November 8, 2013

My Medicare Decisions Are Only A Few Months Away

In May of next year I will be eligible for Medicare, something I have been eagerly awaiting for the last several years. Being on the individual health care insurance market has meant yearly 15-18% increases, year after year. As reported a few weeks ago, I did purchase a policy under the Affordable Care Act that will save me $767 from January through April. Then Medicare starts on May 1st.

Because I am already receiving Social Security payments, I will be enrolled automatically when I turn 65. But, there is more to do if I want more expenses covered and a prescription drug plan. So, I have a lot of homework to do. I have some important decisions to make:

1) Will I stick with traditional Medicare or opt for an Advantage plan?
2) Will I buy Part D coverage for drug coverage?
3) Will I buy a Medicare supplemental plan (Medigap) that covers most of the 20% that Medicare doesn't?


Each choice brings with it a potentially large differences in cost, coverage, and health care.

What follows is what I have been able to determine from many searches on the web. While Medicare.gov is very helpful, it is only one of dozens of sites I explored. Considering how complicated it can become I am pretty sure I have some of the details and averages wrong or incomplete. I expect you to help me by setting me straight!



Traditional Medicare will cost $104.90 in monthly premiums in 2014 (unchanged from 2013). That covers Medicare Part A which is for inpatient hospital care, skilled nursing care, hospice care and other services. Part B covers doctors' fees, outpatient hospital visits, and other medical services and supplies that are not covered by Part A.

On average Medicare pays 80% of the costs generated by Part A or Part B services. I would be responsible for the rest. There is a $147 deductible for Part B that must be satisfied before Medicare pays anything. There are also copays to consider if the doctor I use doesn't accept what Medicare pays as the full amount.

Advantage plans (Medicare Part C) are plans approved by Medicare but run by private companies. They cover everything Medicare does plus offer extra services that include drug, vision, and dental coverage. Many of these plans offer $0 monthly premiums, $0 deductibles, and $0 copays. How do they make money? These companies are paid by the federal government to handle what Medicare usually covers as well as provide them with a reasonable profit.

Restrictions on these "free" or low-cost plans are substantial and must be approached very carefully. If someone is in good health and takes few drugs it may be one's best choice. It is easy to switch plans once each year (even back to original Medicare) if health issues begin to crop up or special care isn't covered by one's current plan.

Then comes the issue of Medigap coverage. These policies cover what Medicare doesn't. Often called supplemental policies, they average around $165 a month. Depending on the type of Medigap policy purchased and how old you are when you buy it, your monthly premiums will either remain unchanged or increase each year.

From what I can find, purchasing a policy that covers Part D (drugs) seems to average around $10-$15 a month. I pay a percentage of each drug cost in addition to that. More expensive drugs will mean substantial out-of-pocket expenses but nowhere close to what the cost would be without insurance coverage. There is also a deductible of just over $300.

Of course, I can't forget about the famous "donut hole" when I think about my costs. When Medicare drug coverage was added in 2003 there was a gaping hole in coverage for those who needed it the most: those who required expensive drugs were forced to pay the full cost when they could least afford it.

The Affordable Care Act finally addressed this situation: the donut hole will close completely in 2020. In the meantime it is shrinking. From what I can determine after roughly $2,900 of drug costs in a year I will pay a higher percentage of drug costs until I leave the coverage gap somewhere around $4,500 (it changes each year). After that I pay only about 5% of any additional drug costs. 

So there I am. I still have the same three questions I had at the beginning of this post, but I think I am closer to answers. The next step will be finding exact pricing and coverage for each of my options and then looking at my budget for next year.

Wish me luck, and let me know what I have missed or have incorrect above.



Some friends forwarded the links below, suggesting I and my blog readers might find them helpful.


https://www.medicare.gov/find-a-plan/questions/home.aspx


http://www.tampabay.com/news/aging/medicare/a-medicare-primer-just-in-time-for-2014-enrollment/2148408


http://money.usnews.com/money/retirement/articles/2013/10/28/6-reasons-to-choose-a-new-medicare-part-d-plan


http://www.usatoday.com/story/opinion/2013/10/21/obamacare-medicare-affordable-care-act-column/3145983/

41 comments:

  1. Nice post Bob. I went through this with my wife eight years ago and for myself two years ago. The one caveat I might offer is the Medigap, which typically has multiple plans (A - G ) increases much more than Medicare as you get older. My wife pays more than twice what I do for the same plan (although a different carrier). Now that she is in her seventies it has been going up about 20 - 30% yearly. You should keep that in mind when you are picking a plan.

    But even with that we now spend about half of what we did on private insurance. And unlike what you hear from some we have never been turned away by a doctor because we are on Medicare. My wife has had extensive, almost annual, major surgeries and never has anyone denied us service.

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    1. Good info on Medigap, RJ. I wonder if the ACA will have any effect on those increases. I guess one of the advantages of the Medicare Advantages plans is the ability to pay just one bill each month instead of one for Medicare, one for Part D coverage, and a third for supplemental policy.

      Of course, there is the opportunity to change plans every year which means the need to stay on top of things never stops!

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  2. I just struggled through all of this as I'm eligible the first of next month. Luckily my husband paved the way before me. We have done excellently on his Medicare Advantage plan. And I adopted the same plan. It's just the standard $104 payment per month out of his social security check. And it is almost as good as the HMO we had for years. I highly recommend it.

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    1. Do you mind mentioning which company you purchased the Advantage plan from? I am a little uncomfortable tying myself to a private company based on my experiences with private health care companies for the past several decades but I will investigate further.

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    2. The exact plan is AARP MedicareComplete Secure Horizons Plan 2 (HMO)

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    3. Thanks! I will take a close look.

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  3. In Arizona where managed care is King, I know losta folks on Medicare Advantage plans who are getting more benefits for their money. As far as drug coverage, it's awful to contemplate, but since Big Phamra has Americans in a throat-hold, we have always looked at the possibility we'd need to go to Mexico for meds if we ever did need them. Awful to have to think that way and I don't know how this might change under the ACA. Americans should just not have to struggle this much over health care in their elder years!!!

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    1. I know some folks who do travel to Mexico a few times a year for their drugs. Prices are so dramatically lower it makes sense. Just south of Yuma, AZ is a Mexican town that seems to exist just to fill American medical needs.

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  4. My parents dreaded turning 65 and denied it. I can't wait. The last year I lived in NY my monthly premium was $1300 (and NY has always been a not allowed to charge more for pre-existing conditions state.) When I moved I was denied from every company but one that nobody accepts and has a 50K deductible (they put the two together now.) I've never even spent a night in a hospital. I feel so screwed by "the system." When my NY PCP stopped accepting insurance he kept me because I "cost him so little." My pre-existing condition was so minimal but I have assets and couldn't risk being uninsured for six months so I could be part of the states "uninsurable pool." Health insurance was truly the more you know the worse you did. Signing up for the ACA was the easiest thing I have done in a long time!

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    1. Your situation is not that atypical and the reason something had to be done about health care in this country. The ACA is not perfect, in fact it is quite flawed. But, it is so superior to the alternative that I am happy I have the chance to use it as a bridge between my present poor coverage and Medicare.

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  5. Bob, We are just a few months ahead of you. my husband will be retiring February 1, 2014 and we will be going on Medicare at that time. I have spent a lot of time online and on the phone figuring out what would be best for us. We have decided to go with Humana's Medicare Advantage plan.
    Good luck and I am sure you will find something that is a good fit for you and your wife.

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    1. Good info, Florence. I am kind of surprised at the strong support so far for the Advantage plans but I will certainly look closely at that choice.

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  6. Bob, I am new to your blog, but have already learned so much! Background: Hubby retired in January 2013 at the age of 60. He worked in construction and his body is just plain wearing out. I'll be 62 soon, still working part time. But I'd like to join him in retirement sooner rather than later. I never realized there were so many decisions to make. It's good to have somewhere to turn for advice, answers, or just suggestions on where to go next. Thank you for the time, energy and effort that you put into this blog!

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    1. You are very welcome. Please feel free to drop me an e-mail (satisfyingretirement@gmail.com) at any time if you have a specific question that I may be able to help you answer.

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  7. We have an Advantage plan through our HMO. Works for us!

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  8. Hey Bob !! Great post as usual. My 83 year old mom has one of the advantage plans because when she retired from the state that is what she was given. Her monthly cost is 25.83. Her copay for a regular doctor visit is 25.00. Her plan also has presc coverage included. Her drugs are mostly low cost ones so her total out of pocket for drugs monthly is about 35 to 40 bucks. I know I could change her over to regular medicare but this plan works for her at this time. It is with Blue Cross/ Blue Shield.

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    1. Another vote for an advantage plan. You folks are helping me quite a lot.

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  9. We have had Medicare Advantage plan for several years and it has been affordable and worked for us. But as you indicated it has always been subsidized by the federal government. ACA cuts funds to Medicare Advantage so we have known since it was passed that the subsidy would be cut and that major changes would happen and it seems that people are already seeing increased costs and doctors dropped from their network. I have read that some of the cuts do not take effect until 2017. It is my feeling that these plans will disappear. But we will keep ours for at least another year and see what happens.

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    1. Good info, Judy. I will do some research on that possibility before I commit. But, I can change my mind in a year if things go south.

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  10. Bob - thanks for the great post. I am probably a bit biased toward Medicare Advantage plans as I previously worked for the organization that owns the Secure Horizon product/brand. I do think that you will find that you get a very good value for your money at a Medicare Advantage plan as long as you realize you need to work within their network, rules etc and can only change carriers once per year. If you choose to pursue a "basic" Medicare plan that provides wider access to providers and hospitals, I would definitely encourage you to get a Medigap policy on top of it. Medicare only pays 80% of their negotiated rate with a doctor and/or hospital. The provider is able to bill you or the difference in the negotiated rate PLUS 12% more than their Medicare negotiated rate. As a result, you could get a hefty bill for services if you don't have a Medigap policy. The benefits of having the flexibility of choosing any provider or facility should be carefully balanced against the increasing premium levels that will occur (assuming healthcare inflation continues as it has historically over the past 10 years or so). Now that I'm digesting the increase in premiums that Tamara and I are likely to incur under our new individual ACA policies for the next 6+ years until I become Medicare eligible, I am beginning to get more into the weeds of what Medicare covers and what you have to pay for it. I look forward to what you and your readers discover through this dialog so thanks for getting it started and being willing to facilitate it! Mike

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    1. The comment just above yours talks about changes to Medicare Advantage programs due to ACA. That will take some checking into.

      I didn't know about the surcharge on top of the Medicare difference. I was planning on a Medigap policy if I go that route anyway, but you have helped cement that decision.

      Am I correct in assuming a decent Medicare Advantage plan operates like Medicare, plus Medigap, plus Plan D?

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    2. Bob - Yes, my understanding is that you are able to get all of this in a single Medicare Advantage plan as they are run today. I would also agree that the implementation of ACA may have some impact on the future of Medicare Advantage plans and what they will be able to offer. Obviously a lot of details to still be sorted out on that front in the coming years. Mike

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  11. AGGG! Glad you all will have it figured out before my husband hits the age in two years. Many thing to think about and research. Thanks for the beginning to the process.

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    1. Everyone's feedback is quite helpful

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  12. Here in the East Valley/Phoenix area,I have seen that the Medicare Advantage plans have a rather wide network of Doctors and hospitals, plus more complete coverage that regular Medicare.If my Dad were out here, I would definitely steer him towards one of those plans. Important thing is to get on board with a family doctor asap early on, before you NEED one.Get established in an office. I hear it can take a little time to get that first new patient appointment but after you are a patient, getting in for care should not be too difficult and there is no balance billing later on. Many offices use NP's and PA's to extend availability, but as a retired NP myself I can tell you it's very good care,overall!! And the MD is always available for complex problems which require the next level of care.

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    1. I checked on the Medical Advantage choices offered through the AARP association with an insurer and was surprised to find only one plan offered for 2014 in Maricopa County (Phoenix metro). Using another resource I found at least a dozen choices, half of which have a $0 premium and $0 monthly charge for drug coverage.

      Considering I am in good health at the moment and take only one prescription pill one of those may be my best choice for now. My present doctor accepts the AARP plan so, for me, it would be simply paying the $104.90 a month (the normal Part B charge) and only $10 for a doctor visit and $4 for my generic drug. Quite a bit better than the $533 my present company wants and the $341 for the policy I bought through the ACA Marketplace.

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  13. Hi Bob - One thing to consider is that if you start with a Medicare Advantage plan, but then want to switch to traditional Medicare at some point in the future, it may be difficult to obtain Medigap coverage when you make the switch. I would definitely check the rules for when Medigap insurers are required to sell you a Medigap policy (you can google “Your rights to buy a Medigap policy”). My father has been on a Cigna Medicare Advantage Plan for many years (he lives in Mesa). He had cancer surgery done by an excellent surgeon at the Mayo Clinic, and may need another surgery if the cancer recurs, but Cigna has stopped paying for Mayo Clinic services. I looked into switching him to traditional Medicare and signing him up for a Medigap policy, but unless you are moving out of the area or your Medicare Advantage plan goes away, Medigap insurers can refuse to sell you a policy. Since my Dad has several pre-existing conditions, it looked like he could have been turned down, and we decided to keep him on the Cigna plan (which he is happy with, in any case).

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    1. Thanks for the heads up. I did check. If I want to switch from an Advantage program back to original Medicare I can buy a Medigap policy without restriction from among several classes (like F through N).This excludes the cheapest options which I wouldn't want anyway. Only if I switch to another Advantage program voluntarily that does not include Medigap coverage could I be denied by a supplemental company.

      I think I read that correctly!

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  14. Medicare itself is fairly simple, but as you point out, figuring out the supplemental options is quite a challenge. I recently went thru this myself -- see http://sightingsat60.blogspot.com/2013/09/tips-for-enrolling-in-medicare.html -- and decided despite the complexities, it would be a good program for me and save me about $250 a month. Good luck!

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  15. Thanks, Tom. I will swing over to your site and take a look at that post. Considering my health I am leaning toward an Advantage policy with a zero premium and zero drug premium each month. There are gaps in parts of its coverage but I take only one pill a day and am in good health. I'd be gambling a bit that the wheels don't fall off in that first year, but even if things go bad that policy is just as good as I have now and I save a few hundred dollars every month

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  16. I live in Alberta, Canada, and am reminded of how lucky we Canadians are to have the health care coverage we do. Currently in Alberta, health care is covered by provincial taxes. That includes physician visits, diagnostics, hospitalizations, surgery for all Albertans. I pay $67/mo for an extended health coverage plan that includes 70% of prescription drugs up to $10K/yr; ambulance service; basic dental care including exam and cleaning with 80% coverage for restorative, endodontic and denture services; travel insurance up to 10 days. I believe when I am 65, this extended health coverage plan will not be necessary. Of course, not all drugs and services are covered and there's always talk of queue jumping and paying out of pocket, resulting in somewhat of a two-tier system. Overall and relatively speaking, we're not threatened with bankruptcy due to overwhelming medical expenses.

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    1. Canada is in step with much of the rest of the developed nations, America is not. Our health care system has been broken for years and would have continued to bankrupt people and the country if something hadn't been done.

      The insane, hysterical rants against Obamacare strike me as so ludicrous. 80% of Americans have insurance through their jobs so they have absolutely no idea of the real cost to all of us. The loudest complaints are against the government involvement, not the law per se. But, those same folks will demand Social Security checks and Medicare coverage without batting an eye.

      Our country will be pulled into a workable health care system, screaming and kicking all the way. But, in a decade, there will be bafflement over the fuss we are experiencing today.

      You have a great deal, Mona.

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    2. Bob,

      If you were diagnosed with a hernia and got your first available date for corrective surgery to be 8 months in the future because it was not considered to be life threatening would you be pleased. That happened to a friend of mine near Toronto. Such waits are not unusual. Each system has its advantages and disadvantages. I can go over a relatively long list of weaknesses in their system, mostly related to availability of services/providers and access to a number of medications (especially some oncology products). Just as I can go over the weaknesses in our system.

      Unfortunately we are not fixing the weaknesses, just changing who is paying for it. You will be seeing more problems is finding an accessing providers in many areas because there is already a shortage in the US and it will get noticeably worse.

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  17. I agree that our health care system has been broken for years and I hope that we will be pulled into a workable system eventually. Having said that I think that the ACA was a false start. However it may be that a false start was necessary in order put the country on the path to fix the system. Yes, it helps some people now, but it has so many negative consequences that should have been foreseen. I can understand some of the kicking and screaming, but I hope it is directed toward a positive outcome.

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    1. Has there ever been a large scale government program that didn't need fixing? The ACA is flawed and built on a shaky foundation. But at least an effort has been made to fix our health care system. To continue to ignore the problem as has been done for the last 20 years would be much worse.

      Fix the law, don't cause it to fail.

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    2. Has there ever been a large scale government program that didn't need fixing? The ACA is flawed and built on a shaky foundation. But at least an effort has been made to fix our health care system. To continue to ignore the problem as has been done for the last 20 years would be much worse.

      Fix the law, don't cause it to fail.

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  18. Bob,

    Concerning your comment

    Of course, I can't forget about the famous "donut hole" when I think about my costs. When Medicare drug coverage was added in 2003 there was a gaping hole in coverage for those who needed it the most: those who required expensive drugs were forced to pay the full cost when they could least afford it.

    The donut hole came about as a compromise. Part D was originally intended to function to limit maximum out of pocket costs for medicines. The high end of the donut whole was originally where coverage was intended to start. The low end coverage was put in out of political necessity because it was not felt that the law would pass because too many would not see benefit. As a result some coverage was put in at the low end so that most would get some benefit. That generated sufficient support to enable passing the law. The gap between was not covered because costs for the program almost doubles when you fill in the gap.

    So yes it will close. But like with many other things WHO ends up getting the bill.

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    1. So, the donut hole was strictly a political expediency? Sounds about right. In theory it should close by 2020.

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  19. Rather than navigate this alone I suggest you get an insurance agent who knows all the ins and outs and can make sure you end up in the right plan. I needed a plan that included the hospitals and doctors that I had worked with for 48 years and would let me get coverage out of network if I'm traveling (and even overseas). My agent is a dream and since I'm healthy it was easy to put me in the AARP Medicare Complete plan through United HealthCare for my area for the $104.90 I pay for Medicare. As you found out each area is different and it was important to me to know if my plan would transfer if I moved to another county to be closer to my kids. I wasn't willing to trust my internet explorations to something this important - my agent is a godsend and I'm very well taken care of.

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    1. Good suggestion. I am comfortable doing my own research, but for many a trusted agent is helpful. Just be sure sure he or she isn't steering you to a program based on the commission generated.

      There are several good Advantage options available to me. From what I understand Arizona has a very robust Marketplace and the rates are lower than in most of the country. I am also aware that Advantage programs may start to disappear because of federal cuts in reimbursement so I will be prepared to switch every year if need be.

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