Navigating Medicare Open Enrollment

Medicare’s annual open enrollment period begins October 15 and extends through December 7.

During this time, people already on Medicare have the option to:

  • Switch from original Medicare (Parts A and B) to a Medicare Advantage plan.
  • Switch from Medicare Advantage to original Medicare.
  • Keep their Medicare Advantage plan or enroll in a new one.
  • Keep their Part D drug plan or enroll in a new one.

All changes, even those made as late as December 7, will be effective on January 1, 2021.

If you have original Medicare and a Medigap supplement plan, you will have to drop Medigap if you switch to Medicare Advantage. There is no open enrollment period for Medigap, and you are free to change this coverage anytime. However, if you do drop Medigap, it may be hard to find a reasonably priced Medigap plan should you later decide to switch back to original Medicare. Call your broker or your Medigap insurer before you drop your plan to find out about re-enrollment terms.

If you have a Medicare Advantage plan, there is an additional enrollment period during the first quarter of next year when you can select a different plan. You also can switch from Medicare Advantage to original Medicare.

Original Medicare is largely the same as last year, although the government is offering some beneficiaries a reduced-price insulin benefit. This benefit should be disclosed on the Medicare Plan Finder, which is loaded with details of all 2021 Medicare plans.

Part D Plans

Part D drug plans are offered by private insurers for those with original Medicare and Medicare Advantage. Plan costs, coverage rules, and covered drugs often change each year, so don’t assume your current drug plan will continue to be the best one for you next year.

You can enter your prescription drugs on Plan Finder and it should provide coverage and pricing details for all Part D plans offered where you live. Low-premium plans may not be the best choice. Look at total out-of-pocket costs for the plans that include your drugs.

Drug plans also may have rules requiring you to get prior approval from the plan before it will cover a drug your doctor has prescribed. Other rules may include “step therapy,” which can require you to first take a lower-cost generic drug before being covered for a brand drug for the same condition. Plans also may impose quantity limits on your prescriptions. Check with a plan on these matters before enrolling.

If you find Medicare shopping daunting, you can get free help with the process from the federally supported State Health Insurance Assistance Program (SHIP). It has offices in all states.

Medicare Advantage Plans

The Centers for Medicare & Medicaid Services (CMS) has long promoted private MA insurance plans over original Medicare, and projects that they now account for nearly 40 percent of all Medicare coverage.

CMS has approved a menu of MA benefits more extensive than original Medicare. MA plans often provide dental, hearing and vision benefits not covered by original Medicare. They also may include fitness benefits and, during the pandemic, expanded telehealth benefits that include behavioral health.

In recent years, MA plans have been authorized to cover non-medical benefits such as food, transportation to health appointments, and in-home safety features such as bathroom grab bars. Plans were slow to adopt these new benefits but they are becoming more common.

CMS has also encouraged plans to reduce the monthly premiums that most beneficiaries must pay in addition to the basic premium for Part B of original Medicare ($144.60 a month for most people in 2020). Many insurers are offering zero premium plans in 2021 but, as with drug plans, you need to make sure zero premium plans aren’t charging higher deductibles and co-pays than MA plans with higher premiums.

MA plans also require people to use doctors and other caregivers in the plans’ provider networks. In original Medicare, people are free to use any doctors that accept Medicare. Make sure your doctors are in your plan’s network before making your 2021 enrollment choice.

I do not provide individual answers to your questions but may publish selected answers in a future blog post. If your question is included, I will let you know via email.

Taking Social Security reduces your ex-spousal benefits

Diana – Minnesota: I’m 71 and my ex-spouse is 67. I began drawing Social Security at age 62, and don’t know if my ex-spouse has begun drawing his Social Security or not. How should I proceed in order to apply for and receive ex-spousal benefits? And what benefit should I expect? Would it be based on his FRA (full retirement age) benefit, even though he hasn’t reached that age? It sounds as though accurate information isn’t always given by people who work for Social Security. Thank you for information and your guidance!

Phil Moeller: If you have been divorced for more than two years, you can apply for an ex-spousal benefit even if your ex- has not filed for Social Security.

Your benefit will be tied to his FRA benefit. However, because you filed for your own Social Security at 62, your ex-spousal entitlement will be much less than half of this FRA benefit. And if it turns out to be less than what you’re already receiving, you would get no additional payment.

People often don’t think about the implications of how filing early for Social Security might affect their future entitlements to other Social Security benefits.

While not wishing any ill will on your former husband, I should also note that the age at which you filed for your own benefits will not reduce your ex-survivor benefits should your former husband die before you.

If this happens, you would be entitled to receive an amount of money equal to the Social Security benefit he was receiving at the time of his death. If he had not yet filed when he died, Social Security would calculate your benefit as if he had filed on the day of his death.

Because you are already drawing your own Social Security, you would receive an additional payment equal to the amount by which his benefit exceeded yours.

Lee – Virginia: I had to file for Social Security at 62. I am 68 now. I was with my ex-husband for 13 years. I’m working full-time at a very good job but have serious medical issues. How do I find out if I can claim spousal benefits? He is about 60 years old or dead.

Phil Moeller: If he is still alive, he is too young for you to claim an ex-spousal benefit. He needs to be at least 62 and have filed for his own benefit or, if he has not filed, you need to have been divorced for at least two years.

If he is dead, however, you can file for an ex-spousal survivor benefit. The Social Security Administration maintains national death records. If you have your ex’s Social Security number, you should be able to call Social Security and explain that you’d like to file for an ex-spousal survivor benefit if your ex- has, in fact, died. You may need to go into an office to actually file for this benefit and bring records of your marriage and divorce.

As with Diana, if it turns out that you are eligible to file for an ex-survivor benefit, your additional benefit would equal the amount by which his benefit exceeded yours.

I do not provide individual answers to your questions but may publish selected answers in a future blog post. If your question is included, I will let you know via email.

Medicare Q&A

I periodically post answers to reader questions. Email yours to philsquestions@gmail.com. I will let you know if I answer yours.

Anonymous – Pennsylvania: I am 42, have three children, and am receiving Social Security disability benefits. I also have become addicted to Xanax, which has been prescribed to me in high doses. I wish the doctors would tell you had badly these medications mess with your mind! Despite my need for help, Medicare has denied me coverage for the rehabilitation help that I need.

Fortunately, I am about to get remarried to a wonderful man who has employer insurance that will cover the care I need. But here’s the rub. The rehab services we’ve contacted say that even though my new employer plan will provide primary coverage, they will send this claim to Medicare anyway, and it will once again be denied! The rehab people are thus telling me to drop Medicare.

I called the agency and was told I can drop Medicare without threatening my disability benefits. However, if I do cancel Part B, I will face big re-enrollment penalties if I again need Medicare before turning 65. That’s a long way off, and who knows what my health insurance needs will be over the next 20 years?

I just keep hitting roadblock after roadblock with Medicare. I am sure I am not the only person is this situation. I have been calling rehabilitation centers for years in state and out of state and no one will help me. I have even been kicked out of hospitals because they say there is no help for me there! This is so frustrating for people who really want help.

Phil Moeller: Unfortunately, you have lots of company here. Xanax is a powerful benzodiazepine drug prescribed for anxiety and depression; others include Ativan, Dalmane, Halcion, Librium, Restoril, Rivotril, Serax, Valium, and Versed, according to Pennsylvania state prescribing guidelines. Addiction to these drugs is a serious and growing problem.

In terms of whether Medicare will cover your treatment, the key variable is whether such care is proscribed as medically necessary, according to Patrice Muchowski, head of clinical services as AdCare Hospital, which operates treatment centers in Massachusetts and Rhode Island and is part of the larger, nationwide American Addiction Centers network.

Medicare will cover addiction treatment that doctors and other licensed caregivers think is medically necessary. If your doctors went through the proper steps, it’s likely that Medicare would cover your care, she said. But she said it’s not clear from what you described exactly what steps you and your doctor already have taken.

Odds are, however, that showing up at a hospital with your Medicare card is not going to get you the covered care you seek. Benzos are very powerful, she stressed, and the best way to come off of them is through “a very, very, very slow taper (program), done either by a physician prescribing it” or a hospital familiar with such treatments. Not all hospitals are equipped to provide that treatment, but ask for a “level 4” facility, Muchowski advised. This is rated as the highest level of addiction care by the American Society of Addiction Medicine.

Muchowski had these additional suggestions, while emphasizing that she would need to know much more about your situation to provide informed guidance:

  1. Not all drug rehabilitation facilities accept Medicare, so make sure you’re talking with one that does.
  2. A psychiatric facility might be worth pursuing, as they usually take Medicare. The American Academy of Addiction Psychiatry has a referral service.
  3. Speak to the person prescribing your Xanax to discuss outpatient programs that can provide you professional help in tapering off this drug. Your prescriber has the right to lower the dosage as well, which could be part of a formal tapering program.
  4. Your fiancé’s employer might have a formal employee assistance program that can help you.

Here’s an email from Steve in Massachusetts that illustrates the issues and decisions that people with disabilities may face if they return to work:

“I am 44 years old, blind, and have had Medicare for about 10 years because of my disability. I did go back to work full-time a few years ago but have continued to pay for Medicare (Parts A and B). It is my only insurance right now, but the out-of-pocket costs are getting expensive.

As a result, I have recently gotten health insurance from my employer and I had planned to stop Medicare. I saw my doctor last week and told him the situation. He recommended that I not stop my Medicare because he said that it could be very hard to get it back, given that I am more than 20 years away from retiring. He recommended that I keep Medicare and look for a secondary insurance. I trust my doctor, but I do not think he is an insurance expert by any means!”

One-size-fits-all answers don’t work here. A person’s specific circumstances – age, health needs, insurance plans, and the like – are all different. What they do share is the need to understand how Medicare does and does not “work” with other insurance programs. This is a big-enough deal at Medicare that the program has an operations manual dedicated to what are called “coordination of care” rules.

Steve’s doctor deserves praise for at least thinking of this issue. Most doctors know very little about health insurance or the financial implications of their treatment. But Steve is right to want a second opinion about what his doctor told him!

Medicare rules permit a disabled person to reacquire Medicare coverage at any time prior to age 65.

Medicare rules permit a disabled person to reacquire Medicare coverage at any time prior to age 65. The issue here is whether, when the person re-enrolls, he would be subject to substantial late-enrollment penalties because he did not have continuous Medicare coverage.

For someone on Medicare who is not disabled, getting employer insurance clearly permits them to drop Medicare without encountering penalties upon re-enrollment. The same should hold for those with disabilities. However, I’ve encountered many illogical things about Social Security and Medicare, so I recommend that people contact Social Security to confirm how the agency would treat them.

In nearly all cases, the employer plan is the primary payer of covered claims and Medicare is what’s called a “secondary” payer.

If a person has a high-deductible plan with, for example, a $3,000 deductible, basic Medicare (Parts A and B) can be used to pay claims in the deductible phase of the coverage. Even with its monthly cost of nearly $145 for most enrollees, Medicare can make sense in some situations.

Beyond high deductibles, Medicare also can help pay some of the covered expenses not fully paid by an employer plan. Usually, it does not make sense to get a Medicare Part D plan here or a Medigap supplemental plan. You would be paying for things your employer plan already covers.

Before making this decision, however, it’s important that anyone eligible for Medicare by virtue of age or disability ask their employer to certify that the employer’s drug coverage is at least as good as a typical Part D plan. If an employer plan does not meet this “credibility” test, then the person must get Part D. Employers are required to provide credibility statements annually.

One final point here is that anyone in this situation who must get a Part D plan need not also pay for Part B of Medicare, although they do need to sign up for premium-free Part A.

I am pretty sure that people with such options can get their coverage coordination questions answered by talking with someone in their employer insurance benefits office. I am also pretty sure, based on literally thousands of reader emails, that talking with their insurer has a popularity rating akin to having a root canal without anesthesia. Time and time again, the best advice I have is that people should speak first to their health insurers, not to me.

 

 

Employers are Helping to Clarify Real Health Costs

In Nashville, going to the Vanderbilt University Hospital emergency room for a moderate problem could be costly, according to detailed cost information compiled by a company called Healthcare Bluebook.

The cost for the visit would be $1,584 – the highest among 30 area hospitals and nearly four times higher than the region’s lowest-cost provider. Further, the quality of care at the hospital ranked in the bottom 5 percent of the more than 4,400 U.S. hospitals with comparable emergency care.

Until recently, such detailed health care pricing information was simply unavailable. Consumers with health insurance might not have cared anyway. Their insurers would have paid most of the costs, leaving them with modest out-of-pocket expenses.

Their employers, however, care a lot. Employer balance sheets are getting eaten alive by rising health expenses. They paid about 20 percent of the nation’s $3.6 trillion health expenses in 2018, or roughly $700 billion. That percentage has held steady in recent years but total costs are rising sharply.

Roughly 155 million workers in the U.S. have employer-sponsored insurance, more than are covered by Medicare and Medicaid combined, and dwarfing the 11 million or so covered by a marketplace plan under the Affordable Care Act.

The average family premium was nearly $20,000 per year in 2018, according to a comprehensive study. Individual premiums averaged $6,715 and coverage for two persons was $13,425. Also, nearly half of those insured were in high-deductible plans, and often had to pay several thousand dollars before their health insurance took effect.

For these reasons, employers have become the most powerful force today driving health-care reforms. They’re fighting back against high medical costs, in part by harnessing increasingly powerful databases to identify who the bad actors are in health care – hospitals, doctors, medical equipment companies and others who charge high prices and deliver substandard care.

To better control costs, large employers began years ago to self-insure their health plans. They call the shots, using private health insurers to administer the plans. This also permits them to see all of the information about their employees’ insured health care spending, including the prices they are billed and the ultimate costs paid after their insurance-company administrators have negotiated final payment terms.

Employer claim information has been pooled by both public and private organizations. When it’s possible to see millions of insurance claims, troubling and powerful trends appear. Prices for the same procedures vary wildly, often in the same ZIP codes.

Healthcare Bluebook, based in Nashville, Tenn., has become one of the largest health insurance claims aggregators. Jeff Rice and Bill Kampine founded the company in 2008 and now roll their eyes at how the steep national recession quickly derailed their development plans. However, they now track the health claims for more than 5,000 employers and say they have enjoyed six consecutive years of triple-digit gains in their business revenues.

By looking at prices charged around the country for thousands of health services, the company has developed a free tool that consumers can use to see how much health procedures cost where they live. The growth of high-deductible employer plans, the two men say, is turning more health care consumers into cost-conscious shoppers.

The growth of high-deductible employer plans is turning more health care consumers into cost-conscious shoppers.

By entering a ZIP code in the tool, users can access the range of local costs that doctors, hospitals, and other health providers accepted as payment for thousands of medical procedures, including dental, hearing, and vision care (items not covered by Part B of Medicare). The range of lowest to highest prices is shown, along with what Healthcare Bluebook has defined as a “fair” price for a procedure.

The procedures are accessible from pull-down menus and are extensive – roughly 30 different entries for different MRIs, for example. The company also provides quality ratings for hospital procedures, based on multiple indicators.

Employer access to the huge variations in health prices has been a wake-up call to them, Kampine said.

Employers are encouraging employees to use lower-cost, high-quality providers because it saves employers money as well. Increasingly, employers are redesigning their health plans to exclude high-cost providers in favor of lower-cost care that still yields high-quality results.

Some employers have gone further by identifying low-cost, high-quality health care providers around the country and sending employees directly to these providers, even if it means putting them on an airplane and paying for their temporary living expenses. The pricing variations are so great that creating what are known as “centers of excellence” programs can save a lot of money, produce superior care, and enhance employee appreciation.

Too many health insurers focus their consumer pricing tools only on a person’s out-of-pocket costs, Rice says. Doing so is “really a disservice to employers” because it does not help identify and weed out high-cost providers. Even if out-of-pocket costs are low, high total costs translate to higher premiums.

The big question is whether consumers use this information to change how they make their health care purchase decisions. Earlier research concluded that consumers did not pay much attention to these new tools and skepticism still exists. But Rice says that Healthcare Bluebook has plenty of consumer data to counter this view, and that the availability of more price information will inevitably lead to greater consumer engagement.

Thirty years ago, consumers did not know what cars cost and were at the mercy of auto companies and showroom salesmen. Today, best-available auto prices can be displayed on smartphones in a few seconds. Rice and other price-transparency advocates think a similar wave of consumer empowerment is happening in health care.

 

Medicare and Social Security Feel the Financial Heat

The trust funds supporting Social Security and Medicare have taken a double hit from the pandemic. While a gridlocked Congress has looked the other way for years as program finances deteriorated, the damage has reached the point that the new Congress elected this November cannot continue to kick this can down the road.

There is little doubt that Democrat control of the White House and Congress would lead to expanded federal spending on both programs as well as rejuvenation of the Affordable Care Act. I know that enormous federal budget deficits don’t seem to matter much these days. Still, I’d feel better if some adults in the room figured out how we’re going to pay for such expansions.

Republicans have opposed such spending but their attitudes could change if Joe Biden becomes president. Continued gridlock likely would produce only band-aid fixes, along with near-constant fights risking government shutdowns.

The biggest hit from COVID-19 to date is that it has reduced payroll taxes paid into the Social Security and Medicare trust funds. At the same time, Medicare expenses have risen sharply due to coronavirus treatment and testing.

It’s also likely that some older Americans facing income reductions have decided to file earlier for Social Security than they had planned. This will raise short-term spending by the program. Because earlier claiming dates entitle people to lower benefits than if they waited, however, the program’s longer-term prospects shouldn’t be adversely affected.

The programs weren’t in great shape before the disease hit. The details are in annual reports from Social Security and Medicare program trustees that were last published in April.

The primary Social Security fund that pays retirement benefits was projected to have enough money to pay all claims until 2034, after which incoming payroll taxes from current workers would pay only 76 percent of the benefits earned by retirees. A smaller fund that covers disability payments was projected to face no benefits shortfall until 2065.

The Medicare trust fund covers Part A of the program, which pays for hospital care. It has been in precarious shape for a long time and was projected to run short of funds in 2026, after which its income would cover only 90 percent of projected expenses.

Part B of Medicare covers doctors, outpatient, and equipment expenses. Part D covers prescription drug costs. These parts of Medicare have no trust funds and depend on Congress to fund ever-widening annual deficits. In calendar year 2019, the combined deficit for both parts of Medicare was nearly $340 billion, By 2029, the trustees projected, this deficit will more than double to nearly $717 billion.

To emphasize, this was all before the pandemic. It’s not clear how severe the financial hit will end up being. But it ranges from poor to worse. The Congressional Budget Office recently updated its look at the trust funds. Since just the beginning of the year, it said, the cumulative deficits of all federal trust funds (which also include military retirement and unemployment) over the 2021-2030 period rose by $130 billion, or 6 percent, to more than $2.3 trillion. The ultimate hit, as we know, will wind up being larger.

The amount of outstanding federal debt has just exceeded the total size of U.S. annual economic output – a level not reached since World War II. Unless the economy gets back into some kind of new normal, this ratio has not finished rising.

Again, I know deficits “don’t matter” these days. The Federal Reserve has made it very clear it will create enough new digital U.S. dollars over the next several years to fund our deficits and permit interest rates to remain at near-zero levels. But Fed leaders come and go, and so do prevailing notions of what’s best for the country.

Trump Payroll Tax Deferments Make No Sense, Unless the Goal is to Attack Social Security

President Donald Trump’s executive order to defer Social Security payroll taxes for the last four months of 2020 takes effect tomorrow. I have not read any expert’s take on this that is favorable, so if you know of any positive punditry, please send me links, and I add them to the bottom of this post.

The rationale for the deferments is the inability of Congress to enact further economic relief for people who’ve lost their jobs or seen their incomes cut by the pandemic. Of course, Trump is hardly a casual bystander to this impasse, having done very little to convince Senate Republicans to come to the negotiating table. House Democrats long ago passed a big stimulus package, and the issue will be one of many contentious issues of the 62 days of scorched-earth election rhetoric until November 3.

The primary group of people needing relief are those with no jobs. Even a temporary payroll tax cut makes no sense to them. They’re not paying any such taxes right now, so how can a reduction in what they’re not paying be of any help? Arguing that employers who are freed of payroll tax obligations would decide that lower payroll costs made it sensible to re-employ people is a stretch.

Having to repay any deferred taxes next year further stretches the credulity of Trump’s action. There has been talk of somehow making the cuts permanent, but taxation is a power reserved to Congress, not the White House. That’s why the best Trump can do is impose temporary cuts. And make them voluntary. There is no assurance that very many employers will take him up on this Apprentice-like offer.

Given the poor targeting of this stimulus and its temporary nature, many critics (and, yes, they’re overwhelmingly Democrats) say the true reason for Trump’s order is to reduce revenues flowing into Social Security and weaken its ability to pay future benefits from the Social Security trust fund.

If you are trapped at home and starving for mental activity, you can find out everything you need to know about the trust fund by reading the The 2020 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds. These people do seem to get paid by the word, don’t they?

The key take away for today’s discussion is that payroll taxes from current employees fall short of paying the benefits that people are entitled to receive. Trust fund surpluses make up the difference, and will be sufficient to permit the program to pay full benefits until 2035. At that time, the SSA carriage turns into a pumpkin, and current payroll taxes are projected to cover only 79 percent of benefits.

Shortening the funds’ solvency periods (there are separate ones for retirees and beneficiaries with disabilities) makes the program vulnerable to the kinds of emergency changes that often bypass the thoughtful analysis that Social Security merits. Covering shortfalls out of general revenues, for example, would end the program’s historical self-reliance on payroll taxes. Requiring program administrators to come asking for money every year would deny retirees the certainty of knowing and planning for their future benefits.

It’s irresponsible to project such a dire outcome from Trump’s executive action. As in so many other areas of government, however, taking a chisel and hammering out even small chinks from the foundation of key government programs makes no sense. Except if the goal is to weaken or end them.

Social Security Q&A

I periodically post answers to reader questions. Email yours to philsquestions@gmail.com. I will let you know if I answer yours.

Diana – Minnesota: I’m 71 and my ex-spouse is 67. I began drawing Social Security at age 62, and don’t know if my ex-spouse has begun drawing his Social Security or not. How should I proceed in order to apply for and receive ex-spousal benefits? And what benefit should I expect? Would it be based on his FRA (full retirement age) benefit, even though he hasn’t reached that age? It sounds as though accurate information isn’t always given by people who work for Social Security. Thank you for information and your guidance!

Phil Moeller: If you have been divorced for more than two years, you can apply for an ex-spousal benefit even if your ex- has not filed for Social Security.

Your benefit will be tied to his FRA benefit. However, because you filed for your own Social Security at 62, your ex-spousal entitlement will be much less than half of this FRA benefit. And if it turns out to be less than what you’re already receiving, you would get no additional payment.

People often don’t think about the implications of how filing early for Social Security might affect their future entitlements.

People often don’t think about the implications of how filing early for Social Security might affect their future entitlements to other Social Security benefits.

While not wishing any ill will on your former husband, I should also note that the age at which you filed for your own benefits will not reduce your ex-survivor benefits should your former husband die before you.

If this happens, you would be entitled to receive an amount of money equal to the Social Security benefit he was receiving at the time of his death. If he had not yet filed when he died, Social Security would calculate your benefit as if he had filed on the day of his death.

Because you are already drawing your own Social Security, you would receive an additional payment equal to the amount by which his benefit exceeded yours.

Lee – Virginia: I had to file for Social Security at 62. I am 68 now. I was with my ex-husband for 13 years. I’m working full-time at a very good job but have serious medical issues. How do I find out if I can claim spousal benefits? He is about 60 years old or dead.

Phil Moeller: If he is still alive, he is too young for you to claim am ex-spousal benefit. He needs to be at least 62 and have filed for his own benefit or, if he has not filed, you need to have been divorced for at least two years.

If he is dead, however, you can file for an ex-spousal survivor benefit. The Social Security Administration maintains national death records. If you have your ex’s Social Security number, you should be able to call Social Security and explain that you’d like to file for an ex-spousal survivor benefit if your ex- has, in fact, died. You may need to go into an office to actually file for this benefit and bring records of your marriage and divorce.

As with Diana, if it turns out that you are eligible to file for an ex-survivor benefit, your additional benefit would equal the amount by which his benefit exceeded yours.

Rita: I worked at a business owned by my uncle. He deducted Social Security payroll taxes from my paycheck, but I later found out that he didn’t send my deductions to Social Security! (Yes, he pocketed the money.) He is in poor health, not coherent, and in his 90s.

His deceit leaves me four quarters short of eligibility for Social Security. What can I do to claim Social Security benefits? I’m in my 70s and do not want to work more quarters.

Phil Moeller: Wow, this is such a tough situation, and I really don’t have a sure-fire solution for you. Taking legal action against your uncle clearly is not an option, although if someone has power of attorney to make financial decisions for him, I’d call them and see if there’s any chance they would make things right with Social Security.

Were this me, I would look for copies of paystubs showing that payroll taxes were deducted from your pay. I would then take these to your local Social Security office and make a plea for reconsideration of your eligibility.

I am sorry you got such a bad deal. Please let me know how things turn out.

How to See All of Health Spending

The U.S. spends roughly twice as much per person on health care as any other developed country. The total bill in 2018 was $3.6 trillion. There are lots of reasons for this but one of the major drivers is that people who use health care – that’s us – don’t know what it costs and in most cases are prevented from finding out.

This is no accident. Over the past several decades, health care providers – hospitals, doctors, drug companies, and medical equipment providers – have done a terrific job of hiding the true costs of their charges. They have been aided in this effort by health insurance companies, which wind up paying for this stuff.

Here’s a more detailed look:

2018 National Health Spending ($ billions)
Total Out of Private Medicare Medicaid
Pocket Health Ins.
Personal Health Care 3,075.0 375.6 1,078.7 697.2 532.8
Hospital Care 1,191.8 34.8 481.1 297.0 196.6
Physician and Clinical Services 725.6 61.2 311.8 170.2 77.4
Other Professional Services 103.9 26.1 35.1 27.2 7.5
Dental Services 135.6 54.9 62.2 1.2 12.8
Other Health, Residential,
     and Personal Care 191.6 6.8 13.6 4.9 111.1
Home Health Care 102.2 10.2 12.2 40.3 35.9
Nursing Care,
     Retirement Communities 168.5 44.8 17.1 38.1 49.9
Retail Outlet Sales
     Prescription Drugs 335.0 47.1 134.3 107.2 33.4
     Durable Medical Equipment 54.9 25.5 11.3 8.9 8.1
     Other Non-Durable Medical 66.4 64.2       – 2.1     –
Source: Centers for Medicare & Medicaid Services

About half a trillion in health spending is involved in research and other charges that don’t directly affect consumers. Of the nearly $3.1 trillion spent on personal health care, you might notice, only about one in every eight dollars comes directly out of our pockets. The rest is paid by either private or government insurance programs.

Health provider bills often are grossly inflated and bear little relationship to the costs of providing care. Insurers negotiate final payment rates, but have lots of reasons for not driving a very hard bargain. They often have favored business relationships with key providers and, in some cases, may even own the providers’ businesses!

Spend a few minutes with these numbers, and you’ll be able to see where insurance helps and where it doesn’t. For example, consumers spent almost nothing out of pocket for hospital care, which cost nearly $1.2 trillion in 2018, and they directly paid for only about 8 percent of their nearly $700 billion in doctors’ bills.

On the other hand, out-of-pocket spending on dental services is more than 40 percent of total spending. And consumers pay nearly all the costs for non-durable medical supplies, which include over-the-counter medications, health aids and other items generally not covered by insurance. The ability of health providers to hide true medical costs has increased over time. Look at this graphic of research from the Kaiser Family Foundation, a leading provider of solid health care information.

Direct out of pocket health spending has fallen precipitously during the past 50 years. Because we pay for such a small share of their health care, we have not cared much about what that care really costs. Many health care experts have adopted a similar view, saying that providing real price information to consumers may not affect how they consume health care.

These attitudes are changing. The introduction of high-deductible health plans and other health insurance “light” products have made millions of consumers very conscious of health care costs. Surprise medical bills not covered by insurance have also alarmed consumers.

Yet in most cases, when consumers do take the time to try to find out what their care costs, they often hit dead ends. Beyond office co-pays, even many doctors and health care professionals have only a loose idea of the real price tag for their services. In many cases, there is no “real” price. It varies depending on where the care is provided– hospital vs. office—and who is paying for it–commercial insurance vs. Medicare vs. no health insurance.

Slowly, however, transparency is coming to health care prices. The Trump Administration issued rules requiring hospitals to disclose their actual prices. The industry has sued but early court rulings have supported implementation of the new rules.

Most large employers are self-insured and use health insurers to administer their employees’ plans. They wind up paying all the bills and have the potential to see what providers charge and what insurers wind up paying for care. Increasingly, they’re using this information to drive down costs and identify higher-quality care providers.

How Medigap Supplement Plans Work

More than 10 million people buy Medigap policies each year along with basic Medicare (Parts A and B) and, for most, a Part D prescription drug plan. Depending on the kind of plan they purchase, Medigap will pay most or even all the expenses covered by Medicare which are not fully paid by Parts A and B. The biggest gap is that Part B of Medicare pays only 80 percent of covered expenses.

There are 11 different Medigap choices designated by different letters of the alphabet. Coverage of all plans with the same letter are identical  and are set by federal rules. Prices, however, are overseen by state insurance rules, and can vary greatly. Once you’ve determined the best letter plan for you, shopping for the lowest price is the best tactic.

More than 60 percent of Medicare beneficiaries have basic Medicare, and more than 35 percent of enrollees instead choose Medicare Advantage plans. Medicare Advantage enrollees aren’t permitted to buy Medigap plans and, in fact, don’t really need them. This is because MA plans have their own out-of-pocket ceilings that protect people from paying more than $6,700 a year, excluding premiums, for Part A and B expenses that their insurance does not fully pay. Plans are allowed to set ceilings of less than $6,700 and, while some do, more and more plans are employing the maximum ceiling permitted by Medicare.

Most likely, more people would buy Medigap plans if they could afford the monthly premiums, which easily can rival the $144 monthly premium that most people have to lay out for Part B of Medicare before they can buy a Medigap plan. The other key limitation for Medigap plans, explained in helpful and needed detail in a report from the Kaiser Family Foundation, is that these policies often lack the protections afforded to buyers of other types of Medicare coverage.

If someone wants to buy a Part D drug plan or a Medicare Advantage plan, they are guaranteed that insurers selling such plans where they live must sell them a plan without raising rates or penalizing them for their age or pre-existing health conditions (there are exceptions, most notably for smokers).

These guaranteed rights also extend to existing Medicare enrollees who want to change Medicare plans during the annual open enrollment period that runs from Oct. 15 through Dec. 7. Being able to freely switch Part D plans and Medicare Advantage plans — or to switch from basic Medicare to Medicare Advantage or vice versa — is a terrific tool for consumers that helps not only them but, by stimulating competition, all Medicare beneficiaries.

Federal rules do provide guaranteed issue rights for Medigap purchasers when they are new to Medicare and in some circumstances when they switch between Medicare Advantage and basic Medicare. The devil really is in these details, so I will forever be referring people to a table in the Kaiser report (see the link above) that explains the exact conditions under which people have guaranteed issue rights to Medigap plans.

However, once the six-month period of federally mandated rights has passed, state rules take over determining the rights people have if they wish to buy new Medigap plans. Here, the Kaiser table of state-by-state rules is invaluable. It should be a mandatory stop for anyone thinking about the role of Medigap in their Medicare plans.

Only four states – Connecticut, Massachusetts, Maine, and New York – extend guaranteed issue rights to Medigap for everyone age 65 or older. The other 46 states and the District of Columbia all have prohibitions and wrinkles, including three states – Massachusetts, Minnesota, and Wisconsin – that sell only one or two types of Medigap plans and depart from the 11 “letter” plans allowed under federal rules.

In most states, people can face higher Medigap rates or even coverage denials if they try and buy plans once their period of guaranteed issue rights has expired. Insurance brokers regularly tell me that this possibility is seldom the case and that people in their states have no problem switching plans without difficulty and without getting hosed by higher premiums. I have not seen hard data on such conversion experiences, and regularly tell readers to test the market for new policies in their state before they switch into or out of a Medigap plan during open enrollment.

However, I suspect that fear of a possible problem makes many Medigap policyholders resistant to change. This situation cancels out the possible benefits of open enrollment, and likely costs these folks both potentially improved insurance benefits and some money.

Another problem with Medigap access rights is that the federal standards do not apply to more than 9 million disabled Medicare beneficiaries who are younger than 65. About 60 percent of the states do provide limited Medigap rights to this group. However, only 5 percent of Medicare enrollees younger than 65 had Medigap plans in 2015, according to the Kaiser report.

Kaiser’s policy experts mention some possible policy fixes to expand the availability of Medigap, including expanding guaranteed issue rights for younger disabled enrollees and people who want a Medigap plan when they switch out of Medicare Advantage plans into basic Medicare.

They also note that creating an annual open enrollment period with guaranteed issue rights for Medigap plans would put them on an equal footing with other private Medicare insurance plans.

“A different approach altogether,” the report concludes, “would be to minimize the need for supplemental coverage in Medicare by adding an out-of-pocket limit to traditional Medicare.”

 

 

Working after 65? What you need to know about employer insurance and Medicare

With so many people continuing to work once they turn 65, the interaction of employer insurance and Medicare is important and often confusing. It’s at the top of my list of reader questions, with most coming from people who are or soon will be eligible for Medicare. Here’s what they want to know:

  • My employer tells me it will force me to get Medicare. Can they do that?
  • I don’t plan to stop working, and I like my employer health insurance. Do I need to get Medicare?
  • I don’t plan to stop working, and I hate my employer health insurance. Can I get Medicare?
  • My employer says they’ll help pay for my Medicare if I will drop my employer insurance. What’s allowed?

Medicare has different rules for employer health insurance plans depending on whether the plans cover more or fewer than 20 employers. We’ll call them “large” and “small” plans here. Even workplaces with fewer than 20 insured employees may qualify as large plans if they’re linked up with a multi-employer group plan. I’ve reviewed these rules carefully with Medicare.

Large vs. small employers

If you work at a small employer plan, your employer is permitted to require you to get Medicare when you turn 65. At that time, Medicare will become your primary health insurer. Your employer also has the option to cancel your workplace plan or retain it as a secondary payer of covered insurance claims. This distinction is important because it can affect the package of Medicare plans you may need, especially whether you need a Medigap supplement plan.

It can be a smart financial move to get Medicare, in addition to employer coverage or in place of it.

If you work at a large employer plan, your employer cannot treat you differently than younger employees. You and, if applicable, your spouse, must continue to be offered employer health insurance. These rules are very clear. If an employer with a large health plan tells you that you must get Medicare at age 65, it is breaking the law. The single exception is for people turning 65 who have end-stage renal disease; they can be required to get Medicare.

Employees with access to large employer-sponsored plans do not have to get Medicare, but they may do so if they wish. Historically, employee plans were so comprehensive and affordable that it seldom made sense for someone to get Medicare. However, rising health care expenses have led many employers to reduce the percentage of the coverage they pay, with many adopting high-deductible plans.

Some high-deductible plans require people to fork over the gross national product of Whatsupistan before their insurance kicks in. For these folks, it can be a smart financial move to get Medicare, either in addition to their employer coverage or in place of it.

Anyone considering this decision should contact their employer plan. They should ask two primary questions:

  1. Can I drop employer coverage? (If so, please provide me details of any adverse consequences.)
  2. If I keep employer coverage, does it continue as the primary payer of covered insurance claims?

Some plans disallow employees from re-enrolling if they drop coverage. As for which insurance plan pays first, the distinction between whether a plan is the primary or secondary payer of claims can have enormous consequences for your wallet and your peace of mind.

Where a person has more than one health insurance plan, “coordination of benefits” issues can become complicated and important.

Medicare’s basic rules

Here’s a rundown of rules, pulled from the current edition of “Medicare & You”:

  • If you have retiree insurance (insurance from your or your spouse’s former employment), Medicare pays first.
  • If you’re 65 or older, have group health plan coverage based on your or your spouse’s current employment, and the employer has 20 or more employees, your group health plan pays first.
  • If you’re 65 or older, have group health plan coverage based on your or your spouse’s current employment, and the employer has fewer than 20 employees, Medicare pays first.
  • If you’re under 65 and have a disability, have group health plan coverage based on your family member’s current employment, and the employer has 100 or more employees, your group health plan pays first.
  • If you’re under 65 and have a disability, have group health plan coverage based on your or a family member’s current employment, and the employer has fewer than 100 employees, Medicare pays first.
  • If you have Medicare because of End-Stage Renal Disease (ESRD) your group health plan will pay first for the first 30 months after you become eligible to enroll in Medicare. Medicare will pay first after this 30-month period.

An earlier column provides additional details on employee health coverage for those eligible for Medicare. I’ve also written an explanatory piece on the circumstances under which someone with Medicare can be denied continued participation in a health savings account, including the usually unintentional disqualification that occurs when a person claims Social Security benefits.

Can an employer help with Medicare costs?

The issue of whether an employer can provide financial assistance for an employee’s Medicare expenses is very clear for large employer plans but can be fuzzy for small employer plans.

In the case of large employer plans, the answer is an unequivocal “no.”

Here’s the language from Medicare’s official rules. (To avoid confusion, group health plans, GHP, and large group health plans, LGHP, are Medicare terms that both relate to plans with 20 or more covered employees.)

An employer or other entity is prohibited from offering Medicare beneficiaries financial or other benefits as incentives not to enroll in or to terminate enrollment in a GHP or LGHP that is or would be primary to Medicare. This prohibition precludes the offering of benefits to Medicare beneficiaries that are alternatives to the employer’s primary plan (e.g., prescription drugs) unless the beneficiary has primary coverage other than Medicare. An example would be primary plan coverage through his/her own or a spouse’s employer. This rule applies even if the payments or benefits are offered to all other individuals who are eligible for coverage under the plan. It is a violation of the Medicare law every time a prohibited offer is made regardless of whether it is oral or in writing. Any entity that violates the prohibition is subject to a civil money penalty of up to $5,000 for each violation.

If you work at a place with a large employer health plan, it is illegal for your employer to offer you any inducement to get Medicare and drop the employer’s plan. Based on my mailbag, such illegal offers are not uncommon. While you may find the offer attractive, just keep in mind that it’s not allowed.

It is illegal for some employers to offer you any inducement to get Medicare and drop the employer’s plan.

The story with small health plans is not so clear. In some cases, providing employees with financial help for their Medicare expenses is just fine. Given that employees at such firms have to get Medicare anyway, such supportive arrangements are more understandable than for employers with large health plans.

However, employers wishing to provide such subsidy programs have to be careful to make sure their offers are properly constructed. These rules are contained in IRS Notice 2015-17, which is written in language only a lawyer charging high fees could love. Here’s the “simplified” version provided by a Medicare spokesperson:

In order for the small employer with less than 20 employees to reimburse their employees for their Medicare Parts B and D and Medigap premiums, the following conditions must be met:

  • The employer offers a group health plan (other than the Health Reimbursement Account (HRA), Flexible Spending Account (FSA) or Health Savings Account (HSA)) to employees who are not eligible for Medicare;
  • Funding for the employees enrolled in Medicare should be made through an HRA (or FSA or HSA);
  • The employee receiving the payment through the HRA (or FSA or HSA) is enrolled in Medicare Part B or D;
  • The HRA (or FSA or HSA) is available to all employees who are enrolled in Medicare Part B or D; and
  • Under the terms of the HRA (or FSA or HSA), the employee (or former employee) is permitted to permanently opt out of and waive future reimbursements from the HRA (or FSA or HAS) at least annually in which case the right to receive funds is forfeited.