Season 1, Episode 7
The Caregiver Trending podcast features discussions on caregiving topics, interviews with thought leaders, and provides expert advice for caregivers from Homethrive’s in-house Care Guides. Episodes are available on Apple Podcasts, Spotify, or wherever you listen to podcasts.
Medicare is health insurance for U.S. citizens that are ages 65 and older. Eligibility may be available before the age of 65 for those with a disability, End-Stage Renal Disease, or ALS (also called Lou Gehrig’s disease).
In 2023, more than 65 million Americans depended on Medicare, a number that is rising in tandem with the aging population, according to the AARP.
On today’s episode, we break Medicare down to the basics, and cover all of the topics that seem tailor-made to confuse:
- The different parts of Medicare and what they cover
- High earners vs. low earners
- Working past the age of 65
- What happens when you travel or move
- Lifetime penalties and how to avoid them
Episode Transcript
Ali Habashi: Firstly, a definition. Medicare is health insurance for U.S. citizens that are ages 65 and older. Eligibility may be available before the age of 65 for those with a disability, end stage renal disease, or ALS, also called Lou Gehrig’s disease. In 2023, more than 65 million Americans depended on Medicare, A number that is rising in tandem with the aging population according to the AARP. But how did we get here? Considering it’s an election year here in the us, it seems only appropriate that we give you a bit of political background.
Although the idea for a national health insurance system had been discussed since the early 1900s, the idea only gained steam once President Harry Truman came on the scene. Only seven months into his presidency in 1945, Truman called for the creation of a national health insurance fund for Americans of all ages.
It took twenty years before a pared down version of this plan was finally passed, not for Americans of all ages, but only for those who were 65 and older. President Lyndon B. Johnson signed Medicare into law in 1965 and handed over the nation’s very first Medicare card to Truman himself, then 81. Now, nearly 60 years later, Medicare is still a hot topic, not just for presidential platforms, but for the millions that rely upon it for their health care every year.
If you are nearing the age of retirement yourself, you may have seen the advertisements that bombard your waking hours during the open enrollment season from October 15th through December 5th. Just as with any insurance, Medicare can be complicated to navigate, is constantly evolving, and includes several different options to choose from. So here’s the goal for this episode: break Medicare down to the basics, so those about to turn 65, and the people caregiving for them, know where to start.
Trish, you are the Medicare Specialist here at Homethrive, so this topic is really your bread and butter. Which is lucky for us, because I have so many questions.
My dad is currently covered by Medicare, so I’ll be coming at these questions from the caregiver point of view. Someone who hasn’t had to think about Medicare until now, and has no background on the subject.
Trish Hobbs: It’s nice to be here, Ali. Thanks for having me.
Ali: Let’s start simple. Let’s start with the ABCs. There are several different parts to Medicare, all of which cover different services.
Can you tell us in the simplest terms what parts A, B, C, and D are, and what they cover?
Trish: Yes, absolutely. And what I’d like to do is break down those four parts into even simpler terms. We’re going to break it into A and B and then C and D. Parts A and B are your foundation. It’s going to unlock the door to the other two parts, C and D, and your supplement plan, which gets into the private sector.
Think of A as housing. It’s going to cover your hospital, home health care, or a skilled nursing facility.
If you pivot over to Part B, think bodies: the people that are running your tests, the doctors, services such as ambulance, x rays, MRIs, even durable medical equipment. That’s going to fall under Part B.
But how are you going to get your drugs covered? You can go down the path of C or D to help you pay your part of Medicare and get your drugs covered.
So Part C is Medicare Advantage, which is a government program where Medicare has partnered with insurance companies and contracted with them to provide you a low-cost plan to help you cover your prescription drugs.
Part D is just a completely stand-alone prescription drug plan, and you’re going to go into the private sector to find your own supplemental coverage to help you pay your part of your medical bills.
Ali: So what does “Original Medicare” mean then?
Trish: Good question. You’ll hear it called different things. People will refer to it as traditional Medicare, Original Medicare, or straight Medicare.
All of those terms are interchangeable, and what they’re talking about are the parts that are on your red, white, and blue card: the foundation. Every Medicare beneficiary, with a few exceptions, will have A and B on their red, white, and blue card, and that is what’s known as “Original Medicare.”
You need to have both of those parts to enter into the other three areas: Part C, Part D, and the private sector supplemental plans.
Ali: So what’s a supplemental plan?
Trish: So a supplemental plan is a plan where you go directly to the insurance company, let’s take Blue Cross Blue Shield for example.
You can purchase a supplement plan from them. What it does is help pay your part of Medicare. So your A and B, which is what you just asked about, the Original Medicare, with that there is 20% of all the costs with no ceiling on it left over for you to pay. The supplement plan is going to come in and pay that 20% for you.
So you can think of it kind of like a gap insurance. Whatever Medicare leaves behind, it pays for.
Ali: So, if I’m trying to decide between Part C, Part D, or a supplemental plan, what are the factors that determine where I go, which direction I take?
Trish: Good question. So I’d like to back up just a moment and let’s think of two paths here. Let’s say you have original Medicare Parts A and B, and then from there you really just have these two paths.
Path one is just Medicare Advantage Part C. Path two, is going to be a prescription drug plan plus a supplemental plan. So these are really the two paths that you want to take to cover your 20%, your hospital deductibles, and your medications.
Everyone’s a little different. One question would be, are you more comfortable paying the premium up front or would you rather pay as you go and when you use the plan? Another question that I like to ask a lot of people: do you have chronic illnesses?
Because those are determining factors that may lead you more into a supplemental plan. Because if you’re going to utilize a plan a lot, copays on a Medicare Advantage plan may actually cost you more than just paying a premium up front with a supplement plan.
Ali: So, if my dad was on a Medicare Advantage plan and we wanted to move him to a supplement plan once he developed a chronic health issue, how would we go about doing that?
Trish: Well, that’s problematic and I’m glad you asked this question because I get these calls on a weekly basis–Mom or dad is now sick with a chronic illness. We’ve been on an Advantage plan. We wish we would have went with a supplement plan.
What will happen is he’ll apply for the supplement plan, they’ll ask for a medical exam, and a chronic illness will show up and the insurance company could deny coverage, they could increase the premium so high you couldn’t afford it, or it would be delayed.
When you retire or you go off company insurance, you have six months to enter into a supplement plan with no medical exam.
So let’s say that person has a chronic illness, it doesn’t matter, they will be approved for a supplement plan. However, with your father, he’s retired, he’s on a Medicare Advantage plan now, now he tries to pivot over to a supplement plan. The insurance company can require the medical exam and be denied coverage for the chronic illness.
Ali: So, would you suggest then, if maybe there was a history of chronic health issues in our family, that maybe we just sign up for the supplement plan off the bat, even if we don’t have any chronic health issues to start?
Trish: Yes, that’s what I recommend is signing up, taking advantage of that period where you do not have to go through a medical exam. Enroll in the supplement plan, and as years progress, let’s say there are no chronic illnesses, you’re struggling with paying that premium at some point, then you could pivot over to the Medicare Advantage plan.
And actually another reason that that’s a good route is because if you start with a supplement plan and then later move to a Medicare Advantage, you can try out a Medicare Advantage plan for 12 months and return back to the supplement plan without the medical exam. So it is a good idea to start with the supplement. You can always switch to the Medicare Advantage later.
Ali: And what are the benefits of a Medicare Advantage plan?
Trish: So Medicare Advantage, there’s two main reasons, people choose Medicare Advantage. The main reason is there’re $0 a month. You’ll find agents aren’t allowed to tell you they’re free. They’re not really free. They’re $0 a month. That’s because it’s a government program. The government is working with the private insurance companies and they’re subsidizing.
They’re paying the premium with your tax dollars. So you’re getting that at 0 a month, but that could vary over the years. The plan could increase in premium. The deductible could change. the plan could even disappear and you have to move over to another plan. So the advantage to the plan to start with would be the zero dollars a month.
And a lot of people want the plans for a few other areas too, like dental, vision, hearing, and they offer a gym membership. So many people want the Medicare Advantage simply for the gym membership.
Ali: I do like a gym membership as part of a benefits package.
Trish: I understand how enticing it is, but I’m thinking dollars. What does the gym membership cost compared to what your health care could cost?
Ali: It’s true, and I’m so bad at going to the gym every week anyway.
Now, I want to step away from all of these plans because my head is swirling. Here’s what I want to know.
Let’s say I am about to turn 65. I’m in the six months leading up to my 65th birthday.
What is going to start happening to get me enrolled in Medicare? Is it something that I need to seek out? Is it something that happens automatically with Social Security? Can you walk me through what’s about to happen?
Trish: Well, Ali, that’s a loaded question because it depends on your situation. Are you still working? Are you going to work past 65? Are you retired? Are you collecting Social Security?
Ali: Let’s just say I’m retired. I’m retired and I’m about to turn 65. Let’s start there.
Trish: Okay, perfect. So you’re retired. You don’t have employment. When you’re turning 65, you have three months prior to your birth month, your birth month, and then three months after your birth month to enroll in Medicare. That’s a total of seven months.
Ali: And how do I enroll in Medicare?
Trish: You would go to the Social Security website, ssa.gov, and it’s super easy. You can click on Enroll in Medicare down toward the bottom of the page. It’ll take you to an electronic application. When you get into the electronic application, it’ll just ask you basic questions.
Ali: And what if I am not retired yet. What if I am still working?
Trish: Good question. This comes up so much. A third of the population over age of 65 are actually working. That’s a common question. They’re told, if you don’t enroll in at least Part A, you’re going to be penalized. Well, that’s not true.
If you are working for a company with 20 plus employees, and they’re offering you health insurance which is considered creditable, you don’t need to enroll in Medicare A or B. You can delay that until you’re ready to retire. So let’s say you’re 65, you’re working with the company, 20 plus employees, and you have health insurance, you don’t need to do anything.
People are so scared. In fact, I had a woman call in the other day, and I explained this to her. She doesn’t have to sign up for either Part A or B. And she said, well, my neighbors and my friends are scaring me.
I need to at least enroll in A, and I know it’s free, so I might as well just get it over with and enroll in A. And I said, well, are you contributing to an HSA? Keep in mind, even though Part A is free, it will stop you from contributing to your HSA.
She said, yeah. I said, well, you’ll have to stop that contribution. She said, that’s okay. I just don’t want to get penalized. I’m just so scared that this is going to be a wrong decision, and I’ll end up with a lifetime penalty.
But the truth is, if you’re working for a company with 20 plus employees, they’re offering you health insurance, you don’t need to enroll in either Part A or B.
Ali: Can you explain what that penalty is that people are so afraid of and when it actually is an issue?
Trish: So when does the penalty become an issue? People ask, well, I must need to notify Medicare at age 65 that I’m delaying. You don’t. You don’t need to let Medicare know.
It’s not about age so much as it is having creditable coverage. And so when you are 67, 68, 70 years old and you decide to retire, that’s when you notify social security. And you’re going to submit a form that you can get from your HR department, or we have it here at Homethrive.
You submit it with your application stating that I had insurance with my company since the age of 65. You submit that with the application, and you’re not penalized. Let’s say you’re 67, you forgot to enroll back at age 65. You have two years with no insurance coverage. So you’ll enroll at age 67.
You’ll go to the application. It says, have you had insurance for the past two years? You’ll answer no. Part B is going to have a 10 percent penalty per year for every year that you weren’t enrolled. And so if Medicare is 175 a month, that is $17 for each year, so let’s say two years, that’s $34 penalty added to your monthly premium.
Part D, the drug plan, also comes with a penalty. It’s much more minor. It’s 1% of the national average of a drug plan. It gets a little more complicated. It’s 1% of the national average of the plan, which I think the national average is about 35, and multiply that by the number of months that you weren’t enrolled.
So it’s very minimal. I think I priced that for an individual before him and his wife were going to not enroll in Part D and go six months without coverage. And I think the penalty was a dollar or three dollars. And for that family, they were fine paying that penalty for their particular situation.
So, the part B is the bigger issue, and you’re really not going to have that issue when you enroll in Medicare if you do it when you turn 65 or when you leave company insurance. After you leave company insurance, you have eight months to enroll in Parts A and B to avoid the Part B penalty.
But keep in mind, you only have two months to enroll in a drug plan to avoid that smaller penalty. So that’s a little tricky, because if you remember what I mentioned at the beginning, you have to have A and B to get to D. I recommend get your enrollment done within two months of leaving company insurance.
Ali: Gotcha. So it’s only really relevant to focus on the penalty or those penalties once we are retired fully.
Trish: Exactly. Exactly. When you’re retired, meaning you do not have company insurance.
Ali: Which is usually cheaper? Medicare or company insurance?
Trish: That’s another common question. When someone’s turning 65, they’ll usually call us here at Homethrive, and we’ll compare those two. I would say almost every time, with maybe one exception, company insurance was cheaper than going with Medicare.
Ali: So if someone is still working when they turn 65, what’s the difference between a low income earner and a high income earner when it comes to Medicare payments?
Trish: So many people that are higher earners are shocked to find out that not only do they have to pay for Medicare, but they’re going to have to pay more for Medicare just because they were a high earner.
And a high earner would be someone that if you’re a single filer and making $103,000 or more. Now that’s adjusted gross income on your taxes, not gross. You’ll be adjusted to pay a higher amount for Part B and Part D for your drug plan. If you’re a joint filer and your modified adjusted gross income is $206,000 a year or more, then you’ll be adjusted for amounts over that.
There’s about four or five different brackets as your income increases. So let’s say you’re in that first bracket. The base premium for Medicare Part B is $175, but it’ll increase to $225 per person if you’re a higher earner over those two amounts I mentioned. And then at some point, it increases by another hundred dollars a month and it can go up the last bracket.
I believe, the part $600 a month for those high earners. oftentimes I get this, they said, well, while I was working, yes, I was a higher earner, but now that I’m retired, my income is going to decrease significantly.
There is a form that you can fill out and appeal that decision to base your part B premium on the current year.
Ali: Gotcha. So you’re not stuck paying that amount forever.
Trish: No, and in fact, even if you didn’t send in that appeal form and ask them to adjust the premium, what happens is it catches up over time every year. So security is going to get your income tax statement and they’re going to adjust your premium according to two years prior.
It’ll catch up eventually, but if you want to take advantage of those lower premiums earlier, then I would send in the form to appeal that decision.
Ali: Sounds good. So what about the other end, low income earners? Can we talk Medicaid for a minute?
Trish: So many people get Medicare and Medicaid confused, and I had done a little bit of a history research on it. They actually developed Medicare and Medicaid in the same year, and I don’t know why they called them close to the same name because it’s super confusing even for me.
But Medicare is the federal level. Medicaid, on the other hand, is your state level.
Medicare is about age and health condition, and Medicaid is more about income and they’ll help you pay your medical bills based on your income.
Ali: So how much would my dad have had to be making in order to qualify for Medicaid?
Trish: It’s going to vary from state to state and it’s going to be based off social security, are you receiving pension, what kind of money is coming in? What assets do you have? They’ll take that into consideration and determine whether you’re eligible for Medicaid or not.
And there’s also levels of Medicaid. If they are partially approved they may get some assistance from the state, but not all.
Ali: Is that dual Medicare and Medicaid?
Trish: Yes, it is when you’re approved for both.
They’re Medicare Advantage plans, but they’re specifically for people that are dually eligible for Medicare and Medicaid. And they’re really great plans, zero across the board on medical. A lot of people get them because they’ll come with very robust dental vision and hearing, and if your state’s Medicaid program doesn’t help you with dental vision and hearing, then those are great to add on for that benefit, and they’ll come with grocery cards, they’ll come with maybe some help with utilities. You may get some money toward putting special features on your home. Maybe a wheelchair ramp or over the counter benefits.
Those become more robust for those individuals that are dual Medicare and Medicaid. They can enroll in a Medicare Advantage plan specifically for them that will help with these extras.
Some people choose not to go on to one of those plans when they’re dual eligible. And the reason is the same as I mentioned early on. Once you implement a Medicare Advantage plan, now that company that’s issuing the Medicare Advantage plan can impose additional rules and restrictions on you to access your care.
So, they’re great plans, but keep in mind how they work. You may need to receive prior authorizations. You may need to do a step therapy program to get that benefit. What also happens is that let’s say you want something that Medicaid pays for. Well, your first payer would be the Medicare Advantage.
If Medicare Advantage does not cover that, then Medicaid won’t cover it. So you’re kind of creating a problem there. In some instances, when you introduce a Medicare Advantage plan.
Ali: Okay. That’s some good clarification.
So my parents are constantly on the move now that they’re retired. They’ve lived in three separate states since I graduated. What do I need to know about my dad’s Medicare coverage if my dad moves to a new area?
Trish: That happens a lot. When someone’s moving, your Medicare A and B, again, the foundation of Medicare, doesn’t change. You would just want to update Medicare with your new address. And the same thing with the Medigap supplement, you don’t need to worry about updating that because remember, that’s your secondary coverage that’s helping you pay your 20% and all that does is follow along Medicare. it does not change your benefits because you’re not tied to a network or anything.
It really comes down to the part C and D.
If you went with a Medicare Advantage plan, you want to update your plan, find a plan in your new area.
I believe you have two months prior the month of, and maybe the month after of the move, to switch your Medicare Advantage or your prescription drug plan.
Ali: I’m noticing this pattern with Medicare, where they give you a little lead time and a little follow up time.
Trish: Yes, exactly. Like with the birthday, they give you three months prior.
Ali: So speaking of travel, my parents are actually slated to go on a trip this week to Ireland. So, can he use his Medicare when he’s out of the country?
Trish: That becomes a little bit more problematic. if you have Medicare with the drug plan and the supplement, Plan F and G will come with some travel benefits, some foreign country benefits.
But still, that is only for emergency and urgent care. When it comes to just original Medicare A and B, there are no benefits when you’re traveling outside the country. We had a member call in that was traveling through Canada ended up in the hospital. Well, Medicare says if you’re traveling through Canada, you must be traveling directly from one state to another.
So you’re on your way to Alaska and you end up in the hospital in Canada, then it’s covered. And this individual, the situation was they actually were staying in Canada. So Medicare did not cover them So, Medicare really doesn’t cover you when you’re out of the country unless you’re traveling through the country to get from one state to another.
Ali: So we’ve spoken about people who have retired. We’ve spoken about people who are still working. What about somebody who was laid off and now they’re on an insurance, one of those in between insurances, like COBRA?
Trish: Yeah, this becomes a problem because people are given so much misleading information on this.
Let’s say you’re 67 years old, and you’ve been laid off, they’ve offered you COBRA, and they’re saying it’s an extension of your coverage from work. It’s the same plan, you use the same insurance card, you continue to use that for six months while you’re on COBRA, a lot will think, I’ll just stay on COBRA for six months and then move on over fully to Medicare at that point.
They’re not enrolled yet during COBRA. So what’s going to happen because you’re Medicare eligible, and you’re unemployed, COBRA is only going to pay in second position. So for simplicity’s sake, let’s say during that six months while you’re on COBRA, Medicare pays 80% and COBRA pays 20%. If you’re not enrolled in Medicare when the provider bills for those services, that bill will get passed on to you to pay. And COBRA is only going to pay their 20% because they’re in secondary position while you’re unemployed. So it’s really important that you do enroll in Medicare right away to help pay for that 80%.
Ali: Gotcha. So now that we’re in open enrollment season, my dad has been getting endless calls, flyers, and commercials targeted at him about the different Medicare deals this season. Some of them actually look like they have some pretty good offers as well. One of them even said he’d get a free mattress if he switched plans.
What should he watch out for when it comes to these offers?
Trish: There’s a lot of people out there trying to sell Medicare Advantage, a lot of brokers, and they will grasp at anything, they’ll look in all the little fine print of the plan to see what Medicare offers, and they’ll just pluck something out.
So what I’d like to say is all of those offerings that you’re seeing in the mail or you’re seeing on commercials, they fall under the umbrella of Medicare Advantage. And so one big one is the grocery card, and they’ll say, you’re entitled to a, I don’t know, $1,488 in groceries per year and call today to get your savings a card.
And you’re not automatically enrolled in this. You have to call to enroll. Same thing with the mattress offer or there’s, there’s just numerous deals. They’re just plucking a benefit out of Medicare Advantage and putting it on an ad to entice you.
And the best way to be careful is I wouldn’t call the 1-800 number on the phone.
I wouldn’t take the phone calls from those agents. They’re usually agents that are, you know, just there for the year to make a buck, and then they’re on to their main job for the rest of the year.
Ali: Sounds like there’s no urgency anyway, if these are just already benefits that are included in Medicare Advantage.
Trish: Exactly. So yeah, so really the only sense of urgency will be you have open enrollment between October 15th to December 7th.
All the ads you see on TV are all directed toward Medicare Advantage. So, there’s not any sense of urgency. You have those, seven weeks there to make a decision.
You can call someone that you trust, call us, call an agent that you do trust and ask them to look up where is that benefit? Is that within Original Medicare or is that in a Medicare Advantage? Do I have it? And just take your time on it.
Ali: So if anybody listening just now is a Homethrive member, how can they contact you to learn more about Medicare? Yeah, so any member here at Homethrive can sign up for a free one-on-one Medicare consultation, and that’s over the phone, 30 minutes.
And that’s not the end. We actually help you from A to Z with your Medicare needs, whether that’s enrolling into Medicare, providing you with forms you need, helping you find drug plans and estimates in your area for supplemental insurance, and then last but not least, getting you over to our partner company, Chapter, who can actually give you the final quote and enrollment into the supplemental insurance.
Ali: Right. Well, thank you so much, Trish, for joining me on the podcast today and teaching us all about Medicare. Thank goodness for you because there’s no way I would have known any of that on my own. and as somebody who soon will have two parents in Medicare, it’s good to know these things and good to watch out for some of those things that you pointed out as well.
Trish: Well, it’s nice to be here, Ali, and it’s definitely a good education for us in our younger years because it’s helping us prep for our day too. We’ll be there someday.
Ali: Yes, we will. And I am not about to be penalized.
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