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Here’s a common conversation I have with my Medicare-aged clients – who are typically also clients of a financial advisor.
“I went to my doctor’s visit and they told me that the shingles vaccination isn’t covered by Medicare?”
Me: “That’s correct. The coverage falls under your drug coverage, the Part D plan. But, expect to pay approximately $175 for the shot. Yes, for each of the two shots – the first one, then the booster.”
That right there is what most of us would consider a “surprise” expense related to Medicare and health insurance, right?
Try this one on. We’ve met Medicare eligible people that have had to pay $30,000 for plane rides to be emergency evacuated to home from outside of the United States when extremely ill.
That’s another surprise medical expense.
Let’s talk about a few large “surprise” Medicare-related expenses that your clients may not know about:
1. IRMAA. This is the Income Related Monthly Adjustment Amount assessed by Medicare for high income earners.
This is definitely the most common “surprise” expense. It’s amazing how many people approaching Medicare age feel that Medicare health insurance is free or at least highly subsidized. When I ask, “Do you know how much you’ll be paying for your Part B premium?” I rarely get a “yes.”
I have a new client who is a physician. He and his wife are newbies to Medicare, how it works and how much it costs. He called me recently in a foul mood saying, “I am paying close to $20,000 a year for this health insurance?” My response? “Yes, you are.”
Surprise. You can help your clients many years prior to Medicare eligibility by discussing with them the impact of the number on the modified adjusted gross income line on their tax returns. That line determines how much their Medicare Part B will cost. Don’t let them be shocked and upset when they learn it from us.
2. Travel and health insurance. When your clients retire, they often want to travel – and travel internationally. Medicare as health insurance is designed to be used primarily in the U.S. That surely doesn’t mean that they can’t travel; it only means that we have to address a few things that they may not have considered before.
Medical evacuation. When a person has Medicare as their primary insurance and a Medigap contract as their secondary, a hole that exists is “medical evacuation.” This is when a person experiences a health emergency outside of the United States. They may need immediate attention and require being flown back to the U.S. This cost is then billed to the client. There is no coverage for the air evacuation. These bills can be $30,000 to $75,000. And, they occur. Our solution? Trip evacuation coverage. We recommend a service called MedJet assist. A 65-year-old couple can buy an annual membership for $399. People can purchase trip insurance like this via their travel agent as well. But be careful about the fine print when you purchase your travel insurance through your AMEX card. You may be flown to the “nearest” hospital in the U.S. versus the hospital in your hometown where your doctor is. MedJet delivers you to where you want to go.
If you have Medicare and are enrolled into a Medicare Advantage Plan, your carrier will very typically provide emergency evacuation coverage at no additional cost. Check your plan details to determine if it is indeed included.
Let’s loop back to the other parts to emergency issues and health insurance abroad. Remember, Medicare was designed for use in the U.S. If you have clients who might visit family for six weeks in Ecuador, for example, we suggest short-term medical coverage to provide coverage in that country. Medigap carriers will provide $50,000 for emergency coverage outside of the U.S. Medicare Advantage plans will also typically provide emergency coverage worldwide. That being said, don’t rely on Medicare to pay for a z-pack if you have a sinus infection on an African safari (one of my clients just booked a safari and are bringing a z-pack).
Lastly, here is a point somewhat related to travel. You may have clients who plan to move overseas in retirement. These folks often will decide to dis-enroll from Medicare Part B coverage since they can’t use it in Spain. While true that their coverage won’t work in Spain, should they decide to move back to the U.S. one day (many do later in life), they will be assessed a penalty as they re-enroll into Medicare’s Part B. One of my clients moved back to the U.S. from Australia after 22 years. She was assessed a 220% penalty enrolling into Part B. That penalty remains with her for life. Surprise.
3. Misunderstanding how pre-existing conditions and Medicare coordinate. Your clients have worked for 40 years, are typically insured with group plans or marketplace coverage where there is no concern regarding “pre-existing conditions.” That all changes with Medicare eligibility. Talk about surprises.
Not understanding what type of product you are purchasing as you enroll into Medicare is one of the biggest mistakes I routinely see. The question is typically, “But I can always change later, right?” Not necessarily.
With Joe Namath on TV during the Medicare enrollment season telling everyone that they can get a free plan with dental, dog food for their dog and Uber rides to their doctor’s office, it’s hard to not get drawn into plans that promise the moon and the stars. I embellished a tad with the dog food, but…. on the surface these plans are very attractive.
Dig into the details of your plan. Understand that if you have cancer, your plan likely has a 20% co-pay for chemotherapy or radiation. With a cancer diagnosis, there are a number of expenses that come along with it. Spending $10,000 on top of your Part B premiums is common when this happens. People in this situation will call me and want to leave their Medicare Advantage plan and enroll into a MediGap contract. But they cannot with a cancer diagnosis. Understand the rules related to your choice of product as you first enroll into Medicare.
A cancer discussion leads us to our last “surprise”: prescription costs. Two of my clients are spending $12,000 a year for a pill that they need to take each day to stay alive. It doesn’t have to be a cancer diagnosis to get sticker shock related to prescriptions.
When a person enrolls into the Medicare system, they are typically upset to see that their monthly co-pay for Eliquis is $100 compared to the $10.00 co-pay they enjoyed while on their group coverage at work.
I hope that you can see the great impact that Medicare has on a person’s finances in retirement. Unfortunately for your clients, most of them just don’t see it coming. Be the rockstar advisor who gives them the heads up!
Joanne Giardini-Russell is a Medicare guru with Giardini Medicare (formerly Boomer Health Group), which was created to help those approaching Medicare eligibility or those currently enrolled in Medicare better understand what they are purchasing and how their choices may affect their long-term outcomes regarding care, finances, etc.
Read more articles by Joanne Giardini-Russell