VOTAVA: MAXIMIZING MEDICARE TRANSCRIPT

Katy Votava Founder & President GoodCare.com

It’s estimated that 95% of seniors are paying too much for Medicare coverage. Today, men and women who retire at 65 can anticipate living another 25, 30 or even 40 years – all of those years receiving Medicare benefits and contributing to them. On this week’s WEALTHTRACK, healthcare expert Katy Votava, president of Goodcare.com and author of Making the Most of Medicare explains what you need to know to maximize those benefits and avoid overpaying.

The opinions expressed on Consuelo Mack WEALTHTRACK are those of the guests and do not necessarily represent the views or opinions of Consuelo Mack or MackTrack, Inc.

Founder and President of Goodcare.com reads the charts of costly Medicare benefits and writes a prescription for a life time of savings. Maximizing Medicare benefits is next on Consuelo Mack WEALTHTRACK.

Hello and welcome to this edition of WEALTHTRACK, I’m Consuelo Mack. This week on WEALTHTRACK we are focusing on maximizing Medicare benefits for you and your loved ones. It is estimated that 90-95% of Americans pay too much for Medicare coverage. We want to make sure you are not one of them.

Our mission on WEALTHTRACK from the beginning has been to help you build financial security for a lifetime. The greatest unknown, in planning for that goal, is life expectancy. Today, men and women who retire at 65 can anticipate living another 25, 30 or even 40 years, all of those years receiving Medicare benefits and contributing to them.

The life expectancy of a 65 year-old man increased two years between 2000 and 2014 alone, from 84.6 to 86.6. Longevity for a 65 year-old woman rose 2.4 years during the same period from 86.4 to 88.8.

Needless to say, every individual is different. But one thing is certain, as we age we use more healthcare services. We see more doctors and visit them more frequently. We take more medications. We undergo more procedures and frequently we need more help. Older Americans cite medical expenses as their largest expense outside of food and shelter, much higher than the general population.

This week’s guest estimates that Americans 65 and older spend an average of 13% of their after- tax income on out-of-pocket health-care expenses. At the core of those expenditures is Medicare, which is why understanding Medicare and maximizing its benefits is so important in the financial planning process, yet it is often taken for granted and overlooked.

No more. This week’s guest is Katy Votava Founder and President of GoodCare.com, a healthcare consulting firm for individuals, small businesses and financial planners. Votava is a registered nurse with a PhD in Health Economics and Nursing. She is a regular columnist for InvestmentNews, a leading publication for financial planners and the author of a new ebook, “Making the Most of MediCare, a Guide for Baby Boomers”.

I started the interview by asking Votava why it is so important to figure Medicare into retirement planning.

KATY VOTAVA: For many people, it’s going to be the largest expense they have outside of maintaining their home. And for so many people, it’s their biggest worry. So it’s like anything in life: if you plan for it, then you have a scheme of where you’re going to go, what you’re going to do, and if you don’t plan ahead, you’re going to be super-shocked on what the costs are. And people, I’ve seen people get all the way to retirement and say, “I didn’t know it was going to cost me this much,” because Medicare is not free and it doesn’t cover everything.

CONSUELO MACK: Talk to us about Medicare not being free. The age-old assumption has been you turn 65, you’re eligible for Medicare, you sign up kind of when you want to, and the you start going and presenting your Medicare card, not that simple, right?

KATY VOTAVA: No, it isn’t.

CONSUELO MACK: All right. So how do we approach Medicare to begin with? I mean, who is eligible for starters?

KATY VOTAVA: Okay. People are eligible for Medicare when you’re 65 years old if you have enough Social Security credits, and the vast majority of Americans do whether it’s through their own work history or a spouse’s. There are people that qualify under 65 due to medical disability as well. But once people qualify for Medicare, then there are three major parts to Medicare; they have to decide which parts and pieces they need and when because not everyone needs everything all at the same time. And there certainly are costs: Medicare A is the hospital component, and for most of us, there is no fee for that because we have prepaid for that. But Medicare B does have a premium, and when Medicare started 50 years ago, it was five bucks a month. No one noticed it; people didn’t even know it was being taken out of their Social Security tax.

CONSUELO MACK: And what is Medicare B?

KATY VOTAVA: Medicare B is the outpatient benefit. It covers all things outpatient: seeing your doctor, laboratory tests, chemotherapy, outpatient surgery, so it’s a big benefit. But there is a cost to it, too, and that cost is based on folks’ income. It’s a sliding scale based on income, and the base fee for people, most people in the United States, is about $105 a month per person. But it goes on up to over $300 a month per person.

CONSUELO MACK: And is that monthly fee, can you deduct, can that be taken out of Social Security, for instance, or is that, that’s going to be paid with your after-tax discretionary income or your retirement income, that’s a cost that you have to bear in order to get Medicare coverage for all your outpatient services?

KATY VOTAVA: It is a cost you have to bear for all of your outpatient services. I recommend people budget it into what they’re going to need in retirement. They actually can have it deducted from Social Security if they’re taking Social Security.

CONSUELO MACK: Right.

KATY VOTAVA: Many folks now are waiting to take Social Security until later. So if you’re going on Medicare when you’re 65 but you’re not taking your Social Security until later than that, they will send you a bill and then you pay that bill. But make sure that you pay the bill.

CONSUELO MACK: Right. And make sure, so Medicare Part B is another essential?

KATY VOTAVA: Yes.

CONSUELO MACK: You’ve got to get Part A; you’ve got to get Part B.

KATY VOTAVA: Got to get Part B. And the third leg of the stool is Medicare Part D for prescription drugs, and that is required as well. And it’s regulated by the government but it’s insurance that’s offered by private companies, and there is a fee for that and it varies: it could be $15, $30 a month; it could be $80 a month, depending on the plan. But there is a huge amount of variation in plans of which plan covers what medication at what cost. So that’s where it’s critical for people to be smart shoppers and look for a plan that’s going to cover their medications at the best possible cost. In every person’s opportunity to look for Medicare D coverage, they will look and see 20, 30, or 40 plans that are available to them, so it can be overwhelming, when you go to do that shopping.

CONSUELO MACK: Let me stop you and ask you about the enrollment period because the enrollment period is very important, it turns out, which I did not know and I’m sure a lot of other Americans before they enrolled in Medicare didn’t know, too. Why is the enrollment period, understanding that’s so important?

KATY VOTAVA: It is key for people to know when they need to enroll in Medicare or when they could delay enrollment. And that initial enrollment period is when we turn 65 years old, three months before and three months after: that’s your window of opportunity to get in without any penalties or any other problems down the road. If you don’t get in then, you may not need to take Medicare if you’re still working and have employer coverage, and you’d have to be working for a company that has 20 or more employees.

CONSUELO MACK: So it doesn’t help if you’re working for an employer who has 20 or less or fewer employees, so small businesses …

KATY VOTAVA: Small businesses.

CONSUELO MACK: … the vast majority of small businesses, they’re at a disadvantage, right?

KATY VOTAVA: The fact is that if it’s under 20 employees, you must have your Medicare A and B. You may not necessarily need the D plan, but you must get Medicare A and B, and that’s the thing that people often don’t realize until it’s a little too late.

CONSUELO MACK: Why is it so important to enroll within that window?

KATY VOTAVA: It’s critical to enroll in that window because that’s your opportunity to get in without penalty and have your coverage start right away. And if you’re allowed to defer, you’re eligible for a special enrollment period later. But if you’re not, then your opportunity to get in is very narrow and you could wait long periods of time to get in for your coverage.

CONSUELO MACK: One of the things that’s so interesting, you mentioned that when you’re signing up for the private insurance for the Medicare Part D, that’s your drug prescription insurance, is it that you should think about what your medications are when you enroll? So of course, that’s going to be a moving target. You’re going to need different medications as you get older. How do we handle that? There’s not just one kind you sign up for and that’s it for the rest of your life.

KATY VOTAVA: Absolutely. How we handle it is do your best shopping when you go in to your first plan; get the best coverage available at the time.

CONSUELO MACK: For your needs.

KATY VOTAVA: For your particular needs, right, because one medication will be very expensive in one plan, not covered in another, but covered fine in another. So do the best you can to get in, and then, once a year during annual enrollment, that’s a time in the fall, October 15th through December 7th, where anybody can shop and look to see, okay, where am I now? How has my health changed? Are my medications costing me more than they necessarily should? And also, by the way, if a person gets a new medication during the year that’s not covered by their plan, they have rights to appeal it, have it added to their plan; the plan has to deal with them in a short period of time. And then, if there, it’s not really dealt with, for example, say that medication isn’t added, the person may have opportunities there and then mid-year to get a different plan.

CONSUELO MACK: How responsive do we expect the system to be to our individual circumstances?

KATY VOTAVA: I think that it’s key right now that you are an advocate for yourself, for the people you’re caring for, because notices roll in and they just come out of insurance companies, and it’s your responsibility to speak up on your behalf. And then, that’s tricky because you may be caring for an elder family member; you don’t even know if these notices are coming in.

CONSUELO MACK: Right.

KATY VOTAVA: And so, I do recommend that people go online and sign up for myMedicare.gov, and can then look at their own account and understand what’s going on in that account. You can see what bills are coming through, and it’s a really good resource for people who like to work online and particularly for caregivers.

CONSUELO MACK: That’s a great recommendation, myMedicare.gov.

KATY VOTAVA: myMedicare.gov.

CONSUELO MACK: Talk about the supplemental coverage. What kind of supplemental coverage should we consider? What do we need?

KATY VOTAVA: Right. Well, we’ve got those three basic parts of Medicare.

CONSUELO MACK: Right.

KATY VOTAVA: We’ve got A, B, and D. And then, two main ways to put it together: one rolls into a package called a Medicare C or Medicare Advantage plan, and that does offer some supplemental coverage, and it puts all your Medicare parts and pieces together, the A and the B and the D. The thing is that it works heavily with networks, so it will work well for a person whose care providers are in that network and hospitals are in that network. You always want to make sure, best as possible, you can get out-of-network coverage, but that supplemental will cover a lot of the co-pays and costs in Medicare. The other main way to go is with something called a Medigap plan, and that’s more of an old-fashioned indemnity plan and it covers on a set schedule the different costs in Medicare. There are ten styles of Medigap plans, so that in and of itself can be overwhelming for people. They’re offered by private companies; my recommendation is that it’s a Medigap plan F style.

CONSUELO MACK: And what does that mean?

KATY VOTAVA: F as in Frank; that’s all it is. It’s a label for a type of plan regulated by the government, and F, I would think about it as F as in full; it’s the most full supplemental coverage you can purchase. It’s offered by a variety of companies, and it’s all the same benefits, so you want to look at the company that your doctor will process with most readily. Prices will vary amongst companies, so that’s another place to do your shopping.

CONSUELO MACK: When a client comes in to you and says, “Look, do I get the Medigap plan, do I get the Medicare Advantage,” what do you, is there a general rule? What do you tend to recommend? Or do you recommend one over another?

KATY VOTAVA: Well, health care coverage is very unique and individual.

CONSUELO MACK: Yes, and it really is; even with these big government programs, it is?

KATY VOTAVA: Yes. And so, here is a basic preference that I want to know from people is do you mind going within a network? And it’s not just do you mind; we’ll do research and say, “Are your health care providers in most of the networks in the area?” And if they’re not, that Medicare Advantage plan isn’t going to buy you a whole lot. You’re going to wind up wanting to go out of network and that’s actually sometimes difficult in a Medicare Advantage plan, and if you want the optimum level of choice, you want to go with a Medigap plan because Medicare itself has no particular networks. That can be more costly but not necessarily so. It also depends on where people live in the United States. In certain parts of the country, upstate New York, the Medicare Advantage plans are what I will call very robust. Most of the health care providers participate in the hospital as well. So it’s comprehensive coverage. In some other parts of the country, you find that the hospitals you want to go to and the doctors you want to see are not participating in those networks. And so, in those situations, a Medigap is going to be more suitable for people.

CONSUELO MACK: So is every state different? Is that basically the way it works?

KATY VOTAVA: Medicare varies down to the county and zip code level. So it’s not just state, it’s regional and down to the county and zip code level. So it is a complicated thing.

CONSUELO MACK: That’s why you’re in this business but …

KATY VOTAVA: Yes.

CONSUELO MACK: How does the layperson figure out that my county and my zip code, that these are the kinds of plans that are being offered to me?

KATY VOTAVA: There is a pretty decent tool called Medicare.gov, and you go on that website and you can do shopping. And for many people initially, I think it can be a bit overwhelming. You can also call 1-800-Medicare, and 24 hours a day, real people answer the phone and they will answer your questions, and a lot, they will actually help people sort and sift to a certain degree and help them identify what’s a drug plan in your area because that can be very complicated. The other really great resource for people is, I recommend they go to Eldercare.gov, and on that website, you put your zip code in, and that will direct you to the state health insurance information system in your area. Every area in the United Dtates has something called an Area Office on Aging. It has a different name depending on where you live, but they will tell you where to go, and there are specialists right at those organizations who for free will help you sort and sift through this.

CONSUELO MACK: Why do 95 percent of people pay too much for Medicare? I read that in some of your literature?

KATY VOTAVA: And that comes from well-done studies from major universities in the United States, and it is shocking. CONSUELO MACK: Ninety-five percent pay too much.

KATY VOTAVA: Ninety to ninety-five percent of people on Medicare pay too much, so they’re wasting money. So here we’re saying, boy, we feel our budgets are tight, but we could do better. And how it happens is two main things: the doctors aren’t necessarily in the network, we talked about that, but the big thing is medications. You don’t want to pick a plan just on premium; you want to pick it based on benefits.

CONSUELO MACK: Okay.

KATY VOTAVA: And so, it’s individually looking to say on that Medicare.gov website, you enter your medications into the system there, and it’ll hold it and it gives you an ID number, it’s not personally identified with you, and then you can use that list to shop and really compare those different plans. So that’s a good place to start. I don’t recommend people stop there because you then want to, if you see a couple of plans, go specifically to those plan websites because most of the time, the Medicare.gov is pretty updated, but it does change and it can change. So you want to verify with those companies. But it’s very individual and that’s how people overspend.

CONSUELO MACK: So the biggest mistakes that people make in handling their Medicare, one is, you just mentioned it, is overspending and that the drug expenditures are the area where they make the most mistakes …

KATY VOTAVA: Yes.

CONSUELO MACK: … is that right?

KATY VOTAVA: Predominantly. That’s one of the two. The second is the network issue, is who are your care providers, not just your doctors but you go to laboratories; ask ahead of time. I’ve had people say, “I’m sent to an MRI; I didn’t realize it was out-of-network.” Well, you have to ask. That’s all there is to it. And so, necessarily ask ahead of time to say, “Where I’m going to for these various tests and treatments, my physical therapists, are they in the network?” All of these care providers will have a network affiliation or not, and it’s very individual based on the coverage that you have, and it can change year to year. It doesn’t necessarily mean that what you have this year, that the networks won’t change next year, and we’re seeing that more and more that they do change.

CONSUELO MACK: So I’m thinking of, for instance, lab results. I just got a physical.

KATY VOTAVA: Uh-huh, yes.

CONSUELO MACK: I should know the lab that my blood tests are being sent to, right?

KATY VOTAVA: You should not only know that, you should know ahead of time if it’s, particularly when you have a Medicare Advantage plan, it’s key; when you have a Medicare Advantage plan, you really must ask ahead of time unless it’s a real emergency, “Is this laboratory in my network?” And it’s really relatively easy to do. There is a customer service number on the back of the card. You call them up and say, “Here’s the lab that’s been recommended for me; is this in the network?” If it isn’t, then get a list, and they’re on the websites, too, and take that back to your health care provider and say, “Is there a lab here that will do just as well?” Most of the time, there is.

CONSUELO MACK: How many mistakes does the Medicare system itself make? I mean, how carefully should we monitor all of those, I’m thinking about all of the things that my mother gets from Medicare …

KATY VOTAVA: Sure.

CONSUELO MACK:… is that I just, it’s kind of overwhelming.

KATY VOTAVA: Yes.

CONSUELO MACK: Should each one of those pieces of paper be read carefully, and should I make sure that the services that she is being billed for that Medicare is paying for, that in fact, she was there that day for that service?

KATY VOTAVA: Uh-huh.

CONSUELO MACK: I mean, is there a lot of kind of fraud or waste within the system itself that we should be monitoring?

KATY VOTAVA: Yes. So there are two different questions here.

CONSUELO MACK: Right.

KATY VOTAVA: One is fraud in Medicare, which actually is a big national problem.

CONSUELO MACK: So I understand, uh-huh.

KATY VOTAVA: And people really need to look at their explanation of benefits, and if there is something there that you absolutely didn’t receive, you should report it.

CONSUELO MACK: Okay.

KATY VOTAVA: But how many times are there errors? There aren’t as many errors with traditional Medicare and Medigap, but you really want to look, particularly I think with Medicare Advantage plans, to make sure, are things properly being coded in the right way so that it’s categorized and paid for properly? And whenever a person is being asked to pay a bill, be very careful and look at that ahead of time as say, “Does Mom really owe this portion?,” because sometimes they’re catching up with pieces and parts of billing. So that’s another place where that Medicare.gov site can be helpful because it will show you what Medicare has paid on her behalf, and then, the insurance company will have its own separate site. So it’s one of those things, too, it does take a little time to put it all together.

CONSUELO MACK: I’ll say. Do you have a view on AARP? I mean, anyone who turns 50 starts getting literature from AARP, and certainly, this is a huge business for them.

KATY VOTAVA: Yes, it is.

CONSUELO MACK: I mean, do you, is that kind of an, is there any such thing as a no- brainer in going for an insurance coverage by an organization like AARP? Or should we really shop around?

KATY VOTAVA: You know, AARP is a great organization and they have a great reputation. But in fact, what they do is they sell their name to an insurance company. So it is an insurance company, United Healthcare predominantly, that provides the health coverage under the AARP label, whether it’s an Advantage plan, a drug plan, or a Medigap plan. And so, that’s what it is, and United Healthcare is a fine company. So beyond that, really, people want to have a brand name that they like; there are some other major brand names of insurance companies. The problem with that is that’s where you can really make a mistake to say, “Okay, I know about that company; I feel comfortable with that name.” And if you don’t shop and then you’re finding out that you’re overspending, that’s a real problem. And yet, I understand why people do that because it’s easier initially to go that way. But stay with reliable companies; that’s key because your things will get processed in a more timely fashion. And so, I think that that’s an important thing: if you see no-name company you’ve never heard of, be very careful. I have seen some and they’re probably fine in some regards, but particularly if they’re new on the market, one of the biggest problems they have is their networks are so small. I have seen brand new companies that you really haven’t heard of, and there isn’t a hospital within 100 miles, honestly, that the coverage works for, and what good is that for you?

CONSUELO MACK: Right.

KATY VOTAVA: You know?

CONSUELO MACK: Last question – one investment for a long-term diversified portfolio, we, every guess gives us one, what would it be in this area, Katy?

KATY VOTAVA: In this area, I have a structure to recommend for people to save for their health care and retirement, and it’s called a Health Savings Account, and it’s actually the most tax-preferred savings vehicle we have in the united states today. Money goes in tax-free, grows tax-free, and comes out tax-free when used for your health care, and people can contribute to that in their younger years and accumulate a balance. I recommend people contribute up to the full amount every year, and they’re going to be surprised how much money they have for their health care in retirement.