Top 5 Medicare Planning Insider Tricks & Tips for Retirees to Consider

Welcome to our resource on Medicare Planning – An A to Z Guide for the Financial Layperson. We believe that you will find this guide not only informative but at times entertaining as well.

When creating this guide, we worked with many different experts on Medicare, including licensed insurance professionals, Social Security administration personnel, in addition to leading industry publications such as the Medicare and You guide.

Our goal with this resource is to give you all the information that you need, without bogging you down with industry jargon and distracting tangents.   

So, buckle in and enjoy the ride, hopefully, you will make it out on the other end without too many scrapes and bruises!

Tip #1 Medicare does not pay for everything – Better to find out now!

Original Medicare is a phenomenal health insurance program. But it does not cover everything, and that is why we have supplemental insurance products such as Medigap insurance, and Part-D Drug plans to cover outpatient medications.

I think it would be instructive to look at some real-life examples of serious costs that are not covered by Medicare.

Certain top-level cancer treatment centers do not accept Medicare payment in full. That means beneficiaries that choose to use these facilities, will have to pay out-of-pocket and seek reimbursement for Medicare’s approved rate of reimbursement. That could leave the beneficiary with significant out-of-pocket costs, that would remain un-recouped. Without the aid of supplemental insurance such as cancer insurance, we could be forced not to use the best doctors for fear of the costs.

Inpatient hospital care whether you are on Original Medicare or a Part-C private Medicare plan, can add up to a costly sum of money. It is a tough pill to swallow either way. If you are on Traditional Medicare, you have about a $1400 deductible that is due, even if you are hospitalized only for three days.

Granted, if your hospitalization had gone the other way, and turned into a two-month stay – you would not have any more hospital bills due. So, we can agree that the situation would be incredibly happy for such a low deductible. On the other side of the coin, we have the daily hospital copays that are a mainstay of Medicare Advantage plans. We can expect the co-pay that is due at the end of hospitalization, which is based on a daily amount.

This amount can run anywhere from $150 to $500 per day, usually with a limit of seven days (billable) for a single hospitalization. That is something that every baby boomer should be considering, is if they would have $1000 available for a hospitalization bill. If not, a recommendation for indemnity plans that would reimburse for hospitalization, I think would be a great recommendation in such a case.

Tip #2 Make a plan for Medicare – Ensuring there is enough in the piggy bank!

When someone is about 64 years old, you start to plan for retirement which usually includes some game plan for your health insurance coverage. Naturally, we understand that Medicare has set cost-sharing requirements, a deductible then daily copayments for inpatient hospitalizations, and a deductible plus coinsurance for outpatient medical expenses.

A point that is especially important to keep in mind, is that these costs do increase. Now the annual increase is not large typically, but there is an increase, nonetheless.

So, whether we are talking about increases in the out-of-pocket costs or premiums for original Medicare, increase in costs for Medigap insurance or prescription drug plans, our out-of-pocket costs do increase as we age.

If we are doing our job and are healthy as a horse at 85 years old, the costs for the system are so going up though we should be applauded on a personal basis.

Let us look at some examples of this in action. In 2011, Medicare Part B premiums were $115.40 a month. For 2020, The Medicare Part B premium is $144.60. That is an increase of approximately $30 a month, over nine years. The part B premium might be close to $200 a month by 2030, which is something to be considered when planning for Medicare.

The inpatient hospital deductible in 2011 under Original Medicare Part-A, was 1,132. The 2020 Part-A deductible is $1408. 10 years from now will the hospital deductible be close to $2000? Only time will tell!

The Part B deductible in 2011 for outpatient medical expenses, was $162. For 2020 the same deductible is $198. If we use the same timeframe as in our previous examples, I think we can expect 10 years from now for the Part B premium to be reaching almost $250.

The point of this exercise is to illustrate that costs do rise, and it is something that we have to consider when planning for Medicare. Those increases will add up to thousands of dollars over the course of your retirement years, so it’s important to keep those in your calculations.

Tip #3 New Insulin Copay Program – Check this list to see if you won the Medicare “Lottery” 

Beginning with plan effective dates of January 1, 2021, a select number of plan sponsors will offer approved insulin drugs at only a $35 copayment. This move by the Trump administration has really benefited a lot of seniors, who not only might be low income but also it brings significant relief to middle-class seniors as well.

As diabetic medications such as insulin can cost hundreds if not thousands of dollars a month even with Part D prescription insurance.

The name of the program is the Insulin Senior Savings Program. The first thing to check is if you are enrolled into a participating plan. If not, you need to shop around at participating plans with this program, the savings here is so significant you do not want to go through this open enrollment season without lease taking a look.

The drug cost is capped at $35 for a 30-day supply. This applies before any drug plan deductibles, does not matter if you are in the doughnut hole are not, you are paying a flat $35. Some of the most popular brands of insulin drugs are eligible for the savings. Humalog, Humulin, Lispro, Lantus – just to name a few.

Check with a licensed agent, for which 2021 plans are participating in this no cost-benefit. The majority are not participating, which is a loss to them – and to their clients. Find out which plants participate, which ones want to see you save money, call your local agent or consultant Medicare.gov.

Tip #4 – Medicare Advantage plans are hot

Make sure you do not get burned! – For the past few years about 1/3 of all Medicare beneficiaries have been on Medicare replacement plans called Medicare Advantage or Part-C. This all those private HMO or PPO Medicare health plans, that you may have seen advertised quite strongly the last few years.

The primary benefit of these plans is a hospital and medical maximum out-of-pocket stop-loss, which Original Medicare does not offer in addition to supplemental/ancillary benefits referred to as extra benefits. These can be services such as dentures, part B premium reductions, a complete pair of hearing aids, transportation to and from a doctor’s appointment, etc.

The plans this year are extremely benefit-rich, so our advice on Tip #4 is to be cognizant of the pitfalls of the Medicare Advantage program which is the managed-care and network aspect.

Unfortunately, as is in life we cannot have our cake and eat it too. We cannot have the benefits of these Medicare Advantage plans, with the lack of a provider network such as in the case of Original Medicare.

If a senior is flexible, a Medicare Advantage plan could be a very solid choice depending on the plan.

But to be categorically accurate, Part-C plans offer more restrictions on access to care i.e. Freedom to choose their own doctors. Medicare Advantage plans are extremely like the plan design used on employer-based and individual/family style health insurance.

The only real difference is the maximum out-of-pocket limit, on a health insurance plan including hospital medical and prescription drugs. With Medicare, there is a maximum out-of-pocket limit for hospital and medical, and for prescription drugs, it has its own Set of cost-sharing requirements. Though with Medicare Part D there technically is not any limit on out-of-pocket cost for prescription drugs. Nor is there a limit on Part B 20% cost-sharing under Traditional Medicare.

Some Medicare Advantage plans are complete winners, if you were the type of person that was happy with your work base plan – you may find that you are comfortable with a Medicare Advantage plan.

Tip #5 – Understanding the History of Medicare, can give you a leg up!

Americans happened to be interested in a national health insurance system going all the way back to the early 1900s. In fact, Pres. Teddy Roosevelt’s platform included health insurance during his 1912 campaign.

However, the support was not fully realized until Pres. Harry Truman got into office.

Pres. Truman in 1945 got the ball rolling with Congress, calling for the creation of a national health insurance fund open to all Americans. His vision would include coverage for office visits, hospitalizations, lab work, dental care as well as short-term nursing care.

Eventually Pres. Lyndon Johnson signed legislation in 1965 that enacted the Medicare system, as we know it today. In 1966, the very first Americans experienced their first foray into a socialized health insurance program.

The Medicare program has largely remained the same ever since. It is what us young folks like to call “Old School” health insurance.

It is largely based on the old Blue Cross and Blue Shield concept of “Hospital” vs “Medical” insurance. That is why you have different “Parts” of Medicare.

Before Medicare was enacted, most Americans obtained their health insurance benefits through Blue Cross and Blue Shield. Blue Cross provided insurance to cover hospitalizations, and Blue Shield provided medical expense insurance for outpatient services.

When our political leaders drafted the Original Medicare legislation, they borrowed heavily from the Blue Cross and Blue Shield model. That is why there are two parts to Original or Traditional Medicare. Part A is Medicare’s version of Blue Cross (hospital) insurance, and Part B is Blue Shield (medical) insurance.

Thank BCBS for this confusing part (no pun intended) of the Medicare program!

That is the list! There are of course plenty of more tips and tricks that we could share! Thank you for taking the time to read through our list of Medicare planning tips. Please reach out if you have any questions!