Costly Medicare Missteps to Avoid in 2021
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As we complete another round of annual election period craziness in Medicare, it’s time to pause, reflect and figure out what in the heck to help you all with next year!
I repeat this daily, but it truly is amazing how many Medicare mistakes I see made by Medicare beneficiaries. A person’s entrance into the Medicare system doesn’t come with a very good user’s manual. There is a lot of chaos surrounding the event. It feels like the system is designed to confuse. I’m often asked, “How does the average consumer do this alone?”
My only answer is, “You don’t stand a chance, unfortunately”.
So, my agency becomes the consumer’s user manual – the guide that they need to make proper Medicare moves. We specialize in that very first transition to Medicare that a person makes. They may be coming up to their 65th birthday and worrying about how to get to the system properly or they may be 68 years old and ready to retire, also wondering how to get to the Medicare system without any penalties or gaps in coverage, for example.
It’s critical to point that piece out. I best help those who are new to the Medicare system. It takes multiple steps and hours to counsel a person in what to do to get from point A (generally employer insurance or individual coverage) to point B (the Original Medicare system and Medicare products that they might require). It is not a straight line and there never seems to be a 100% answer for anything. Questions are often met by our advisors with an answer such as “Wellllll, let’s talk that through”.
Getting into the system the right way is key. When I get calls about someone who is 72 and didn’t know this or that and now has a health crisis, a penalty, a gap in coverage? It can be unfixable. We’re not miracle workers.
I focus on helping folks avoid making mistakes.
Let’s look towards 2021 and provide some practical tips that might help someone avoid goofing up the process!
Establish a relationship with your guide before they are needed
Age 65 just doesn’t sneak up on you. Well, I suppose it truly does in many ways, but what I mean is that you certainly know it’s coming. You don’t approach that day and look back saying, “Oh yeah, I forgot I was 65 verss 63!” And, if you don’t remember, you’re certainly getting enough postcards in the mail or robocalls on your phone to remind you that the big 6-5 is coming: Medicare eligibility.
Huge tip. Start looking for help at age 64 or 64.5. I don’t mean go to fifteen seminars or spend hundreds of hours doing research. But try to make a bit of sense of the system. Ask your financial professional for a good referral. Every firm should have a good referral relationship with a Medicare guide. If you don’t? Read here – Joe Namath and Fidelity are happy to step in. I point out Fidelity as they now are offering Medicare services and yes, your clients, will stumble along their information. They’re big and smart enough to know that 12,000 people a day are turning 65 and they’re all trying to figure out how to avoid Medicare mistakes.
Know what you have available to you for coverage at age 65. If you know that you have retiree healthcare options from your employer when you retire? Call THEM! Push them to tell you what the process is to enroll into the plan that you are eligible for. So many people who are teachers, municipal workers, FEHB, etc. poke around calling agents, going to seminars and they generally need none of that and are truly wasting time and energy. Call the office that administers your plan, get the information, understand what you need to do and be done.
Don’t worry about the outside world and how they have to deal with coverage. Don’t worry that they can buy a plan for “zero cost” from Joe Namath and you have to pay $35.00 a month. Understand your coverage and be happy that you don’t need to join them as a consumer battling the industry.
Those who do need help enrolling into the system need to get some help. A good agent can help them navigate the enrollment with the Social Security Administration. The little things such as “Help, I just got locked out of my online portal and can’t enroll; what do I do?” Something that small can present months of stress to a person.
How much will Medicare cost? Learn that before you enroll. No one likes the surprise on their sign-up day with us as we say, “you didn’t know you’ll be paying $504/month Mr. Higher Net Worth Person?” And that’s not the total cost. People like the heads up to plan a little bit ;)
Use this time period to take notes, write down your questions and get comfortable with an agent who can help. Ask the agent you are working with how much they do in the Medicare space. Many advisors have a health insurance license, that doesn’t mean that they know much about Medicare so be careful there.
Find a good, qualified guide.
Don’t call the insurance carrier directly to enroll
Some people make the mistake of finding a good guide, getting all sorts of great information and they’re ready to pull the trigger. They call the carrier directly and enroll into their plan and they are thrilled to have that purchase behind them.
Then comes the annual election period of time when they can evaluate their Part D drug plan, for example.
Are you shocked to learn that the person who enrolled you last year at that big carrier is nowhere to be found and the carrier really doesn’t care about helping you with your drug plan?
Correct. I suggest a long-term relationship with a good agent. Good agents have tremendous value. I have a hard and fast rule that I will not run a drug plan analysis for people who do not have their Medigap plans held with us. We can’t. There are millions of people that need help each year and it’s impossible to take on orphaned accounts. So, if you enroll with us, we will babysit you into the future.
Going back to my first point, find a good guide. Find out if the agent you chose does much in the Medicare space and is committed to being there for a while. Many people enroll in a plan with an agent and in the following year they can’t contact the person. Well, guess what, that agent is generally being paid that second year but just isn’t around to help you. It’s no surprise that insurance people really do get a bad reputation. It’s a business with a high dropout rate as you can imagine.
Lastly, know that if you call a carrier directly to purchase you Medicare product, the price is no different than buying via an agent. So, it only makes sense to find a good agent since it is “free” to you.
Year-end financial impact on Medicare premiums
Each November, the Social Security Administration sends out the notices to those in the Medicare system about its new premium for the coming year. So, at this writing, people are still receiving their notices about their 2021 premiums.
Now, know that the government never quite writes a letter clearly so it can be difficult for many to understand just what they’ll be paying in January 2021. There can be several bills, statements and confusion abound.
What is not confusing is that the actions you take in any calendar year that will impact your modified adjusted gross income will affect your premiums.
Example. An email arrived from a couple that were new to Medicare in early 2020. They were shocked to learn that their premiums for January 2021 will double due to the fact that they moved a large sum of money from a traditional IRA and moved into a ROTH IRA during 2019. Yes, that impacted their MAGI for 2019 and thus the two-year lookback that the Social Security Administration takes will find the increased amount and assess premiums accordingly.
I routinely assist our clients with requesting a redetermination of Medicare premiums if there is a good reason to do so. A good reason to do so would be a new retirement situation (loss of income as you retire), a death, a divorce or things of that nature – but not for moving funds from one account to the other.
Work with your clients to understand the Medicare premium impacts that might occur based on your strategy with them. After monies have sloshed around, all we can do is say to your client is, “Yep, that’s how it works. Nope, you can’t appeal that”. They’re never happy campers but it is what it is.
Treat Medicare as a research project
Time. Use your time wisely. Don’t make a rash or rushed decision about Medicare when you get there. Don’t listen to well-intentioned family and friends who tell you what you ”have to” do. Don’t listen to the misleading TV commercials telling you that everything in Medicare-land is “free.” It’s not. There’s no free lunch. If you don’t do some homework, you can get burned. And the key thing to understand is that some mistakes that are made, cannot be fixed.
Time your enrollment into the Medicare system properly. That means, if you are newly turning 65 and you need Medicare insurance as your insurance at age 65? Enroll for Part A and B prior to your 65th birthday month. Simple. If you’re retiring at age 68 and need to leave the employer coverage? Get your Part B set up properly upon retiring (not at age 65), without penalty and coordinated with the employer coverage that will end. Not difficult, just requires some timing.
Don’t assume that you can beat the system. A case I saw recently showed a higher net worth individual who decided Medicare premiums were too expensive. So, the person opted for a route that only ends with a large Medicare penalties years after realizing the Medicare’s insurance system was indeed the way to go.
Understand that pre-existing conditions can and will preclude your purchase of Medicare supplements (a.k.a. Medigap contracts) at certain times. Because you “were healthy” and chose a different plan, your health changed and now you want a true supplement… the carrier doesn’t really care that you made a mistake. And you lose.
Think long-term. Yes, you might purchase this plan at age 65 but imagine yourself as your 80-year-old self. If you were to be affected by an illness, how would you like to seek care, what level of coverage do you think you might want? Try to not focus on every dollar spent or not spent today; try to not be short-sighted. That’s a difficult thing for some, easy for others. Insurance is peace of mind. It’s designed to be there when you need it. Don’t try and beat the actuaries. You will lose.
So, that in a nutshell, is a rather “simple” plan as to how to be successful in your transition to the Medicare insurance system. Best wishes and yell if you need us.
Joanne Giardini-Russell is a Medicare nerd with Giardini Medicare, which was created to help those approaching Medicare eligibility or those currently enrolled in Medicare better understand what they are purchasing and how their choices may affect their long-term outcomes regarding care, finances, etc.