make too much money. And it doesn’t take much for a retiree to exceed those IRMAA thresholds if they’ve been a good saver and/or have healthy income coming in from pensions, annuities, investments, etc.
I’m not sure how you spent your Thanksgiving week, but I spent a good chunk of mine updating my comprehensive guide on how to navigate IRMAA surcharges, which includes the freshly updated 2024 IRMAA brackets.
So if you want to view the updated income numbers and get ahead of next year's planning, I’ll include a link to the publicly available article in today’s show notes. I’ll also add a link to the episode description so you can access it directly from your podcast app.
Now, while not everyone will be negatively impacted by IRMAA or the changes to Medicare Part B and D premiums, many retirees will be (or should be) reviewing their Medicare plans right now during the open enrollment period, which began on October 15th and closes next Thursday, December 7th.
As a reminder, this specific enrollment period applies to everyone currently on Medicare – it allows them to change their Medicare health plans and prescription drug coverage for the upcoming year to better meet their needs.
We all know that navigating Medicare is confusing and challenging. And, unfortunately, many retirees make Medicare decisions without understanding the long-term implications. Long-term implications that, in worst-case scenarios, can put a retirement plan in jeopardy.
Welcome to the Stay Wealthy podcast, I’m your host, Taylor Schulte, and today I’m sharing 3 big Medicare pitfalls to watch out for.
These mistakes are easily avoidable but, unfortunately, all too common.
If you’re currently using this enrollment season to evaluate your current Medicare plan – or want to brush up on your Medicare knowledge ahead of turning age 65 – you’re going to enjoy today’s episode.
To grab the links and resources mentioned in today's episode, just head over to youstaywealthy.com/205.
As a refresher, there are two main ways to get Medicare when you turn 65.
You can enroll in what’s often referred to as “Original Medicare” or you can instead opt for a Medicare Advantage Plan.
Original Medicare is a federal health insurance program that provides Part A (hospital insurance coverage) and Part B (medical insurance coverage). If you need or want Part D prescription drug coverage, you can join a separate Medicare drug plan.
Medicare Advantage Plans, on the other hand, often referred to as Part C, are offered by a private Medicare-approved company. They cover everything Original Medicare covers and usually include Part D prescription coverage as well. They also offer additional benefits that you may or may not need, such as dental, vision, fitness, hearing, and more.
The Medicare plan you choose directly impacts how much you pay for coverage, the doctors you have access to, the quality of your care, and the services you receive. In other words, it’s a very important decision.
And while Medicare Advantage Plans often look enticing, there are some major downsides that aren’t always clearly spelled out when people are evaluating their options.
For example, last month, the Wall Street Journal ran an article sharing a story about a man who enrolled in a Medicare Advantage Plan when he turned 65. Several months later, he was diagnosed with prostate cancer, and he quickly found out that the specialists he wanted to see weren’t in his network of available doctors.
In response, he attempted to switch from his Medicare Advantage Plan back to Original Medicare, which would give him access to more doctors. With large out-of-pocket costs looming over him due to his cancer diagnosis, he also tried to get a Medigap policy which would help cover those expenses.
But Medigap insurers rejected him because of his prostate cancer diagnosis.
And this leads us to Medicare Pitfall #1, which is sometimes cleverly referred to as “The Medigap Trap.”
Medigap is extra insurance that you can voluntarily purchase from a private insurance company to help you pay for out-of-pocket costs you incur. In order to buy Medigap, you must be enrolled in Original Medicare. You can’t enroll in a Medicare Advantage Plan AND buy a Medigap policy. It’s one or the other. So, if you have Original Medicare, and you’re worried about covering out-of-pocket expenses, you can elect to purchase a Medigap policy.
While Medigap coverage may not be for everyone, it is important for everyone on Medicare to know that they can only get a Medigap policy during the annual open enrollment window that ends on December 7th. It’s also important to know that if you pass on Medigap when you first have the chance, it isn’t guaranteed that you’ll be able to purchase it in the future.
Unlike most health insurance, insurers can reject Medigap coverage due to pre-existing medical conditions. Just like the man in the WSJ story who was diagnosed with prostate cancer.
The only time period where Medigap insurers can't reject you or charge you higher premiums due to pre-existing conditions is when you first join Medicare at age 65. Specifically, when you join Medicare at age 65, you have six months from when Part B coverage kicks in to buy a Medigap policy without being rejected.
During this time period, you’ll also typically get better pricing and more options to choose from. After that window, there’s no guarantee that you will be able to buy a policy in the future, and options may be limited and/or more expensive.
If you’re outside of this six-month window, there are some hyper-specific situations that still where you are guaranteed to be able to buy a Medigap policy and avoid being denied. These situations are known as “guaranteed rights.”
One popular “guaranteed right,” is if you initially choose a Medicare Advantage Plan but decide you don’t want it anymore and opt-out during the “trial period.” This is known as a “trial right” and, in short, it says that if you opted for a Medicare Advantage Plan when you were first eligible for Medicare and within the first year you decide to you want to switch to Original Medicare, you have the right to purchase a Medigap policy.
There are some additional nuances I won’t go into right now. But if you want to learn more and also learn about the other “guaranteed rights” that may apply to you, I’ll link to a good resource in the show notes which can again be found by going to youstaywealthy.com/205.
Once again, Medigap policies aren’t for everyone, but everyone should be aware of their rights to purchase and the potential consequences if coverage is skipped.
And while opting for Medigap coverage is a highly personal decision that should be discussed with your trusted advisors, there are three main reasons why a Medigap policy might be suitable.
You have a healthy retirement plan and are ok paying a little more in premiums to choose any doctor you want, regardless of network or geographical location. This is especially beneficial to retirees who plan to do a lot of traveling or live in different parts of the country during different times of the year.
In a similar vein, if you want the ability to see a specialist without a doctor’s referral, a Medigap policy would be fitting.
Lastly, perhaps the most obvious, you are likely a good fit for Medigap if you have health concerns or ongoing medical issues and need the extra coverage to help with high out-of-pocket expenses.
It’s important to note that Medigap does not provide prescription coverage, so you would still need to purchase a Part D plan. Also, it’s worth noting that Medigap premiums are typically higher than a Medicare Advantage Plan.
So, be sure to weigh all of your options, talk to your trusted advisors, and have a clear understanding of your guaranteed rights in the chance you skipped Medigap and have determined that it is, in fact, something you want to purchase.
Ok, pitfall number 2 is auto-renewing your Medicare Part D prescription coverage plan every year. As mentioned at the top of the show, some of the headlines flying around right now are misleading people into believing that Part D premiums are going down next year. But since the cost of Part D depends on a number of factors, including your state of residence, it’s very possible for your premiums to increase significantly in 2024.
To be sure, and to confirm you have the best plan, everyone should take advantage of the current open enrollment period that ends next week on December 7th to review your Part D options.
A great resource to lean on is the Medicare Plan Finder on the Medicare.gov website which I’ll link to in the show notes. The tool is interactive and will prompt you to enter all of your prescription drugs and dosages and then present the different plan options available to you.
While we’re talking about Plan D mistakes, it’s also worth mentioning that your Part D prescription plan should be an individual decision.
In other words, I don’t suggest blindly choosing the same plan as your spouse. There are no household discounts when buying Part D coverage, and since most couples don’t take the same prescriptions, you may find that one plan is better for you and another is better for your spouse. You can use the same tool I just referenced on the Medicare.gov website to evaluate your options.
And to avoid any confusion, if you are on a Medicare Advantage Plan instead of Original Medicare, your plan likely includes Plan D coverage, so this is a step you can potentially skip.
Number 3, alright, the last Medicare pitfall to share with you today is failing to read the “Limits Apply” fine print when shopping for Medicare Advantage Plans.
First, before I share more here, it's worth noting that if you’re currently enrolled in a Medicare Advantage Plan and want to switch – or are considering switching – to a different Medicare Advantage Plan, your open enrollment period begins on January 1st and ends March 31st.
If you fall into this camp or you’re considering a Medicare Advantage Plan, be sure to read the “Limits Apply” fine print when reviewing your options. Again, you can use the tool on Medicare.gov to evaluate the options available to you.
After entering some basic personal information, you’ll be provided with a list of plans. Click on “Plan Details” and on the next page you’ll see a hyperlink that says “Limits Apply” under each section of the plan. Click that link to read the fine print that is initially hidden on the page to ensure you know what those limitations are.
Unfortunately, most people don’t read the fine print and then find out the hard way that something isn’t covered or requires tedious steps in order to get approval for something. This is especially common when people get a little older and need more costly care. Routine care wasn’t an issue, but now that they have more complex medical needs, they run into hurdles that prevent or delay access to the care they need.
To be extra safe when evaluating Medicare Advantage Plans, I would suggest going directly the insurer's website and downloading what’s called the “Full Evidence of Coverage.” I’ll link to one from Anthem in today’s show notes so you can what it looks like and the info contained. Unfortunately, these documents are typically 200+ pages, so it’s still a chore to fully understand the ins and outs of these plans.
As always, consider leaning on a professional if needed. While there are some Medicare-specific experts out there, they may not be able to be completely objective when providing advice. A certified financial planner who doesn’t sell insurance and specializes in retirement planning may be a good place to start.
But if you prefer a medicare broker, it may be wise to do some of your own research first either through Medicare or other free advocacy organizations that I’ll link to in today’s show notes.
Choosing the right Medicare plan is a big decision, it’s not just a quick box to check at age 65. So, take your time, talk to the right professionals, and evaluate your options while you’re still healthy, so you don’t find out the hard way down the road that you don’t have the coverage you need.
Once again, to grab the links and resources mentioned in today's episode, just head over to youstaywealthy.com/205.
Thank you, as always, for listening and I will see you back here next week.
Episode Disclaimer: This podcast is for informational and entertainment purposes only and should not be relied upon as a basis for investment decisions. This podcast is not engaged in rendering legal, financial, or other professional services.