On this week’s episode of The Secure Retirement Podcast, we focus on healthcare coverage, particularly Medicare Parts A - D, as we continue to address the key issues that affect members of the Florida Retirement System. With Medicare available from coast to coast, the information in this episode will be valuable to our listeners nationally, even for those outside of the Florida Retirement System.
John says, “Most people do not feel the effects of healthcare, or inflation in general, until they've been retired five to seven years. Then all of a sudden, without increasing spending or being extravagant, it's enough time for them to see some cost of living increases at the grocery store. And, healthcare is the biggest expense in retirement.”
We discuss the rising costs of healthcare, as well as:
Differentiating between the four types of Medicare coverage
Enrollment windows and when to make your decision
The delayed impact of IRMAA - Income Related Monthly Adjusted Amount
Staying updated with the annual changes and increases
And more
Mentioned in this episode:
John’s podcast: https://johnhcurry.com/podcast
John’s website: https://johnhcurry.com
John’s office number: 850-562-3000
Transcript
Steve Gordon: Welcome to John H. Curry's Secure Retirement Podcast. My name is Steve Gordon, I am your host today. And we are continuing our series of episodes, specifically geared towards members of the Florida Retirement System. Now, if you're not a member of the Florida Retirement System and you're tuning in today, then you do want to stick around because we're going to actually talk about a subject that applies to everyone. We're talking about Medicare today. I'm here with John Curry. John, welcome.
John Curry: Hello, Steve.
Steve: You know, this one. Again, following up after our last conversation on Social Security, this is another big area of concern for folks. And I know that, you know, health care is really one of the biggest worries and costs for people going into retirement.
John: It is, in fact, it ties up there sometimes it'd be one or two. But always what comes up is I'm worried about how do I cover my health care costs and in retirement and beyond? And I'm also concerned about running out of income. I want to make sure I don't run out of income.
Steve: Well, the two seem to be tied together. Because if my health care costs go up too much, I'd run out of income, wouldn't I?
John: Well, you're going to have less spendable income, because we're seeing health care costs go up more and more. And that is a big concern for our nation. And so many people who do not have health insurance. So what's the answer? Is that a universal health plan is that Obamacare as it's called, who knows? I don't have the answers. All I know, is this, something has to be done. But I go back, I'll save this 1000 times. You have to take control of your own personal economy and do your planning first. Because you do not know what's going to happen in Congress or the legislature.
Steve: No, and you can't, you really can't control any of that. So as we were preparing to record the episode, I said, you know, we really ought to start off by explaining the the two parts of Medicare, yes. And then you said, Well, no, no, there are four parts. And I didn't know there were four parts. So educate us on the four parts, because I may not be the only one that didn't know that.
John: Okay. Well, let me do this. Let me give a quick overview. And then we'll come back and put some meat on the bones. How's that?
Steve: Sounds good.
John: Okay. So there are four parts. Most people only think about Part A and Part B. Part A happens pretty much automatically at a 65 if you're in a social security system. And part A covers the what was called the hospital insurance. So it helps pay for inpatient care in a hospital or limited time at a skilled nursing facility, following a hospital stay. So part A also pays for some home health care and hospice care. So there's a lot of confusion about it, there are some deductibles that you have to satisfy.
I'm going to stay away from those today, because they change each year. And I don't want to have to go back and change this every time. Medicare Part B is called medical insurance. It helps pay for services from doctors and other health care providers, outpatient care, home health care, and certain medical equipment. And Part B costs you money. So when you sign up for part B, you got to pay a monthly premium, which comes out of your Social Security check. And I have a lot of people come in and go I don't understand this. And I paid into Medicare all these years. Yes, you did. You paid 1.45% of your income into Medicare. Unlimited, if you're under a million bucks, you're paying 1.45% on every dollar. Social Security has a cap. We talked about it. Last episode is 137,000. This year at 6.2%.
But Medicare Part A for the most people, you pay nothing for it. But if you don't have 40 full quarters, 10 years of service under the Social Security system, you may have to pay into Medicare Part A. So most of the people listening to this will not have that problem, but they may know people who do and then you have what's called Part C, Medicare Advantage plans. So Medicare Advantage plans is where you say okay, I'm not going to be in the original Medicare. It is a special program that was established by Congress to say, okay, we're trying to control these health care costs. So in our area, in Tallahassee area surrounding counties you have a CHP Advantage Plan. So Capital, Capital Health Plan, thank you Capital Health plans. Mental block. Capital Health Plan has a program where state employees can be a member of that
Steve: And capital health plan for those who are outside the area is a local insurance health insurance company.
John: HMO. Health Maintenance Organization. And we could get into the pros and cons of that. I will say this to people who say, Well, I don't like the plan, they have a good plan. I don't work for them, so I'm not going to be endorsing it. But I will tell you, I've been to two of their workshops, because so many clients who are affected by it is, is good. There are also issues, especially if you intend to travel a lot.
And I'll come back touch on those, because when I made my decision as to which way to go, original or C, I chose original. So we'll come back to that. And we'll talk about the pros and cons. And I should say this, now, I am not licensed to sell Medicare Supplement policies, I don't get into that. And I also don't work for the government. So what I'm going to share is my information that I've gleaned from dealing with this with clients and also their websites, and the research I do.
And then Medicare Part D, that's a biggie, because I just got impacted myself. I have a medication. It's a drug plan D for drugs, and medication I've been paying $25 a month for. Went to fill the prescription on Thursday price jumped to $108 a month for the balance of this year, because I'm in what's called the doughnut hole. So you reach a point of where certain medications, I'll even tell you this one happens to be eliquis. So there's no generic for yet. So it's expensive.
I don't know what it would be without care. I mean a plan probably five or 600 bucks a month. But this stuff is a complicated topic. It changes, some people will change plans, or every year or two. So we'll talk about that in a few minutes. But let me pause there guys see you I see your eyes glazing over.
Steve: Already confused. John, you know this, I've got a technical background, I think I'd rather go play with a slide rule than try to figure this out. So so we've got these four parts, you've given us kind of the overview. And let's kind of break them down with a little more detail kind of one by one because I think that'll help people.
John: Okay. Well, the first thing to look at is is what is Medicare just think of Medicare as being our country's federal health insurance program for people that are 65 or older. There's some exceptions, younger people can benefit too. But let's just keep it simple. Say it's designed for people who are 65 and older for healthcare. When I retired on paper, I was under a pension plan, but also the Health Insurance Program. So I chose not to go into Medicare Part B, at age 65. I waited until 66. So when I started collecting Social Security, I actually had another year before I started, Part B. Come to think it, so two years. And I did that because I had health insurance coverage. So it made no sense to switch.
So if you are part of a qualified group plan, you can stay under that or go to part B depending upon which one is best for you. So it's not automatic that you've got to go to part B. But it is important that when you register for part A, you let them know, I am covered under a group insurance program. So I will be deferring into the future before I take part B. If you don't, you may find that you're paying for part B, and you didn't mean to. And to their credit, they actually will call you they called me and I'm told by their people they call.
So you go online, you enroll, they follow up to make sure that they have everything they need from you. And then then they start taking Medicare Part B out of your check. Out of direct deposit. Now there's two parts to Medicare, think of it this way, original. And then we talked about the Medicare Advantage with the original plan. I'll just want to talk about myself pick on me. What I did, I chose after looking at all the options that applied in our area, and there's a bunch of them, I decided that I would stick with Medicare original meaning Part A Part B and I would purchase a Medicare Supplement policy that would fill the gaps. It's called Medigap insurance by some people. So supplemental plan.
So I have Part A Part B that I pay premiums for. And then I have premiums, I pay for it a separate policy that would fill the gaps. Why? Because I wanted the ability that no matter where I'm traveling around the country, that if I have to go get services at a hospital or doctor, I walk in, I put down my Medicare card, I put down the card for the company representing the Medicare gap policy. And that's it I'm done. I rarely pay anything out of pocket. They'll be some things I have to pay. But very little.
Now, where I get in trouble, though is the beginning of the year is there is a deductible, you have to pay out of your pocket before you get full benefits. And then I also bought a part D supplement. So Part D, is a plan, and I've changed it twice, once I had two different plans sort of one year, because of the medications or own, you'd want somebody who handles that for you to shop it and tell you which Part D plan is best. So that you have to do during the open enrollment period each year. And if you miss it, you'll have to wait until the following year.
Steve: And what is what when does that typically happen during the year?
John: The short answer is typically October through December. I can't give you the exact dates, I could probably look it up.
Steve: But I'm sure it varies year to year. But generally what we're talking about is the towards the last quarter of every year.
John: That is correct. And that's why you see so many ads on television about Medicare, because there's a limited window there to enroll.
Steve: So, so you've talked a little bit about the four parts. And there's this name that's floated around, I guess it's an acronym IRMAA. What in the world is IRMAA?
John: Well IRMAA is spelled IRMAA folks. And basically, here's how it works. When you sign up for Medicare Part B, like for example, this year in 2020, is $144.60 per month for part B. However, if you earn over a certain income level, and Medicare publishes that each year, it's a different number, then you could pay as much as 400, and something dollars a month. $428. So your income in retirement will impact how much you pay for Medicare Part B. And that part B number remember is in addition to any type of supplemental policy you buy. So we'll have people come in very upset with the government saying, Can you explain this to me, all of a sudden, my Social Security check moved from x down to here, because what happens is they look back two years.
So whatever your income was two years ago, impacts you today on your Medicare Part B premium. And when when I do seminars on these topics, because the two biggest seminars we offer Social Security and Medicare, sometimes we'll combine the two, because people have so many questions about so we're just gonna do an extended sort of hour and a half with a two hour session and simplify it and cover both. But it's interesting that people will say I had no idea that the premiums could be higher. Well, most of us don't, until it hits us. So I started educating people. And the reason that I started educating people, Steve, was with one of my long term clients, 35 year plus client.
She came in one day and said, You know, I don't understand what's happened here. But my Social Security check dropped, I got this letter. And it was about IRMAA, you know, your, your premiums have increased because of the IRMAA. Income Related Monthly Adjusted Amount is what it stands for. And she's waiting. So basically, they're taking my money from me. So yes, because they're feeling is because you earn more money. And any money you take out of retirement accounts, like CDs, she took a chunk of money out of her IRA for a trip. Well, that pushed her over. And it was two years previous, so it hit her this year. That year, this year. So it's pretty complicated. But when it hits you and you all of a sudden you see your check drop, or your deposit drop, you're like, what happened?
Steve: So what I what I'm hearing you say is that when people are making decisions about when they take income, from maybe their retirement accounts or through employment or anything else. Sounds like they need to pay attention to where they stand related to these thresholds.
John: Absolutely. And sometimes there's nothing we can do to help them other times we can, it depends on what assets they have. As we'll get into another episode, we'll talk about required minimum distributions. That's where people usually feel it. Because all of a sudden, they've been retired for a few years. And now they're forced to take money out of retirement accounts. So that's income they didn't have before. And it pushes them up into another bracket for the IRMAA test. And then they get, boom, they get smacked. Wow, Where'd that come from?
Steve: So you're forced to take money out? Yes. puts you in another bracket that forces you to pay more.
John: That's correct. I have said for years, 35-40 years, I've said, I don't understand. I know why, but Congress should do away with the required minimum distribution. If you are frugal and you saved your money, you should not be forced to take it out. Because if you have retime resources you're having, you're putting less pressure on the system. System, meaning Social Security to help other people.
But the reason they do it is they want the money all these years, you defer, defer, defer thinking you're saving taxes, and all of a sudden, you're taking it out, you go, I didn't save any taxes, I simply deferred it into the future. And then you get a cost of living adjustment, the Social Security maybe, and then all of a sudden, you see that disappear because the Medicare Part B premium was raised. And then if you get impacted by IRMAA, you have a further increase.
Steve: This is all really depressing.
John: Well, I'm sorry. I didn't write the tax law. My job though, is to help people to the extent that they'll let me project them into the future. So I'm experiencing this, let me help you. So I learned a long time ago, if I see your head, forehead is bloody, and skin missing, and I look over that wall, and I go, I see some blood and skin there, I don't need to go pound my head into the wall, if I see you do it.
So I learned a long time ago, I'll be glad to pay you for your time and your services to save me time, and money, and frustration, and in some cases, anger because I get frustrated. So my deal is this. This is what I do every day that I see clients. I read it, study it, and somewhat of a geek about it, I'm gonna learn and stay on top of it. But there's a lot of stuff I don't know anymore. But when it comes to retirement planning, understanding how to get money out of retirement plans had to coordinate with Social Security and Medicare required minimum distributions. That's pretty much where I live.
Steve: Well, you were you use the word coordinate there. And yes, we talked in an earlier episode, I think I'm hit the comment that all of this is like a giant jigsaw puzzle, where they don't give you the picture on the box. And maybe they mix two pictures together with the pieces. And somebody's got to somehow sort it all out and make it work.
And I mean, with all of the, the rules and regulations, and the different considerations here. This just seems so overwhelming to try and deal with. I can't imagine having to, you know, you look, you're looking at this several times a day with different clients every day. It just seems like it'd be a real challenge to do. And certainly for individuals who don't go through this don't even know where to find all the information. Maybe sometimes, it's gotta be completely overwhelming.
John: It is overwhelming. And one thing is, I think, where I don't think, I know for a fact that what happened for me one day and and I won't call the client's name, but long term friend, 45 years. He came in frustrated. Said John, I don't understand this stuff. He's an attorney, very, very intelligent guy. He says, I'm tired of this. I'm sick of it. And I'm not getting I'm not getting help at work. I'm not getting help from the Social Security Office, when I call and ask questions. I'm more confused. Can you help me?
And that was the beginning of me getting serious about many, many years ago. I don't know how long, 15-17 years ago, because I wasn't to the point of being concerned about Social Security or Medicare at that point. But I got on that track to start learning. And then, you know, among other financial advisors, they'll call me and say you're the expert in this stuff. I say, eh, be careful, I don't claim to be an expert, I claim to be very knowledgeable. But I don't know that I'm the expert. But I know I know it pretty well. I would say very well actually. But it's how do you coordinate it. And one of the things that I'm tempted, and I was tempted, am I now because we talked about keeping this simple for this episode.
But there's so much stuff when I get the manual each year, the Medicare manual is about an inch thick. And I actually read it. I go through it every year, highlight it, you know my style. I'll highlight stuff, put sticky notes on it. So people come in the office, I'll ask the question, so I don't I'm not sure that. Let me look. Go to it right up on the website and make sure nothing's changed. So there's your answer. How did you find it so quickly? Because I read it and study it.
Steve: It's critical.
John: I get I keep all of my letters there in a binder in the office. So somebody says, Well, that doesn't work that way. Well, there's a letter from Medicare. Read it. It shows you what my IRMAA is. So IRMAA does exist. Shows my premium going up. Okay, I read there some black and white read it, you will have increased Part B premiums, there's no way that that can't not happen, because of the costs.
Steve: Well, is there anything else that comes up in your conversations around Medicare? John, as we kind of push towards the end of this episode, anything we haven't covered? That's critical here?
John: Well, we've covered it, but I'm gonna put it in contrast for you, in 2019, the Part B premium was $135.50. And this year it's $144.60. Okay, so what a $9 increase. So people say, well, it's not that big of a deal. It's not in one year. But if you're retired, and all you have is your pension, and Social Security, because you didn't save or plan and have other resources, or you did but you used them to take care of children or grandchildren that had to come back home, then that $9 increase every two or three years or every year, that erodes your net income. And if you see tax increases, come along with it, that hurts. And that's why most people do not feel the effects of cost of health care, or inflation in general, until, until they've been retired five to seven years, is what I say.
Then all of a sudden, they'll say, John, what's happening? You know, we haven't increased our spending, we're not extravagant. I say, Well, you've been retired about five to seven years, that's enough time to just see some cost of living increases at the grocery store. You know, health care, your health care is the biggest expense in retirement. For most people, some people still have a mortgage payment, most don't that I've worked with, but you look at your health care. I mean, I know what I'm paying for me, and then I go look at I have to pay $108 for that one prescription for the rest of the year. And then next year, I'll have a $400 deductible. So I'll have to pay for four months basically for it again, before the coverage takes over.
So I would just like to conclude that it's hard to fully understand all the pieces. It's not that difficult if you're willing to take the time to read it and study it. And just about time you think you know it, something will change, and you got to go back and read it again. So I'm constantly looking at and when I do the webinars and seminars is good, because it forces me to go back and double check all the numbers, like this sheet that I showed you that took off of the Social Security website. In the past, we've just referred to a book. No longer. You got to go to the website and get a straight from the the Social Security Aministration. Let's end with this. I was going to say that Social Security, Medicare, healthcare in general and your pension are very important benefits to you. But it's up to you to make sure it's coordinated properly. The government is not going to do for you. It's up to you.
Steve: Good advice. Well, folks, this is another in the continuing series that we're doing on on the key things the members of the Florida Retirement System need to pay attention to as they approach retirement in retirement, as they're planning for that. We've got one more to go in the series. In the next episode, we're going to talk about required minimum distributions. RMDs. John, I know, that's a big topic. A lot of questions around that. You want to give us just a 10 second preview?
John: Yes. RMDs were never designed to create income for you. It was a way for Congress and the IRS to recover all the taxes that you didn't pay. And they're finding more and more ways to collect the taxes and faster. Stay tuned.
Steve: So folks, tune in for that one. That is a big, big issue for folks. And if you have enjoyed this episode, maybe you found you found this kind of midway through the series if you go to johnhcurry.com click on the podcast link at the top, you'll find all of the podcast episodes, including all the ones in this series for members of the Florida Retirement System.
And if you're not a member of the Florida Retirement System, there is a wealth of resources there on the website for you as well. Make sure you subscribe to the podcast and leave a five star rating. You can find it on Apple podcast, Spotify, Google podcasts, and share it with a friend share it with a friend that needs to hear this information. You know and please help them. So John. Thanks for being here with me again. I'll see you in the next one.
John: Very good enjoyed it.
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