The Medicare Maze SABH Meeting #91
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Jeanne Texeira: This is my first time doing a presentation on Zoom. So thank you for your help Greg. I appreciate it.
So I’m calling my presentation “The Healthcare Maze”. And why did I do that? I looked up what the word “maze” meant and it’s defined as a network of paths and hedges designed as a puzzle which one has to find their way. And when I went out to apply for Medicare, boy that’s what I found. It was a maze. The vocabulary is unique and the acronyms– oh my!
So fasten your seatbelt, it’s a bumpy ride. My goal today is to share my experience and hopefully make it easier for you when you cross this bridge. I found a lot of paths and I have called them “The Swim Lane” and I’ll introduce you to the different paths I found.
This is not a deep dive into Medicare. A dive into Medicare takes an hour to almost two hours to comprehend. So if you’re interested in a deep dive I’ll give you some resources or put a note in chat, and Greg and I will try and line someone up.
So let’s walk through this material together. So I’m going to go over the history. I’m going to go over the Medicare process. I’m going to go over cost because that’s my favorite topic. And where to find help.
So first of all, I want to say I am not an expert. This information is for presentation purposes only and make sure you do your own homework.
So let’s start off with the background. When I went to search this I found that Healthcare in America, in 1940 only nine percent of our population had health care insurance and then by 1950–wow! it exploded–50% of America had health care insurance. So here we are today, 2021, 92 percent of America has health care insurance.
So what caused all that. Right after Pearl Harbor, 1942, our government passed something called The Emergency Price Control Act and they did that because they were trying to fight inflation. So they froze prices and they froze wages. Well employers were trying to hire tons of people to build all those trucks, planes, jeeps and ships and they needed people and they wanted to attract talent. So they introduced us to something called fringe benefits–and yes that’s the start of pensions and health insurance being attached to your employer.
So then the IRS came along and said, ,Gee let me sweeten the pie a little, health insurance is exempt from federal income tax and payroll tax making it again very lucrative for our employers to continue to provide this. In the 1950’s 85 percent of the cost was covered by our employer. Today that’s about 22 percent.
So a little more on the background about how we got here. In 1965 Johnson signed the Medicare Act. That’s the start, and when he did that the cost to the average beneficiary was four dollars. In 1972 we added long-term disability and end-stage renal–which I looked up–and for anybody that has to experience that, that’s that kidney stuff. Then in 1973 the feds funded the development and expansion of HMOs. Interesting, that will later be known to you guys as Medicare Part C.
Then in ‘77 they created the support structure. Anybody that’s on Medicare has run into the CMS and that stands for the Center for Medicare Services. And if you’re on Medicare any other medical stuff you run into–the billing codes and they’re known as CPTs.
Then in 2003 we added drug coverage to Medicare. And they snuck this one in on most of us. Anyway medicare premiums will now be based on your income. And then the next big one that we experienced in 2010 the Affordable Care Act or Obamacare was passed.
So back in 2000 the typical Medicare person, for their part B paid 45 dollars; and today we’re paying 160 to 175 dollars for Medicare Part B. So I also want to know one thing about this. This Healthcare Market Day in 2020, the money studied through that is 4.1 trillion dollars.
When I retired back in 2016 and found myself in this Healthcare Maze I thought, how hard can this be? I’m a supply chain manager for a professional buyer. I bought corporate jets and mainframes– 30 years buying experience–I’ll make it through this.
So I scheduled lunches with my buddies that were already on Medicare. And when I came back from those lunches, I mean I was so confused. I said, okay. I started researching it–and I’ll flip to this next page where I will introduce you to what is called the 3 to 15.
I said three to five ways, three to fifty ways that we deliver health care. And the important thing here is that you have to decide where you are today, and when something will occur and you’ll change lanes and need other kinds of health care.
So this next spreadsheet is going to blow your mind. Let me walk through a few of these key issues. Number one. 55 percent of America is in this top category here called employer sponsored group insurance, and again, that’s how America gets their health care coverage.
We have 177 million people in that swim lane. The next big one is Medicaid. In California that’s called Medi-Cal, and again we have another 76 million in that swim lane.
So Medicare is what I’m covering and Harry Sit has covered the direct purchase marketplace.
The Medicare recipients, there’s 64 million of us, and in Harry’s swim lane there is 45 million. So needless to say, these are other swim lanes that people may be in. There may be more out there, this is all I found. But regardless it adds up to 432 million. Well the population of the U.S is only 332 million so I guess that means 100 million people are out there with dual coverage.
Nice, so I want to spotlight a couple other things. The uninsured in America is down to eight percent but that is still 28 million people. I also want to spotlight how much, and what I did was I bolded the numbers to show how much the government was actually paying for or subsidizing, and they are paying for 241 million people healthcare insurance. So at 332 million–241, the government is subsidizing tons. Okay, so enough about the background.
This is the Medicare process. And I thought it showed best as a flowchart. So when you enter Medicare you basically have to pass–you have to decide how you want your coverage. You have original Medicare and you have a Medicare Advantage Plan–but by the way those two words, I have several other names and you’ll hear some of them as we go through this presentation.
We have 64 million people on Medicare, and 36 million people choose original Medicare and 28 million people choose the Advantage Plans. So I’m going to walk through a little bit about these plans.
Part A is free and the desired age to sign up is 65. Medicare Part B is not free and does not cover 100% of your medical, covers 80 percent. You have a prescription drug plan and that is primarily for your out-of-patient drug coverage. Part A covers your in-hospital drug coverage.
So that’s another insurance policy that you buy.And then you have–because Medicare Part B only covers 80 percent of your health care, you require or choose, most of us do, a Medicare Supplement or a Medigap Plan. So that’s the swim lane and I’ll give you some cost, about how much this costs in a minute.
Then the second swim plan is–oh and b the way in how you want your insurance delivered– if you’re one of those people that wants to be able to go to the Mayo Clinic or you’re traveling in Europe you may want to look at the original Medicare plan because those advantages are not in an Advantage Plan.
The cost difference between these two, just so you know, I’ll give you more detail on cost in a second, but it’s about 100 to 150 dollars a month. So that could be sizable on a budget.
So a Medicare Advantage Plan. Now I don’t have one of these, so later in our talks, people that know more about this feel free to chat. But they usually combine parts A, B and D, and that’s again your hospital, your healthcare provider, and your drug plan. So it’s typically provided over here so you don’t require any additional policies. This kind of one-stop shopping, but you are limited with a network.
Okay so this slide–I’m just going to do a quick walk through, I’m not going to go through all of this–this is for you to read later. But I do want to warn you about two things. Sign up for Medicare on time. You have a Medicare part A. You sign up for that typically at 65 and Medicare Part B when you no longer have credible employer coverage.
I want to footnote something here. It is important. The insurance companies that are out there want you on Medicare as soon as possible because that becomes your prime provider. So it’s important to know what their objective is. Don’t miss these sign ups.
So when you choose original Medicare you run into shopping for these supplements and all I want to do is share with you that it is alphabet soup again but here it is. They call these different plans you can buy on the marketplace: A,B, C, D, E, F, and so on. And then the government regulates these plans. So that all insurance providers offer the same product. So be aware of these. They’re out there, and again, these Medicare Supplement Plans cover the 20% that Medicare doesn’t.
So now on to cost. A typical family budget in America–excuse me income in America–is about $78, 000. So let’s round it off at 80k. I know the Bay Area can get a little bit more than that but what’s important about this chart is it shows us how much of our money we actually spend in taxes. Now this chart only shows federal and state taxes, and I’ll show you in a minute, I’ve added yet another little secret tax we all pay. So this comes in a kind of handy because healthcare is down here and on this chart a person making $80,000, basically they’ve got health care expenses around five thousand dollars a year.
This website where I found it is called howmuch.net, and that’s what they do, is they try to put all these many things into graphics. So if you want to play around this is a great site. Also, if you don’t keep track of your spending and you don’t have a budget, this gives you kind of an overall ratio about how you might be spending your money. It’s an interesting walk into where your money goes.
So back to where we were. Where does healthcare fit in this? Number one in our spending is taxes, federal tax, state tax, sales tax, and I’ve thrown in property tax–yes number one. Number two through four spending is housing. That’s our rent, mortgage. Transportation, cars, gas, maintenance, insurance. And then food, and I’ll include in there both in home and away.
And number five is right up there and increasing at a run rate of six to eight percent a year. So I told you I would share a typical budget with you. You can see an itemized cost on health care, so of course I’ve got to use my own profile. I’m single so this is for one person. Couples can double this amount. But I will just say I’m in my 70’s. Health issues I’m pretty healthy–one or two good little chronic conditions– and I live in Northern California. And the reason that’s important, in Northern California, is because this is definitely–these prices that you will pay are definitely state and zip code specific.
So I’m itemizing these details and here comes that 165 dollars a month that the feds will charge me that’s as long as my–oh here’s another acronym for you–MAGI–they call it modified adjusted gross income. So if you’re making less than ninety seven thousand dollars a year it’s around 165 dollars. Then you have that supplement Medigap policy that I talked about and the one that I chose is currently running about 252 dollars. When I started this was around $160. My drug coverage–this is my outpatient drug coverage–I plugged in a number of thirty dollars. I typically have paid anywhere from thirty to forty dollars for this.
I don’t have any deductibles on this on the path that I’m on so I just plug this in here as a placeholder. Then you have deductibles and copays so I plugged in about $500 for that.
Now Medicare does not cover dental, vision, over-the-counter products or hearing. So I plugged in some numbers and you could quickly see that I get to around seven hundred dollars a month or about eight thousand dollars a year for a typical retiree.
Now a Medicare Advantage plan will be about $100 to $150 a month less, but you’ve got more copays and deductibles. That’s what I’ve been told.
So moving along. I warned you earlier that Medicare charges you based on your income, so again, this is one of those charts and graphs that you can study later. And here in this first line, a single person making less than ninety seven thousand dollars is paying 165 dollars a month for insurance. The reason this is important is that if you sell your home you can easily grow into another bracket and your monthly Medicare premium could run you four to five hundred dollars a month. Now the good news is it only lasts for one year. And then again it surprises you because they take your income from two years ago.
So they have the same thing on your drug plan, and again, here’s the premiums if you’re less than $97,000. No adders, but you get down to if you sell your house in one year you’re going to pay an additional $70 on your drug plans.
So what are some critical indicators? First off, watch inflation. Second, watch what our government is doing. As I noted to you earlier they’re footing the bill for a lot of this. Changes–insurance companies are consolidating, doctors are moving, and retired–some just get so fed up with the system they leave. Hospitals are acquiring each other.
Emerging–the medical hardware and service industry is constantly offering new products that may or may not be on the Medicare approved list. And the pharma and drug industry is doing the same thing.
Examples of that is the new Pfizer drug called paxilovoid, is the new antiviral they’re using if you get covid and end up in the hospital. Well that’s not on the Medicare approved list. It’s not FDA approved so if you get covid when the emergency note expires I’m not sure you’re going to get this drug if you’re on Medicare.
Second good example on this one is the shingles shot. Many, many years ago I got the infamous single shingle shot and they said that was a lifetime drug. Well five years later they said the efficacy went away and no longer, and they have a new drug. That’s good news/ bad news. It’s not on the Medicare approved list and it was $200 per shot, and it’s a two-shot series, so out of pocket paid four hundred dollars for single shots.
So there’s just a couple examples. You need to do your research. You need to know what your docs are prescribing and pay attention.
So I learned through Monte Carlo simulations that the life expectancy they use and those could be entered by yourself but are frequently entered by an advisor. So I want to warn people to make sure you know what they’re using in these retirement simulators. The average life expectancy prior to covid was 79. Today it’s around 77. The good news: if you make it to 65 you can add another 17 to 19 years to that so that takes you up to 84. So know your age is used in these tools before you decide it’s time to retire.
I know of a friend of mine that recently told me a good story. He said that he went to his financial advisor and thought, and the advisor advised him he had enough money to retire but then he questioned what did you add for medical costs. And he found out the advisor had not added anything. Once he added the medical costs, my friend was still working and for a long time. So be aware of what goes into these numbers.
So again, final thoughts of forecasting a plan for the process to go up. Preliminary numbers are six to eight percent a year.
Consider a health savings account–Harry went over that–while you’re healthy and younger. It can be a nice stash for when you need to pay these other medical bills later. Fidelity– you might want to establish one account for just medical costs and Fidelity suggests today $315,000 per couple.
So I’m a business girl so I try to create hedges when I can. So here’s a few that I’ve highlighted for you. You can relocate the cost for Medicare and all these medical things change and vary per state and for zip code. You can work longer, get a second career that offers healthcare insurance. This is one I did. I bought healthcare mutual funds and a few stocks. I own stock and Pfizer and I’m really glad.
Invest in your health. This one we hear it all the time–diet and exercise. And then last but not least don’t forget to evaluate a long-term health care plan. They’re expensive. They say the sweet spot for those is age 59.
So understand your wild cards and by that I mean what is unknown and unpredictable, which is kind of how long we’re going to last on this planet. So know your chronic conditions, your health. Look at your DNA.
You’ve got to support yourself for maybe 20 years, maybe 30 years. So last but not least I’m going to cover some alerts and key takeaways. And again, I mentioned this one. Sign up for Medicare on time. There’s penalties–A, B and D all have penalties and they’re different.
Original Medicare does not cover long-term care, dental care, routine vision care, hearing aids, overseas care, and as I footnoted some Medicare Advantage plans do cover these items.
So next is insurance companies cannot ask you healthcare questions during your initial enrollment period, which is three months before you turn 65 and three months after that. You may be asked healthcare questions. More than likely they’ll come to you in the form of an application.
So you will be asked and they call it underwriting questions, which I didn’t even know what that word meant. I had to go look. It’s a professional risk assessment and they can deny you.
So a little about cost and pricing. This domain– hospitals, doctors, drugs–is all anchored in what I call list price.So know that that’s the price that comes first on those bills. So ask, negotiate, and shop. Now you might say yeah you end up in emergency and that is an unplanned health occurrence and no you can’t ask, you can’t negotiate, you can’t shop. But if you’re going to have a knee replacement you can. When you’re out buying drugs you can. And there’s lots of pasta out there and I’ve given you some in the help material that I will make sure everyone gets.
Last but not least, once you choose a Medicare Advantage Plan or any plan for that. This may be the last path for you. You may not be able to upgrade. So you may be able to downgrade your plans. Everyone I’ve talked to, that seems to be okay. All these companies let you downgrade your plans. But to switch back and forth between a Medicare Advantage and an original Medicare–it may not be as easy as it sounds. I’m getting mixed messages on that. So be aware you may not be able to downgrade or upgrade.
So help. I’m not going to go over all this help. I just want you to know that there’s Medicare counseling. Several people have also used this service as well as source-wise. This is a local service. All states have a similar service. I’ve referenced that down below but I really was impressed with the service they do both in-person counseling, and they have tons of virtual information on their website. Go to their events page and there’s tons of information out there for deep dives.
And the second thing I really liked in all the help that I’ve gotten are these two books called Get What’s Yours. One covers Medicare and one covers Social Security. I’ve bought them for myself and my family members and I found them simple explanations. It makes it very understandable. Those are my two favorites.
I’m throwing in the package for people later, that are looking at this, a whole list of definitions, trying to explain what they are. We all have gaps in insurance in our lifetime. You don’t know whether you’re going to retire early, maybe a FIRE person, you’re going to be self-employed, you encounter a layoff.
Here’s places to go for gap insurance or gap care. I was actually surprised how many free clinics are still in San Jose.
So at every presentation I’ve been to on healthcare I’m always asked questions about how immigrants can get Medicare. So I’ve tried my best to answer that and I’ll include that in the package for people who want to explore that. There are some avenues out there but they’re few and far between. Basically in a nutshell you need to be a U.S citizen or a legal permanent resident on a green card.
So again the Medicare alphabet. Here you go. I include a slide on that for people. I don’t know what to say about this other than to include that Medicare part A covers all your drugs for inpatient care, so while you’re in the hospital they take care of all your drugs. Your prescription drugs down here ,Part D. That’s where you usually purchase a plan.
Again the Medicare acronyms. I’ll include this in the package. HMOs, PPOs, EPOs. There’s four or five more new one but at least this will get you started.
And with that let’s open it up for questions. This is a very complicated topic and I’m sure everybody’s got a few questions. If you don’t I’ll be surprised.
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