This week, Devin is talking about Medicare with Danielle Roberts of BoomerBenefits.com. Danielle is an expert on Medicare supplements and Medicare Advantage plans, and runs the Boomer Benefits company to help seniors with their Medicare needs.
The Parts of Medicare
Part A is hospital coverage – that’s what pays for in-patient hospital care, skilled nursing care, hospice, some home health care, and blood transfusions.
Part B covers pretty much everything that Part A doesn’t cover. It’s more like the insurance you had when you were younger, covering doctors appointments, physical therapy, medical equipment.
Part D is prescription drug coverage.
Part C is a Medicare Advantage plan, which combines A and B (and even D) together. These are run by private companies.
Medigap is also known as the Medicare Supplement.
How Medicare Works
For a normal person, they are automatically enrolled in Part A and B. To cover the things that aren’t covered by A and B, you’ll buy either a Medicare Advantage plan or a Medicare Supplement to help fill in those gaps.
You get Parts A and B through Medicare. Medicare Part B only pays 80% of your expenses, so that can really add up quickly. A supplement will pay some or all of that cost. The Medicare Supplement is purchased through a private insurance company. A Medicare Advantage plan is also purchased through a private insurance company, but it is a little different because it covers all your care, including the care that would usually be covered by Parts A and B.
Medicare Advantage Plans
When you join the Advantage plan, the plan takes over all of your health care. Medicare pays that plan a set premium each month to take on the risk of your health care needs. The Advantage plan pays all the claims that you have that year. It’s closer to traditional insurance, where you pay a co-pay or cost-share for each service provided. Medicare Advantage plans are very popular for certain groups of people. This includes people who take don’t use very much health care over a year.
Medicare supplements work more like secondary insurance. Medicare pays first, covering the things covered by Medicare, and the supplement pays some or all of the remaining costs.
How do you know where to look for a supplement? How do you know which is the right supplement for you?
One of the great thing about Medicare supplements is that each plan has the exact same coverage. If you look at a Medicare Supplement, like a Plan F or a Plan G, the benefits are exactly the same no matter which policy you choose – Medicare designed it to be that way so that you can shop that policy based on price. You can look at the rate increase history for those carriers. The premium will vary based on a couple of different factors, including the age when you purchase the policy, your gender, your zip code, tobacco usage, and any household discounts.
The carrier sets the rate and the agent can’t change it. So, you’re picking the carrier that you want. You can look at the rate, and their history of rate increases. You also want to look at the company’s financial ratings. There are great companies that have A and B financial ratings, so there is no reason to go with a company that has a lower financial rating.
When Do You Get Supplemental Coverage?
Medicare supplements and Medicare Advantage Plans have different rules for when you can get in and out of them. Medicare Advantage plans and drug plans work on an annual basis, with an open season each fall. Medicare supplements do not have an annual election period. You can apply for a new Medigap plan any time you want.
You have six months after becoming eligible for Medicare Part B to purchase a Medicare supplement without a health review.
If you purchase a Medicare Advantage plan when you first become eligible at age 65, there is a 12 month period in which you can get out of the plan at any time. This allows you to move to a Medicare supplement, without underwriting, if that is a better choice for you.
Now what happens if you’re in a Medicare Advantage plan and something bad happens? After the 12 month window, then you’re subject to medical underwriting and review.
Do Agents Have Conflicts of Interest?
Just like any type of advisor, you need to understand how your Medicare advisor is being compensated. Devin is skeptical, because he doesn’t know if the insurance agent is going to put the client in the best plan for the client, or in the plan that will give the agent the higher commission.
Danielle explains that one of the big differences with a newer agent is they may only offer a few of the available policies. And when they’re building their business, it is possible that an agent would want to push you towards a Medicare supplement that pays the agent a little bit more. When you’re working with a more established agency, they don’t have time to worry about those small differences in commission.
When shopping for an agent, here are some questions to ask.
- What companies do you represent?
- What types of policies do you sell?
If your agent only sells a few plans, then you may not find out about a company that might be less expensive.
Devin asks Danielle, from the agent’s standpoint, does one type of plan pay the agent more? Danielle answered that you can look up what the annual commission rate for an policy. The rate on a Medicaid supplement is right around 20%.
Before you get to the point of purchasing additional Medicare coverage, you should learn about the difference between a Medicare Advantage plan vs. a Medicare supplement. It is important for you to look at what those services will cost you and figure out what questions to ask.
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