Benefits of a Medicare Supplement Plan

Introduction

The following table lists all of the possible benefits of a Medicare supplement plan. Plan F is the only plan that contains all of these benefits.

Basic Benefits

  1. Part A coinsurance. The Medicare supplement will pay the $315 per day coinsurance for days 61-90 of a hospital stay. The Medicare supplement will pay the $630 per day coinsurance for the 60 lifetime reserve days. The Medicare supplement will pay for 365 additional days of hospitalization after Medicare hospitalization benefits are exhausted.
  2. Medical expenses Part B: The Part B coinsurance is generally 20% of Medicare approved expenses. This includes the coinsurance for outpatient services and surgery. Plans K, L, and N require the Medicare beneficiary to pay a portion for the Part B coinsurance. ***Details below.
  3. Blood: The first three pints of blood.
  4. Hospice: The Medicare supplement pays the hospice coinsurance.

 

Skilled Nursing Facility coinsurance

  1. Medicare pays 100% for the first 20 days for an approved stay for skilled nursing facility care.
  2. For days 21-100 Medicare will pay for an approved stay. There is a $157.50 per day coinsurance that the Medicare supplement pays. ***See below for Plans K and L.

 

Part “A” Deductible

  1. For 2015 the Medicare Part “A” deductible is $1,260 per hospital benefit period. The benefit period is for 60 days and begins after one’s discharge. The Medicare supplement could pay this benefit more than one time per year. .***See below for Plans K and L

 

Part “B” Deductible

  1. 1. The Medicare Part “B” deductible is an annual $147 in 2015.

 

Part “B” Excess (100%)

  1. 1. In general, if a Medicare Part “B” provider charges an excess above the Medicare approved amount, this benefit will pay that amount. Physicians may charge a maximum of 115% of the Medicare approved amount. These are known as non-participating physicians or physicians that do not accept Medicare assignment.

 

Foreign Travel Emergency

  1. In general, Medicare does not pay in foreign countries. One will pay the first $250 for Medical services. After that, the Medicare supplement will pay 80%, and the insured will have a 20% coinsurance. Usually one must pay his/her bill upfront and then bring the bills back to submit a claim.

 

Out-of-pocket limit

  1. 1. For Plan K there is a maximum annual out-of-pocket limit of $4,940. The Medicare supplement will pay 100% after that limit is reached.
  2. 2. For Plan L there is a maximum annual out-of-pocket limit of $2,470. The Medicare supplement will pay 100% after that limit is reached.

 

High-deductible Plan F

  1. High-deductible Plan F pays the same benefits as Plan F after one has paid a calendar year deductible of $2,180. This deductible is for what the Medicare supplement would have paid. Medicare still pays its part when one has high-deductible Plan F. After one has met the deductible, then the plan pays just like a regular Plan F.

 

***Details for Plans K, L, and N

  1. Plan K: Hospitalization and preventative care paid at 100%. Other basic benefits are paid at 50%. Pays 50% of the skilled nursing coinsurance. Pays 50% of the Part A deductible.
  2. Plan L: Hospitalization and preventative care paid at 100%. Other basic benefits are paid at 75%. Pays 75% of the skilled nursing coinsurance. Pays 75% of the Part A deductible.
  3. Plan N: The insured pays a maximum $20 copay for a doctor’s office visit and a maximum $50 copay for an emergency room visit.

Quiz: Your shopping type

Emotions and Sentiments or Knowledge and Understanding.

Pick whether you believe the statements listed below are primarily based on Emotions and Sentiments or Knowledge and Understanding.

The agent said to get Plan F so you don’t have to pay anything.

You have to pay a higher premium for Plan F compared to Plan G. Depending on your state, the Plan G may be a better value so you will pay less compared to Plan F.

The Council of Aging people told me that this national organization’s Medicare supplement was better, so I should go with that one.

Bless their hearts, but unfortunately the CoA volunteers have made plenty of gaffs. This is another one. The benefits for the Medicare supplement plans are standardized. If the CoA volunteers are recommending a large, name brand Medicare supplement that is more expensive than a smaller company’s plan, aren’t they actually doing a disservice for their audience?

My neighbor said that this (Brand X) is a good one.

It’s good based on what? This is invariably based on opinions that are based on feelings.

Do they pay?

They all pay! Any thinking or suggestions that any given company doesn’t pay is flat out wrong.

I’ve never heard of that company (Brand Y) before (with a worried tone implying that it may not pay).

It doesn’t make any difference if you have heard of the company or not. They all pay!

But, can they drop me?

As long as you pay your premium the company cannot drop you, no matter how many claims you have had. Every Medicare supplement policy says this in its policy language.

That company is only in a dozen states (fearing that the company is too small and may not pay its claims).

They all pay their claims. They also pay claims in all 50 states, even if they do not write business in a given state. Additionally, the smaller companies can have stronger financials compared to the larger ones.

They treated me really good.

The company did not single you out to “treat” you well after they paid a claim of yours. They simply performed their end of the bargain… You pay your premium, and they pay your claims if and when they occur. It’s simply a business obligation on their part.

My husband has this one, so I might as well get the same one.

What if your husband's plan is overpriced now? Why overpay if you don't have to?

I’ll call an 800 number because I want to cut out the middle man.

I heard this one from a gentleman that was misled by the Council on Aging. There is no “middle man”. The rates are all filed with the state insurance department, and it makes no difference whatsoever, as far as the premium goes, if you purchase your plan from an agent or through a company’s 800 number. When you sign up via an 800 number, you pay a commission to an agent that you will undoubtedly never see. In addition, you usually pay more than you need to, because the 800 number order takers aren’t looking out for your best interests. They don’t explain to you other lower cost options.

I don’t want to change.

This is a fairly common sentiment. It basically boils down to this: The devil I know is better than the one I don’t know. Knowledge of the Ten Mistakes, especially number one and two, can help overcome this fear. A new, lower cost company will pay its claims just as well as your old company.

I want to get the most bang for my buck.

Usually these people want to listen to the facts and get the best buy. They understand the basis for going with a particular plan. They quickly grasp recommendations to help them get the best buys. They tend to be less swayed by hype.

I don’t care about a more competitive price; I just want to make sure they pay.

Again, this statement is based on the fear that a particular company may not pay its claims.

I wan my plan to cover everything that Medicare doesn’t.

No plan covers non-Medicare covered expenses. It’s correct to say the following: My Plan F covers both deductibles and the co-insurances not covered by Medicare. This is true with any Plan F.

I’ll go through all of this (meaning the stuff in the mail), and when I figure it out, I’ll call you.

This is more of a brush-off. This person won’t figure everything out because relying on what comes in the mail is like playing poker or pinochle with nine cards missing from the deck.

I don’t want to have to pay any deductibles or copays.

See number one. A higher premium for Plan F in many cases incurs more out-of-pocket costs compared to Plan G. People, and agents, conveniently forget that your premium is also an out-of-pocket cost. Now, if you say that you are perfectly willing to pay, let’s say $300 to buy a $182 benefit (in 2017) benefit, then you could argue for Knowledge and Understanding.

I trust the Council on Aging folks.

Why and based on what? While Council on Aging people do have a minimal training session, they are not insurance licensed. Unlike insurance agents, they aren't required to take Continuing Education courses. Lastly they don't have to annual re-certify for Medicare Advantage or Part D plans as insurance agents are required to do.

I like the one I have.

People tend to like what they own. For example, most owners like their car. This common sentiment also crosses over to intangibles such as insurance products. Now, do you like paying $0.50 to $1.00 more per gallon for gasoline than you need to? Probably not. So why do people persist in paying more for a Medicare supplement than they need to? I believe that it comes back to the fear of change or fear that another company won’t pay. For others it’s a pride thing. People don’t want to admit to themselves that they made a bad buy.

I know I don’t understand all of this, so I want you (an insurance professional) to help me.

These people know their limitations, and they know they need help. It’s also been my experience that these types of people are some of the best and easiest ones to work with. The only caution I have for these folks is they don’t allow themselves to get led astray by a bad agent.

What Kind of Shopper are You?

There are two types of mental actions that we primarily use when making decisions about most anything we do or buy. In general they are one of the two following ways: Either we use emotions and sentiments (E&S’s) or knowledge and understanding (K&U). Which one do you think the advertisers rely on almost exclusively when seeking to get you to make a buying decision for a particular product?

Just think of the advertising for soft drinks. “Pepsi hits the spot” and “the Pepsi generation” are old slogans you likely recognize. The TV ads showed attractive young adults playing volleyball at the beach. The association with the good times, youth, and vitality was very powerful. Never mind the fact that the consumption of soft drinks, especially colas, can lead to all sorts of adverse health effects. For more details about the latter, please refer to my archived Newsletter #9 and Newsletter #13.

There’s little controversy left concerning the fact that smoking is a really bad thing for one’s health. That should be obvious, as sucking smoke containing dozens of carcinogens into one’s lungs year after year inevitably leads to all sorts of health problems. However, despite what would appear to be common sense, the macho Marlboro man and the feminist Virginia Slims woman sold billions of dollars’ worth of cigarettes.

In light of the fact that buying and drinking soft drinks is literally peeing one’s money down the drain and smoking is literally burning up one’s cash, how do advertisers convince people to make these purchases? It’s real simple; they appeal to one’s emotions and sentiments. In spite of all the logical reasons for declining such purchases, people continue buy them anyway. The truth is, emotions and sentiments are a far more powerful motivator than knowledge and understanding. This is so much the case that people’s E&S’s often override any common sense whatsoever. The ad designers, schooled in the art of advertising psychology, are well aware of this and are experts at manipulating people’s emotions in order to get them to think and act a certain way.

Just walk down the grocery store aisle containing laundry detergents. There are enough exotic designs and swirls to dazzle anyone’s imagination. A plain white box that says, “Tide Laundry Detergent” in black, block letters does not have the sensory stimulation as does Proctor & Gamble’s real thing. This sensory stimulation is part of the appeal to one’s emotions and sentiments. The product designers know this, and where appropriate, they take full advantage of this technique.

The case is just as true when it comes to the promotion of Medigap insurance or Medicare supplements. However, a different set of emotions and sentiments is targeted. Obviously, the advertisers are not pushing the Pepsi generation or the Marlboro man, so what E&S’s do you think they hit on?

Let’s see, seniors want to have the confidence that their Medicare supplement company is solid, trustworthy, and will pay its claims. One national organization uses this approach in their TV ads for their Medicare supplements. Speaking somewhat melodramatically, their voice-over commentator makes this emotional appeal to you the viewer: “You have your Medicare health insurance card and our I.D. card; you are now set!” From the standpoint of an appeal to a person’s E&S’s, these ads are powerful and extraordinarily well done. You’ll notice in this example there is no mention at all of being competitive or getting the best buy.

In print advertising, including mailers, some insurance companies make an implicit claim that their product is somehow superior to others. They extol their benefits as if somehow, their plan is uniquely better. Their graphics, color schemes, and advertising copy are carefully orchestrated to give you the reader, the impression that these are the people you can trust.

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During the appointment the agent doesn’t mention the card at all. But if you do inquire about the “under $50” product, he says, “Well really, that’s (meaning the high-deductible Plan F) not that popular of a plan. Most people want more benefits and get Plan F.” If you haven’t guessed it already, this technique is called bait and switch.Some mailers definitely push the envelope on ethics. Here’s a piece I picked up from a home a couple years ago. Hmm, a Medicare supplement for less than $50? The promoter of this oversized postcard wanted to appeal to a person’s sense of “getting a good deal”. Don’t we all love bargains! This company ostensibly promoted their high-deductible Plan F, which statistically, zero percent of the Medicare supplement shoppers buy. So yes, the real objective of this card was to get people to ring their 800 number and to get their agent in front of people.

I should add that whenever a mailer mentions a Medicare supplement rate, most all states’ insurance departments require the company to specifically state the exact rate and which plan that rate references. There can be no ambiguity allowed whatsoever, as there must be full disclosure. The state where this first card originated is an exception to the general rule.

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This second specimen is an example of a full-disclosure postcard. You’ll notice that the plan letters and rates are clearly displayed. The fine print at the bottom of the card discloses the legal form numbers for each plan mentioned (red arrow). As it states just the facts, this card is straightforward in its use of K&U. There is no appeal to one’s E&S’s. It exemplifies a fully compliant advertising piece. The agent that mailed this card is simply saying, “Here is a company I represent, here’s their rate, and here’s my contact number.

As an aside, there is something else very instructive to learn here. Notice that the difference at age 65 between their Plan F rate, $139 per month, and their Plan G rate, $111 per month, is $28 per month. $28 times 12 months equals an annual $336 more to buy their Plan F. All you are getting for $336 is a $147 (in 2015) Part B deductible benefit. Do your E&S’s tell you that you have to get Plan F, or does your knowledge and understanding suggest that Plan G, in this situation, is a better buy?

In another mailer the advertiser makes an interesting assertion: “Helping you with the High Costs of Medical Care”. Their appeal to your E&S’s is to get you to think that they are on your side. The brochure is well done as far as the copy and printing goes. The only problem with this piece, however, is they are making things worse because they attempt to sell you their high priced Medicare supplement. I wrote about this company in my document, Ten Dishonest Tricks of Unethical Agents.

How do they entice people to pay for their non-competitive Medicare supplement products? Simple. They train their agents to push people’s emotional buttons. They’re experts at pandering and manipulating. Unfortunately, there are enough gullible people who fall for their hype, as this company is still around. Once you expose their agents for who they are and what they do, they run like scared cockroaches.

To assist people in combatting this promotional nonsense, I wrote the Ten Medicare Supplement Shopping Mistakes. To listen to this fifteen minute audio presentation, please click here. In Mistake #1 we learn that the plans are standardized. Therefore, any company’s Plan F will have identical Medicare benefits to any other Plan F. So, if Brand X claims the virtues of their plans, you can substitute Brand Y or Z, instead. You can rest assured that the benefits are identical. The only exception is that a couple of companies may offer a dental & vision or a health club benefit, but at a higher premium.

Not only do companies push people’s emotions and sentiments button, but people do it to themselves. How many times have I heard people say, “Do they pay?” Initially, that’s a good question, especially if a person has heard about the war stories of some under-65 health insurance company not paying their fair share of their claims.

That’s why I wrote Mistake #2, which is thinking that a company will not pay its claims. They all pay their claims, even the ones that use questionable marketing ethics. They are mandated by the state insurance departments to do so. Even after I have put this information in people’s hands, some have still persisted with their doubts and fears (E&S’s) about a particular company not paying its claims. If still in doubt, they can contact the consumer affairs office at their state insurance department regarding the complaint history of any company. There may be an infrequent billing error, but rest assured; the companies, all of them, pay their claims!

All of my Ten Mistakes are based on knowledge and understanding. This is to assist you, the shopper, to make the best buy for your situation. A good working knowledge of these Ten Mistakes will help steer you to the use of your K&U faculties rather than relying on E&S’s. Unfortunately, there are those people, even when the facts are dropped in their laps, who still persist in spending sometimes hundreds of dollars more per year than they need to.

Why does this occur? I think it’s mainly due to the fact that some people let their emotions and sentiments drive most of their decisions. These tend to be the people who are willing to spend a dollar on gas driving across town to save a dime on a bag of sugar! It is also my observation that these are the types of people who are buffaloed by the slick-talking agent that is fully aware of this situation and uses emotions and sentiments to pander to them.

Much more could be said about this aspect of human psychology, but that is beyond the scope of this article.

Take a Quiz

To assist you in determining your shopping type, I have developed the following quiz. The following are statements that I have heard people say over and over. Mark “A” if you believe the statement is based on emotions and sentiments, and mark “B” if you believe the statement to be based on knowledge and understanding.

Quiz Time!

Characteristics of a Pro-Agent

What to look for when shopping for an agent:

  • Look for one that is knowledgeable about his subject. You can ascertain this by looking at the contents of his website, his newsletters, his seminar information, and any information he provides to you.
  • Choose an agent that works with a large number of Medicare supplement companies. Usually, the more the better.
  • Look for an agent that is patient with you and is willing to take the time to explain things to you in an understandable manner.
  • Look for the agent that is willing to put everything on the table, including any downsides to any plan that he is discussing.
  • Go with an agent that you feel comfortable with and demonstrates ethics in his practice.
  • Look for an agent that you perceive cares about you, your situation, and will be there year after year to continue to guide you through the Medicare maze.
  • Look for the agent that makes it easy for you to get in contact with him.
  • Go with an agent that gives you sound reason or basis for making a particular decision.
  • As always, testimonials or references never hurt.

 

Avoid these kinds of people:

  • Agents that disparage another company, especially by making any hint or innuendo that they may not pay their claims or will go out of business. Those agents don’t have that particular company in their briefcase, so they attempt to drive a wedge between you and that particular company. They suggest that you pay a higher premium for no reason at all other than for them to make the sale. Agents like these also tend to badmouth other agents.
  • Agents that are single company agents or SCA’s. For more background, please refer to my online document, Dishonest Tricks of Unethical agents #6.
  • There are exceptions, but usually it’s best to avoid agents in big box stores. Too many people have gotten bad advice or made hasty decisions only to regret it later. A good agent will offer to meet with you later in a quiet place. He will not be in a hurry!
  • Agents that pander to you.
  • Avoid property and casualty insurance agents. Their specialty is auto and home coverage, crop insurance, or commercial lines, but they do not specialize with Medicare products. They may carry a company or two, but usually that’s about it. Do you see your urologist when you have a heart problem? Probably not. Unless you want to pay more than you need to, don’t fall for their “let’s get it all under one roof” company line.
  • When pressed, agents that can give no reason or basis for a particular recommendation other than to say, “I think it’s a good idea, or this is a good one”.
  • The commission chasers. This is very common. Agents will pass up showing you a more competitive plan because it doesn’t pay as much commission compared to a more expensive one. Please refer to Dishonest Tricks of Unethical agents #1 and 2 for more information.
  • Agents that appear to be uninformed, make off-the-wall statements, or make erroneous assertions. Likewise, be very wary of agents that make vague or unsubstantiated statements.

In conclusion, finding a professional agent helps you to not only avoid Major Mistake #3, but also to avoid the first two Major Mistakes.

Selecting a new policy or changing to a different one doesn’t have to be a scary process. A good agent will hold your hand and walk you through the entire process step by step. The result will be that you will have the confidence that you made the right decision and ended up with the right policy or plan. If you are replacing your existing Medicare supplement, you will have the peace of mind that your new plan is every bit as much as the one you have, but you will be paying less money.

Major Mistake #3

The third major mistake is shopping for a plan, when you should be shopping for an agent.

There are some shoppers that have figured this out on their own and have intuitively avoided making these three mistakes. They know they are confused by the brochures that jam their mailboxes, so they toss them as fast as they arrive. They don’t want to talk to someone in Kalamazoo, so they seek to find an agent to help guide them through the Medicare maze.

However, the majority of shoppers are still mistakenly shopping for a plan rather than a good agent.

If you are approaching 65 and will soon be on Medicare, it is logical to think that you want some sort of a Medicare plan. You look at the brochures that arrive in your mailbox and maybe even call some of the 800 numbers. On more careful consideration, this is like getting the law books out when you have a legal matter instead of shopping for a good attorney.

There are those shoppers that believe that if they go through enough agents, they will magically find the perfect plan. The irony about those types of folks is this: They are usually the ones that fall victim to the fast-talking, pandering agent. They often don’t recognize good advice when they hear it.

Finding a qualified insurance professional saves you much grief in another way. Countless Medicare supplement shoppers have gone to a friend, the senior center, the Council on Aging, calling 800 numbers, and who knows what else, only to get the wrong and often contradictory information. Working with a pro-agent from the get-go saves you all of that frustration.

I was an educator for 22 years. From the standpoint of instructional technology, the way that this Medicare maze is being presented to Medicare recipients is worse than abysmal!

In a classroom setting, good teaching technique says that the teacher should present one concept at a time to his or her students. When they master that step, the teacher presents the next step and so forth. For example, in teaching geography, the teacher will present the concept of “latitude” first to her students. When they have mastered that, she continues with “longitude”. Good teaching progresses one step at a time.

Bad teaching throws multiple concepts into the very first lesson. Imagine trying to learn about latitude, longitude, parallels, meridians, date lines, equator, Tropic of Cancer, Capricorn, etc, etc, all at one time. It likely will turn into one big mish-mash, with the result that many students will be totally confused and passionately hate geography lessons.

As your 65th birthday approaches, you will be inundated with a tidal wave of information. There are Medicare supplements, Medicare Advantage, Part D prescription plans, Medicare Advantage plans with built in Part D benefits, and a dizzying number of choices in each category to choose from. A good agent can explain each concept one at a time and help you understand which option best suits your needs.

Going through that Stack of Stuff can or will put most people on mental overload! You don’t have to do it, as there is a much better way.

Isn’t your objective to simply understand the Medicare maze so that you can make a smart decision that you are comfortable with? Assuming that’s a YES, here’s what to do.

 

Be Smart and be Clever

Make yourself a SPAM Box. It could look like this:

The majority of you are now hooked up to the internet and have email. Most all email servers have SPAM filters. You want to read the emails from your kids and grandkids and see their pictures and not waste time going through the SPAM. Just as email servers have their criteria for what emails get dumped into your SPAM Box, you do likewise with your Stack of Stuff. Once you have made your final selections and are happy with them, then you can empty your SPAM Box without any reservations.

 

Candidates for your SPAM Box:
(Keep in mind that you can always go back and retrieve these items.)

• Just about all company mailings.

• Pieces from pharmacy chains.

• Agent pieces that mention a particular insurance company or its rates. Note: As soon as that company goes up 15%, those agents are onboard with the next lowball company.

• Seminar invitations if that is not your thing.

• An agent mailer that appears to be poorly done.

 

Maybes:

• An insurance company that has an affinity relationship with your fraternal order, union, club, religious group, or association.

 

These go in your Inbox:

• Your “Medicare and You” booklet.

• The envelope from CMS that has your Medicare card and related information. Very helpful is the 31 page red, white, and blue Welcome to Medicare Booklet. It offers good, basic information to help you get started.  Click image below to view.

• Other mailings from CMS which might include a survey for Medicare recipients.

• Any other piece with a government return address. It could be very important.

• A quality postcard or other piece from an independent insurance professional if you are shopping for a good agent.

• Seminar invitations, if that is your thing.

 

Okay, so you’re now convinced that you should be shopping for an agent. Here is what to look for.

Major Mistake #2

The second major mistake is contacting numerous companies via their 800 numbers.

Recently I spoke with a gentleman, Sam, who was looking for a Medicare supplement. He then mentioned that he was also interested in a Part D prescription plan. He told me that he had received a brochure from company Z and called them for information.

I ran his meds on Medicare.gov, and sure enough, another company was a substantially better buy. The customer service rep (CSR) for Company Z could only promote her company and explain how their copays worked. As far as the rep goes in this situation, it’s like someone trying to sell you a shoe that doesn’t fit. If the shoe is too tight or hurts your foot, you know that right off the bat. In the case of a Part D prescription plan, you won’t know that until you run your meds on Medicare.gov. For Sam, calling the 800 number was a needless diversion and a waste of time.

In another situation I met with Linda. She explained to me that because she was in a hurry, she had called an 800 number from a brochure she received in the mail to sign up for their Medicare supplement. Linda continued by telling me that one of the first questions the operator from Company Y asked her was, “Do you smoke?” She admitted to having an occasional smoke, so the rep signed her up for the tobacco rate Plan G.

Unwittingly, Linda had made at least three mistakes that I covered in the Ten Medicare Supplement Shopping Mistakes. She wasn’t taking advantage of open enrollment discounts for tobacco users, she called an 800 number, and she was going to pay a 25% higher premium than need be. And here is the saddest part.

There are millions of Americans on fixed incomes and tight budgets. Many of them are making a financial sacrifice to purchase their Medicare supplement. Some have considered the usually lower premium Medicare advantage plans, but they are concerned about the various copays. This was the case in Linda’s situation. She wanted the peace of mind and financial protection that the Medicare supplement plan affords. So ask yourself, are the people on the other end of the 800 number really concerned about you and your budget, or are they just interested in selling you their company plan?

As I sit down face to face with prospective clients, I well understand the pain and frustration that many of them are going through. There are times when I wish I could discount the premium, but regulations prohibit that. The least I can do for them is to show them how to navigate through the Medicare maze as affordably as possible. Folks, that doesn’t happen when you call the 800 numbers.

There are other ways that a good agent can show people how to save money. For example, on several occasions I have shown people how to save four months of premium for their Part D prescription plans. For those taking no meds, they can wait until the seventh month of their Initial Enrollment Period (IEP) to sign up for their plan. That saves them four month’s premium or generally $60 to $120. The 800 number people are instructed to get you signed up as soon as possible.

Here is another story of a bad experience caused by responding to a company mailer and calling their 800 number. I signed up Shirley for a Medicare supplement, and a few months later she mentioned to me the burial life insurance policies that she bought for both her and her husband. She described to me the very affordable premium and what she thought was a permanent policy. As soon as she mentioned the actual premium, I knew exactly what she had purchased. It sure wasn’t what she thought it was!

I explained to her, “Oh, I know what you have. It’s actually a form of term insurance with a premium that stair steps up every five years. If you live a long time, you will likely be unable to continue paying their escalating premium. People get those policies only to drop them when they can no longer afford the ballooning rates. In other words, it puts you in the position of hoping you will die before dropping the policy so your beneficiary can collect the death benefit.

I continued by telling her, “I want you to verify everything I’ve said. Call the insurance company tomorrow and ask them how it works.” Shirley did exactly as I suggested, and was not happy when the rep confirmed everything I outlined to her. She was disgusted by the misrepresentation and immediately cancelled both policies.

Here is what happened in another situation. Becky received an elaborate brochure with an impressively embossed plastic wallet card attached. Her name was on it, of course, and the card read in shiny gold letters, “PREFERRED MEDICARE REVIEW. She called their 800 number and left a message. Within 30 seconds a call came back to her. In the end she signed up over the phone for a high-deductible Plan F. She paid 22% more than she needed to.

This company is essentially a boiler room operation that uses “flim-flam” marketing. Their rep also led Becky to believe that their plan would have the same rate for four years. When I explained to Becky that no company has a four year rate lock, she said, “I’m going to call my agent.” Moral to this story: The more flim-flammy the marketing, the more flim-flammy are their reps.

There are many, many more examples that I could cite. Calling a company’s 800 number can lead to costly mistakes. Even if an 800 number company is competitive, a good independent agent will most likely carry that company’s products anyway, so you don’t have to go the 800 number route.

A related mistake that people make when calling a company’s 800 number, is thinking that somehow it will be a better deal (price) compared to working with an agent. Usually, the opposite is true. The Medicare supplement rates are all filed with your respective state insurance department. These rates are the same whether you buy your Medicare supplement direct from the company, an independent agent, or even Santa Claus. Even after hearing this, some people continue to ignore the facts and press onward in their blind ignorance and stupidity.

When you buy via the 800 line, you are paying a commission to an agent that in the majority cases, you will never meet or speak with again. If you have a question, a problem, or a claims issue, most generally you will speak with a different rep every time you call that company.

There are a myriad of other ways that a caring agent brings plenty of value to the table for the people he meets. For sure, one of the ways is advising them to avoid garbage financial products and insurance scams.

 

This leads to the third major mistake.

Major Mistake #1

The first major mistake is reading endless company mailers and thinking that you need to digest and understand that Stack of Stuff.

Does this scene look familiar?

 

 

Many shoppers intuitively but mistakenly think something like this: “Well, I’m in the market for a Medicare plan, so I might as well learn about it by going through this Stack of Stuff. Maybe I’ll make some calls to Brand X’s and Brand Y’s 800 number.”

Those Americans that are approaching their 65th birthday are invariably on everyone’s mailing list, and they are being honored, or maybe inundated, with a flood of brochures from various insurance companies. These brochures, of course, all pertain to some aspect of Medicare related products. These can include Medicare supplements, Medicare advantage plans, and Part D prescription plans; or seminar invitations for the same.

Additionally, there may be other pieces from agents that send out blanket mailers, usually a card with a business reply address. If you are a member of an association or fraternal organization, you may receive mailings from their affinity partners. These are insurance companies that offer their members a Medicare supplement at a group rate. Lastly, some of the chain pharmacies distribute pieces pertaining to Part D Prescription plans (PDP’s).

 

Most importantly, you are receiving communications from The Centers for Medicaid and Medicare Services, or CMS for short. CMS sends you their 140 page publication titled Medicare and You.

If you are already drawing Social Security, the Social Security Administration (SSA) automatically signs you up for Medicare by issuing your Medicare card. It usually arrives about three months before the first of the month in which you turn 65. It arrives in a 6 x 9” envelope with Centers for Medicare and Medicaid Services (CMS) in the return address area. Here is a sample envelope and card:

Your receipt of your Medicare card means that you are automatically signed up for both Medicare Part A and Part B. They both are usually effective on the first day of the month you turn 65. If your birthday is on the first of the month, then your Medicare effective date is usually one month earlier.

As the brochures flow into your mailbox like a massive lava flow, do you want or need to take the time to go through that stuff? Does it help you, or does it actually leave you more confused? Here’s a collection from another household.

Remember, there is nothing out there that suggests that you need to go through those stacks. The mistake is simply thinking that you need do so. Making this first mistake then opens the door for the second mistake.

Medicare Part D Prescription Drug Plans

The current Medicare Part D Prescription Plans or PDPs were an outgrowth of the 2003 Medicare Prescription Drug, Improvement, and Modernization Act (also called the Medicare Modernization Act or MMA) passed by Congress in 2003.

In the original model for PDPs, Medicare beneficiaries were to pay approximately a $35 per month premium, a $250 deductible, and 25% of the total drug costs between $250 and $2,250. All PDPs were to be offered through private insurance companies. There were no Part D plans offered or run by Medicare or the government itself.

Medicare allowed the insurance companies to come up with other models for PDPs. For example, some plans do not have a deductible. Instead, they have set up tiers, or various copay levels for generics and brand name prescriptions. This is still the case today.

For additional details of the original set up, please refer to a 2005 government agency publication titled THE MEDICARE PRESCRIPTION DRUG BENEFIT (PART D) Fact Sheet . Please keep in mind that the numbers shown on this sheet are NOT current.

 

Medicare and You - Medicare.govFor current information about Part D plans, please refer to pages 87-102 of the 2014 Medicare and You booklet published by the Centers for Medicare and Medicaid Services (CMS).

Beginning in 2011, some of the insurance companies offering part D plans initiated a new trend. Formerly, we had network and non-network pharmacies only. Your copays were what they were at a network pharmacy. Your plan was not accepted at a non-network one.

Now, a few of the insurance companies have aligned themselves with a national pharmacy chain(s). These are known as “preferred” pharmacies. How do you know if the plan uses preferred pharmacies? When you do a drug search on Medicare.gov, you will see one of two designations under of the listing for each plan. They are as follows:

Pharmacy Status:
Preferred-Network

OR…

Pharmacy Status:
Network

If you see the words “Preferred-Network”, that tells you the plan uses preferred and non-preferred network pharmacies. In general, your copays are lower at a preferredpharmacy.

Medicare.gov now requires you to choose a pharmacy when running your prescriptions on their site. If you select a pharmacy that is not a “Preferred” pharmacy with any Part D plans, then your search may not show you the plans that are the best buy if you douse a preferred pharmacy. The work-around is to select Walmart (even if you do not shop there), Walgreens, or even CVS. Doing so will pull up the plans using that particular pharmacy as a preferred pharmacy.

A good strategy is to run your prescriptions using different pharmacy scenarios. Let’s say you live in Missoula, Montana and buy your prescriptions from Albertsons. Select Albertsons pharmacy and run your results. Go to “edit” and run your prescriptions again. This time, choose Walmart or Walgreens. See if one of the plans using a preferred pharmacy shows up as being more competitive.

For more details concerning PDPs, please call 1-800-MEDICARE (1-800-633-4227), visit Medicare.gov or consult with the 2014 Medicare and You booklet.

For assistance in running you meds on Medicare.gov, please consult with your insurance professional or another knowledgeable person.

Medicare Advantage Plans

Medicare Part C or Medicare advantage plans (MA) are privatized Medicare plans. To better understand this concept, here is an analogy: Many people living in rural areas have privatized mail delivery. The Post Office contracts with private mail carriers for so much per mile to deliver the mail. Once the private carrier picks up the mail from the Post Office, the delivery service from there on out is performed by a private party.

In a similar fashion, MA is privatized in that Medicare contracts with the insurance companies that offer MA plans. Medicare pays the insurance company a monthly capitation rate, meaning so much per head per month. It might start in the $720-$750 per month range. This amount can go higher for people with chronic illnesses or in higher cost regions of the United States. From that point onward, Medicare no longer pays any provider when an MA plan member has a claim. Instead, the MA plan pays the doctors and hospitals.

There are some people that erroneously believe that the premium the MA plan charges, let’s say from $0 to $150 per month, plus a person’s Medicare Part B premium ($104.90 per month for most people in 2013), plus the medical copays is what finances MA plans. That would be nice if that were the case, but it’s not. It’s the $720+ monthly capitation rate that makes MA plans work. Your Medicare Part B premium simply goes into Medicare’s or the government’s pot.

 

History

Depending on what source you start with, the concept of MA began with the 1982 Tax Equity and Fiscal Responsibility Act (TEFRA). This act allowed privatized HMO plans to contract with Medicare to deliver a form of privatized Medicare. The Balanced Budget Act of 1997 established the Medicare+Choice program. The latter was renamed Medicare Advantage by one of the provisions of the 2003 Medicare Modernization Act (MMA). It was this act that also stepped up the controversial capitation rate to the MA plans.

 

SHIP - Overview of the Medicare Advantage PlanFor more details, please refer to this three-page document produced by SHIPOverview of the Medicare Advantage Program.

Types of Medicare Avantage Plans:

HMOs or Health Maintenance Organization Plans: In most HMOs you can only go to network doctors, hospitals, or other health care providers that are contracted with the plan. In an emergency, all hospitals must accept your plan. You may also need to get a referral from your primary care doctor to see a specialist.

HMO-POS: The “POS” stands for point-of service: This means that you can go to non-network providers. In many cases, you may have higher, out-of-network copays. Please check with your specific plan.

PPO or Preferred Provider Plan: Again, this is a networked plan. You pay lower copays for network providers and usually higher copays for non-network ones. PPOs are more suitable, in general, for going out-of-network.

PFFS or Private Fee for Service: This model is similar to original fee-for-service (FFS) Medicare. You can go to any provider that agrees to accept the terms and conditions of the plan.

 

Kaiser Medicare Fact SheetFor more details about the types of MA plans, please refer to the following documents: The first is the Kaiser Foundation’s Medicare Advantage Fact Sheet. Additionally, this document provides another historical perspective and other details about MA plans.

 

 

Medicare and You - Medicare.govCenters for Medicare & Medicaid Services (CMS) publishes Medicare and You. For more details about MA plans, please consult pages 15, and 70-81. This publication, though daunting for some, is very thorough and does a good job of explaining the subject it is covering. Note: The version that CMS mails to you lists the MA plans available in your county of residence. This generic version does not.

 

Many MA plans have Part D prescription drugs included with the plan. These are MA-PDs for short. If you enroll in an MA-PD, you do NOT sign up for a stand-alone Part D prescription plan. Doing so will disenroll you from your existing MA-PD plan.

There is another important wrinkle to understand. Some HMO or PPO MA plans are medical only. They do NOT have a prescription plan imbedded in them. If you have one of these MA plans only, you cannot sign up for a stand-alone Part D plan. Doing so will disenroll you from your HMO or PPO MA plan.

For more details and information, please consult with Medicare and You, call 1-800-MEDICARE (1-800-633-4227) or call any particular MA plan. Lastly, a good agent will be able to answer many of your questions. If you desire to dig into all sorts of statistical minutia about MA plans, go to CMS.gov.

Controversy
Here is the controversy concerning MA plans. It is beyond the scope of this document to do an in depth study, but I will bring up the basic issue. MA plans receive an extra subsidy from Medicare of around 13-14%. In other words, Medicare budgets so much money per month for every American on Medicare. The MA plans, subsequent to the 2003 MMA, receive about 13-14% extra subsidy above and beyond the funds that Medicare budgets.

Please refer to page 2 of the Medicare Advantage Fact Sheet, first column under the heading, “Payments to Medicare Private Plans”. This is what has allowed the plans to offer extras beyond what original Medicare offers, extras such as routine vision exams and eyewear, preventative dental, over-the-counter items, and health club memberships.