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What you don’t know about Medicare can cost you a lot, says Melinda Caughill, founder of 65 Incorporated.
In a recent interview on the Decoding Retirement podcast at the 2024 Schwab Impact event (watch the video above or listen below), Caughill explained some “dark little secrets” about Medicare that everyone now and in the future should know, from the importance of double-checking. information from Social Security agents to review your distribution each year.
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Here are some of the potential problems in the Medicare system Caughill highlighted.
Caughill described enrolling in Medicare as a step-by-step process that goes beyond choosing specific insurance providers such as UnitedHealth ( UNH ), Humana ( HUM ), or Aetna.
The first step is to decide when to register, which depends on the individual’s needs, such as whether to register at the age of 65 or to register late.
The next step is to choose the type of Medicare coverage that best suits the individual’s needs. This is often called choosing a “way,” since it can be a one-way decision without going back.
Read more: Medicare open enrollment: How to add or modify your coverage
After determining the time and method, people should choose the right insurance plans. Enrollment in Medicare will be completed through the Social Security Administration, followed by enrollment in any supplemental coverage.
However, the method does not end there. The final step involves reviewing and possibly updating the individual’s coverage annually to ensure that it continues to meet the individual’s needs and circumstances.
An elderly man waits for his prescription to be filled on October 3, 2023, at a CVS pharmacy in New York City. (Robert Nickelsberg/Getty Images) ·Robert Nickelsberg via Getty Images
“The sixth step in enrolling in Medicare is to review your coverage every year for the rest of your life,” Caughill said. “No autopilot.”
Failing to verify coverage means you are giving insurance companies a blank check. And “just because you don’t have any changes to your health or medications” doesn’t mean your health plan will stay the same year after year, Caughill said.
Premiums, deductibles, out-of-pocket copays, provider networks, and more can change each year, all while keeping the plan’s name, he said.
When you contact the Social Security Administration (SSA) to file for Medicare, you may not only find it difficult to find useful information, but you may also find incorrect information.
For example, Caughill told the story of David, an employer-paid COBRA health insurance provider until October.
In January of that year, David called the Social Security Administration and asked the representative if he should enroll in Medicare. According to Caughill, the Social Security representative advised David to file for Part A but to wait until October to file for Part B, Nov. 1 before it arrives.
Unfortunately, this strategy was wrong and had devastating consequences.
According to Medicare.gov, if you have COBRA and are eligible but not enrolled in Medicare, COBRA may only cover a small portion of the health care you receive, leaving you to pay more on your own.
“Actually, it’s unfortunate that they got this guidance because, the reality is, if you have COBRA coverage after age 65, COBRA coverage is secondary to Medicare regardless of whether you enroll in Medicare or not,” Caughill said.
David incurred between $800,000 and $1 million in medical bills over the next 10 months. Due to the guidance of the Social Security agent, these payments were not covered, leaving him and his wife, Julia, with nothing to cover.
When Julia contacted the Social Security office to report receiving the wrong guidance, she was told there wasn’t enough information about the January call to review her case.
“The Social Security office said, ‘Well, I’m sorry, we want to help you, but we … don’t know who this worker is who helped you. So you’re on your own.'” According to Caughill.
When dealing with the SSA and Medicare, Caughill recommended documenting any conversations with officials, noting the date, time, what was said, and who you talked to.
If things go wrong, he said, you have to prove that you have a bad idea. And even then, it’s hard to find rest.
“Even with complete documentation, it can be difficult, if not impossible, to get Social Security to process things,” Caughill said. “But if you have no documents at all, you are not guilty.”
There are two ways to opt out of enrolling in Medicare, Caughill explained. One can enroll in Medicare Advantage, or what some call Medicare Part C, or enroll in original Medicare and purchase a Medicare Supplement Insurance plan or Medigap.
“The unfortunate thing,” Caughill said, is that Medicare insurance agents are paid more to sell you a Medicare Advantage plan than a Medigap plan.
In fact, he noted that Medicare insurance agents make 40 percent more on the initial commission selling Medicare Advantage plans than Medigap plans. On average, they make $715 in commissions on a Medicare Advantage plan, versus $483 on a sold Medigap plan.
Isabel Diaz Tinoco and Jose Luis Tinoco look at a computer as Otto Hernandez, an insurance agent, shows them the different insurance plans available on Nov. 1, 2017, in Miami, Fla. (Joe Raedle/Getty Images) ·Joe Raedle via Getty Images
Over the course of 20 years, a Medicare insurance agent will earn $775 in commissions per Medicare Advantage plan sold compared to $3,335 per Medigap plan sold.
This does not mean that Medicare Advantage plans or insurance agents are “bad,” Caughill noted in his presentation at Schwab Impact 2024. It just means that the business of selling Medicare insurance encourages agents to promote one type of product over another, no matter what it is. really like the customer.
“You have to know this,” Caughill said. “Always know where the money is going, and make sure the direction you’re getting is in your best interest.”
To find an agent who puts your needs first, Caughill suggested asking agents a few questions: Do they sell Medicare Advantage, Part D, and Medigap plans? What is their sales ratio for Medicare Advantage vs. Medigap policy? and how many companies are they allowed to sell?
Caughill also advised people to listen during sales negotiations. An agent who values negotiations about low monthly payments and other free benefits? (Not good.) Does the agent only talk about today, saying you can always change your coverage later? (Wrong.) Or does the agent talk about provider networks, drug formularies, prior authorization, and guaranteed case rights? (Good.)
“There are good insurance agents out there,” he said. “There is also a bad one. … So you have to ask those questions. And if you ask those questions and find a good one, as much as you can, work with it.”
The Inflation Reduction Act limits annual out-of-pocket drug costs to $2,000. However, this coverage only applies if the drugs are included in the Part D drug plan, Caughill said.
If the drug is not covered by a Part D plan, the $2,000 limit does not apply, and you will be responsible for paying the full cost of the purchase, whether it is $200 or $20,000 per month.
“You will pay the full retail price of that drug,” he said.
Caughill said it’s also important to note that drug plans can change their formularies, or the list of drugs they cover, each year, meaning a drug covered this year may not be covered next year.
U.S. President Joe Biden talks about his plan to protect and strengthen Social Security and Medicare, as well as lower health care costs, in Tampa, Fla., Feb. 9, 2023. (Mandel NGAN/AFP) (Photo by MANDEL NGAN/AFP via Getty Images) ·MANDEL NGAN via Getty Images
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