Episode #02 of Intentional Wealth:
Medicare Planning with Cassy Phillips

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Welcome to Intentional Wealth, a monthly podcast where alongside notable financial professional guests, Private Wealth Advisor and Founder of Braun-Bostich & Associates, Amy Braun-Bostich, delivers useful insights and strategies that help YOU live your best financial life! Remember, when your goals are meaningful and your wealth has purpose, you can truly live with intention. Now, here's the host of Intentional Wealth, Amy Braun-Bostich.

Amy Braun-Bostich: Today I'm joined by Cassy Phillips from Insurance Consultants of Pittsburgh, located just south of the city in Mount Lebanon. This is an agency that we've come to rely on personally and for our clients, for many years, because of their fairness, honesty, and client-satisfaction focused service.

So welcome, Cassy, and thanks for joining me today.

Cassy Phillips: Thanks for having me.

Amy Braun-Bostich: Well, it's a pleasure to have you here and discuss everything that we need to know about Medicare as we approach age 65. We're going to cover several different topics under the Medicare umbrella today. Each of which is incredibly important and impactful for individuals to fully understand before the age of eligibility, because making uninformed decisions could have lasting negative effects.

Why don't you start with telling us a little bit about what you do, and the services offered at Insurance Consultants of Pittsburgh.

Cassy Phillips: Okay. Well, thanks Amy. First, I really want to thank you and your staff for the opportunity to work with you and your firm and your employees. You have such an impressive operation, and you and your staff always go above and beyond to assist clients and associates like me to make it a great working experience. So, thank you!

So, I don't want to give away my age, but I've been in the insurance business for over 40 years. I'm approaching Medicare age myself. And so, I understand the anxiety and the concerns people have about changing health insurance at this point in your life. I started my career in the property casualty side of the business, and then several years later I added life, disability, long-term care, and Medicare to the services I offered. And the last, probably 20 years, I've really focused a lot on Medicare. I have a lot of different companies and I sell both the Medicare supplements and the Medicare Advantage plans. I think an advantage to working with somebody like me is you get to pick what product works best for you. You know, I don't go out and sell one product for one company and tell you why that's the best you should have. And so, it's your decision.

Amy Braun-Bostich: That's terrific. I think that's one of the things that I've always valued about our relationship, is that if there was something additional that a client had available to them that you thought was superior or better for them than what you could offer, you pretty much just flat out said that. Totally honest with the client about that, so that has given us the confidence and the trust in you to continue to work.

Cassy Phillips: Yes, I never force anything. You know, if someone has a better option through an employer or something like that, I would definitely steer them in that direction.

Amy Braun-Bostich: Okay. Well, now, as a foundation for our discussion, can you talk generally about what anybody approaching 65 needs to know about Medicare and just a brief description, if you will.

Cassy Phillips: Sure. Well, first and foremost, what I would want them to know, when you purchase a Medicare Advantage plan or a Medicare Supplement plan, you're going to have excellent coverage and it's very affordable to you. You also don't need to worry about issues such as pre-existing conditions or being declined or rated-up due to health issues. You know, when you have your eligibility period, there is no reason or no event where you ever would be declined or rated-up, or something like that, with a policy. Clients are eligible at age 65, and those that are receiving disability benefits for 24 months become eligible for Medicare. And that becomes your initial enrollment period.

Amy Braun-Bostich: Sounds good. Now, there are several parts to Medicare, but many people don't know what each covers. Can you review the components?

Cassy Phillips: Yes; I know it can be confusing trying to decipher through the different components of Medicare, but I always try to fully explain this to my clients and break it down, so it makes sense to them. The Part A and Part B is called original Medicare. That's actually the government side of the medical coverage. Part A is the hospital coverage and Part B is your doctor and your testing and that side of the coverage. Part C would be your Medicare Advantage plan that would fill all the holes in from the government side, and Part D is your prescription coverage.

Amy Braun-Bostich: Sounds good. Anything else that you think people need to know about that? For instance, a lot of times people think Medicare is free. Obviously, Part A is, but Medicare has been paid into for more than 10 years, right?

Cassy Phillips: Sure. So, for most people, Part A is free. It's based on either their earnings or the earnings of a spouse or a parent and the number of quarters that they worked. And so, the majority of people will always get Part A for free. So, you know, is it free? No; you've just paid for it over the years of working, and at age 65, then you have no additional costs for the Part A side. Since you've paid into the FICA taxes in your salary, that has paid for the Part A for you. It's the Part B that has a cost to it.

Amy Braun-Bostich: Okay. Do you want to touch on that a little bit, about the cost associated with Part B?

Cassy Phillips: Yeah. So, assuming that they have the Part A for free, the Part B does have a cost to it and its income based. Now for most people, they fall into the initial income level, which would give them a monthly Part B premium of $148.50.

That income level, anyone making up to $88,000 for an individual or $176,000 for the joint tax followers would be in that $148.50 range. It does jump up then into different brackets as the incomes get higher, but still fairly affordable. I think the next bracket is like $204, something like that. It's not a huge jump in premium.

Amy Braun-Bostich: Great. Well, we've seen even people with modest incomes get into those higher premium amounts when they've sold property, or when they've had capital gains for a year, it's just bumped them up. But that's not permanent, right? So that is only for one year.

Cassy Phillips: There's a two year look back. As far as the Social Security office adjusting your premium payment, it's a two year look back. But you're right about that. I do come across clients who may have gotten a large buyout from work, or they happen to inherit something, or you know, anything that would put them in that higher bracket. And so, they are going to pay; if that happens right as they're 65, they are going to pay a premium, but it's not permanent.

Amy Braun-Bostich: That's great. Yeah, I consider it sort of an additional tax on assets; basically, we talk about that in such a way. So yeah, I think I want to say that, did H. W. Bush do means testing? Was that when that started? Or sometime during that period?

Cassy Phillips: I believe that, yes.

Amy Braun-Bostich: How about the enrollment process? Let's talk about the period, the process, the time to complete the sign up. Also, there are some people who think it's automatic, and I guess if you're on Social Security it probably is, right? But let's talk about enrollment a little bit.

Cassy Phillips: Okay. You're correct that the client is automatically enrolled in Part A the first of the month that they turn 65. A lot of people think that they have to enroll in that, and that's not the case. They do, however, have to sign up for Part B if they are not going to take their Social Security income. If you're taking your Social Security income for your age 65, then they will enroll you in part B. They know you are retiring.

The Part B is what I always caution clients that you want to contact the Social Security Administration and let them know the date that you are going to take it, if you're not going to be also taking your Social Security income, because they are independent of each other.

Amy Braun-Bostich: Alright.

Cassy Phillips: The Part B enrollment is actually the trigger that allows a client to buy Medicare insurance. You can't buy it just with Part A, you have to be enrolled in Part B. So that's always the first step that I tell clients. The enrollment process starts three months prior to their age 65, and it extends three months past their 65th birthday. You don't really want to cut it close. So we never have to be concerned that you don't have insurance, I always recommend they start the ball rolling three months, or at least two months, prior to their 65th birthday. They have to be in the system for Medicare, for Part B, in order to be able to come to someone, an agent like me, and get them into a Medicare Supplement plan.

So, there's special enrollment periods too, Amy, like if someone works past age 65, whatever age it is it doesn't matter, but whatever age they then decide on retiring, that becomes an open enrollment period for them or a special enrollment period for them. And the advice I give clients is, you know, your first start, if that's the case, if you're over age 65, is you have to pick that retirement date. You've got to decide if it's October 1st or November 1st, and you've got to set that date and then you enroll in Part B for the first of that month effective date so there's no lapse in coverage. It's really a seamless transition. You know, if you get it rolling early enough, it's seamless. So, clients don't have to worry that there's going to be a mess when they first go in. That's not the case.

Amy Braun-Bostich: Okay. And what about clients that have HSAs, Cassy?

Cassy Phillips: So, with an HSA, once you're on Medicare you can no longer contribute to an HSA. However, that doesn't mean that you lose it, or you have to move those funds if you don't want to. You can use the funds in an HSA for expenses for Medicare, like premiums or co-pays, or even I believe vision and dental expenses. And so those funds will be put to use from the HSA for that. But the contribution is the key. You can't add to it anymore.

Amy Braun-Bostich: Okay. And what about Part D? There's so many different choices, right?

Cassy Phillips: There are a lot of choices for Part D. Part D, of course, is your prescription plan. And what I generally do with clients is, if they're choosing a Medicare Supplement rather than an Advantage plan, then I will take their medications and the area they live in, and the pharmacy, and I will actually shop for plans.

So, you know, that's what it comes down to- the choice is what's best for you with the medications you're on. And Part D plans have a wide range of premiums. They can start at $6 a month and go to, let's say $150 a month. I've never come across anyone that needed a $150 prescription plan. The problem with the $6 plan is the formulary may be small. And what that means is, you know, maybe there's 15 medications for cholesterol, but each company will say, “Okay, we're taking these 10 in our formulary.” And so, when you go with a plan that's that inexpensive, what you have is a formulary that may be an issue to you through the year. And for the clients that say, “Well, I'm not on any medications. I don't care. I'll go with the cheapest one.” Well, that's fine, but what if next month you are? And you're on a brand drug that’s $600 a month and it's not in their formulary? That's what I caution them. And believe it or not, most, probably 90% of my clients, I can get them in a plan, for about $25 to $30 a month, that's excellent.

Amy Braun-Bostich: Okay. Now what if they make a bad decision? Like you said, they say, “Well, I'm not on medication. I'm going to go with the cheap plan.” When can they change to another plan?

Cassy Phillips: So, the enrollment that they see advertised and whatnot on TV all the time, that's the annual open enrollment. That's for people that want to change their plans. So, the nice thing is clients don't have to worry that they're picking a plan now and, you know, down the road, they might regret it. Every year you can change plans if you want to. You don't have to. If you like the plan you're in, you can keep it forever, but you are able to do that. Enrollment period starts October 15th and runs to December 7th. And the choice you make then would be in place January 1st.

Amy Braun-Bostich: Okay. Speaking of TV, I get this question a lot. On TV, they have these advertisements for a Medicare Supplement or Medicare, I guess it's Advantage, and you may even get money back from Medicare that will cover your hearing, will cover your eyes or vision, will cover dental. And it just sounds almost too good to be true. What are they talking about?

Cassy Phillips: Well, I'll start with the zero-premium that you see. My response to that is always nothing's free. But what a zero-premium plan is, is they’re referring to Medicare Advantage plans. And with the Medicare Advantage plans, when you go into that type of plan and your application goes in, the government can see you've chosen an Advantage plan over a Supplement. What actually happens is, your money that you're taking for your Part B out of your Social Security check, which I said for a good amount of people is about $148 a month, that money goes from the payment you receive, and Medicare then sends it to that company. And so that Advantage company is getting your Part B premium. They all offer a zero-premium plan. And what that is, is since they're getting your $148, they'll give you this zero-premium plan without any additional premium. It is as good of medical coverage as some of the most expensive plans out there. The difference is it might have a hospital per day copay rather than a per stay, as some of them have. Usually they don't include vision, dental, hearing, that type of thing. So that's what a zero-premium is. It's meaning that whatever you're paying out for your Part B is all that you have to pay.

Some of the Medicare Advantage plans include vision, dental, hearing aid coverage. There's a lot of bells and whistles in those plans that people like. Companies will offer plans that if you purchase that Medicare Advantage plan, and again, we're referring to an Advantage plan not a Supplement, but a Medicare Advantage plan, if you choose those plans, it will reduce your Part B premium. The trade-off for that is those plans generally have higher copays, higher hospital stay copays and that type of thing. So that's your trade-off for it. And I haven't sold a lot of those for that reason. When I sit with clients and show them the charts and the grids and they start to understand the products, then they see the options and weigh them- is it better to have my Part B premium reduced and pay these higher copays? And again, that's up to them. There's no one product for everybody.

Amy Braun-Bostich: Okay. Now there is some confusion about the difference between the Advantage plans and original Medicare. And, also, if you go on Advantage and you want to switch back to original, you have to qualify for that, right?

Cassy Phillips: That's correct. So, in your initial enrollment period, which is when you're turning 65 or you're coming off an employer plan, you choose any plan you want with no underwriting whatsoever. I'm not sure why it's done, but the Supplements are more restrictive than the Advantage plans after that initial enrollment period for a client. Let's say you picked an Advantage plan and down the road decide you want a Supplement, and one's not better coverage than the other, I do want people to know that. Whatever plan you choose with Medicare is excellent coverage, but maybe you don't want copays anymore. Maybe you don't want to worry about networks and whatnot. And you want to go back to a Supplement down the road. At that point, you have to go through underwriting. You can be bumped up in rates to a standard class, or they can decline you going into it. I don't want to scare people with that. You would never find yourself without insurance.

The Advantage plans, you can move from plan to plan every year; there's no underwriting. There used to be if you had end stage renal disease, and that's not the case now. So, you can always switch Advantage plans.

You can always go from a Medicare Supplement to an Advantage plan. The issue is going from an Advantage plan to a Supplement down the road, if you would ever want to do that. And I don't have a lot of people really that want to do that. Once they're in a plan, they usually have found their niche other than if there's product changes or whatnot, and they want to make a change down the road. But going back into a Supplement down the road requires underwriting.

Amy Braun-Bostich: Okay. And why might somebody want to do that? Maybe just because of the out-of-pocket costs?

Cassy Phillips: I'll give you an example. I had a client that was in her eighties when she got my name from somebody, who was referred to me and she had had an Advantage plan. She said, “I had a horrible year this year.” She said, “They've taken me out of my home so many times in an ambulance.” And she said, “I'm thinking I want a supplement.” Well, obviously I knew that she was not going to be able to do that if she had that many health issues, but I sat with her. Her issue was, “I've had these copays. I've had ambulance copays, hospital copays, that type of thing, and I think I'd like to switch into a plan like a Supplement, where you do not have copays”. So, I sat with her and we went through and totaled all of her hospital, ambulance, doctor copays and that type of thing. And at this point, she's in her middle eighties. When we went and looked at the premium at her age, to buy into a supplement at that age, it was actually cheaper for her to pay her copays than the premium, buying in at that age. But that was her thought process, at this point, I don't want copays anymore.

So again, you would never be in one plan and not have coverage for something. That's not the way Medicare works. If the federal government says it's a covered Medicare expense, it doesn't matter what type of product you have, it's covered. And, at least here in Western Pennsylvania, the Advantage plans that I work with, they have full networks. So, all the hospitals or whatnot are in there. You don't have to worry about that. But again, there's clients that have children living all over the country. And one instance I had, was a woman lived here and none of her children were in Pennsylvania. She needed a hip replacement. The kids all wanted her to come have that done in their state so she could stay with them. You know, if you're looking at that down the road or that's a possibility, then the Supplement is the way to go, because there is no network with a Supplement. For a lot of people, they say, “I would never leave my area for care.” So again, it's a personal thing.

Amy Braun-Bostich: The future- it's hard to predict though, isn't it?

Cassy Phillips: Yes. Yes, it is. 

Amy Braun-Bostich: I've also, anecdotally, heard of areas in the country or pockets in the country that aren't as fortunate as we are, where they don't have a ton of medical insurance and Advantage plans available to them. Is that still the case or is everybody pretty adequately covered now?

Cassy Phillips: On the under 65, that was truly the case. There were actually counties in the country that had no companies. When the new health care came out, there were companies that pulled out of states and actually left areas with no companies; they since have companies.

On the Medicare side, I think the biggest thing that I hear from state to state is that there are some states where some doctors don't accept Medicare patients. And so that can be true around the country. I couldn't tell you what states they are. I had a cousin in Colorado that, years back, told me that was a situation in her area. In Western Pennsylvania here, it really floored me to hear her say that about her area, because in Western Pennsylvania the doctors don't even ask if you're on Medicare. You know, everybody takes it. I have never had a client call and say, “I have a doctor here that doesn't take Medicare.” So really not an issue, absolutely, in our area. That I know for a fact.

Amy Braun-Bostich: Okay. And one other question that I get a lot is, if I'm traveling, if I'm on Medicare or Medicare Advantage and I'm traveling overseas, what are some of the things I have to be aware of if I become ill?

Cassy Phillips: So, you have coverage with your Supplement plans for emergency care anywhere that you travel. So, if you would go to an emergency room- that's always my recommendation, whether you're in the United States and just out of state, or you're out of country- you go to an emergency room and it's always covered like you're in-network. The issue clients have is, depending on the country that you're traveling to, some of those countries will not bill our, you know, United States or Western Pennsylvania companies. And so, they want you to pay up front with a credit card and then you come home, and you're reimbursed.

The answer is kind of twofold. Yes, it's covered for emergency care. I know I had a friend in Aruba who had a heart attack while he was there. I always recommend travel medical insurance. It's international; you get it with an international company. And so those countries will bill an international country, an international company like that. And it's kind of a relief off your mind that you don't have to worry about, you know, where am I accessing? You know, what's my credit card limit if it's something serious. So, I kind of always recommend that. Pick up an international medical policy. You actually buy a pool of money when you do that, and you pay for it only for the so many days that you're gone. Well worth it to give you the peace of mind that you don't have to pay for it first and come home and resubmit bills later.

Amy Braun-Bostich: Well, that's a really good tip! Are there any other tips that you have, or any other sorts of ongoing maintenance related things that people should know when they're already on Medicare?

Cassy Phillips: So, the good thing I want to tell clients is that you don't have to re-enroll every year. Because of the amount of junk mail that people get during the open enrollment period, the annual enrollment period in the fall, they think they have to pick a new plan every year. That's not the case. If you're in the plan and you like it, you can stay in it forever. There's absolutely no re-enrollment at all. It just rolls from year to year.

The good news too, is that you don't see drastic things with Medicare. I don't see drastic rate increases and, you know, premium changes with Medicare. The plans may be tweaked with an Advantage plan. They may tweak copays each year. Here in Western Pennsylvania, I have seen, and I have companies whose rates decreased actually, if you can imagine, for almost seven years in a row. I see the rates on Advantage plans go down as much as I see them go up. And again, they're usually very minimal. The Supplement plans never go down, but the rate increases are pretty minimal on those also. So, it's not a shock each year to maintain the plan that you have. I have to say for the most part, most people get into a plan and keep it for a long time. I do get calls of people saying, “Here’s my situation. Do you think I need to switch to anything?” I've spoiled my clients. A lot of them just call, they don't even open the mail and see what the new plan changes are. They just call and say, “Am I good where I'm at?” You know, so that's okay too. But that's the biggest thing I would tell them. There's not a lot of maintenance as far as keeping it.

And, even the Part D, you know, if you had a major change in prescriptions through the years, you can change that too. And that's what I do for my clients. I'll actually go shop all the plans with their specifics and tell them if it's worthwhile making a change at the enrollment period.

Amy Braun-Bostich: One of the weirdest things I think about premium changes is that if I'm on Social Security and I'm on Medicare, then my Medicare premium can't go up more than my Social Security went up, right?

Cassy Phillips: There's been years, there were quite a few years in the past, where they didn't even increase the Part B premium, so it's not a given. The last couple of years it has increased each year, but again, that hasn't been drastic. I think last year it was $144, I think. And this year is $148. So, you don't see drastic changes- at least we haven't ever, that I know of, and as I said, I've been around a long time. We don't see anything drastic with Medicare that would be a real burden on customers to pay it.

Amy Braun-Bostich: But, if I'm not on Social Security but I'm on Medicare, my premium could go up. Even though another person on Social Security that is on Medicare, their premium might not go up, right? There's something tied to Social Security increases and Medicare premium increases. There's sort of a safe harbor. And I always thought that was sort of weird, you know, that one group of people could have a higher Medicare premium than the other.

Cassy Phillips: You know, I'm not familiar with that, Amy. I don't know what the circumstances would be, that someone would be higher than someone else. Yeah, I'd have to look into that.

Amy Braun-Bostich: That's just an oddity that I remembered. Maybe I'm misremembering it too. Well, this has been really incredibly useful information and I hope it's cutting through confusion for clients and there's some valuable takeaways for our listeners.

Anything else that you'd like to add or that you think we haven't covered that we should, that I should have asked you about?

Cassy Phillips: You know, Amy, I just sit with clients, as you said earlier, a lot of times and don't sell them anything. And I'm happy to do that because actually those type of people have built my business because they give me so many referrals that I am constantly busy with Medicare.

You know, I think what I've come across this year, more so than in past years, is people that are retiring at 65, or whatever age, and have spouses that are quite a few years younger. And they're beside themselves trying to figure it out, because some companies allow them to stay on retiree benefits. And if they do that, their spouses get to stay on. And so, their option is, “What should I do? Should I stay on here?” Whether it's a retiree, regular medical or retiree Medicare, when you stay on the employer plan, your spouse can stay there because the cost to them to buy an individual plan can be very expensive.

I've come across that quite a few times this year and have sat with clients and we've gone through the whole offer from the employer and compared it to what their spouse is going to pay if they come off that employer plan and they buy their own Medicare separately and the spouse then has to go on her own. And it's always a hit or miss. Sometimes I'll say, “Stay on that employer plan, at least till your spouse turns 65. And then we readdress it, if it's better for both of you to come off.” And sometimes it is.

I have run into a lot of, let's say teachers with the teacher's union, who they'll give them money towards their Medicare premium, and they buy it through the employer. There was a time when that was always the way to go. I found the last couple years that sometimes, even though they're getting a hundred dollars, or whatever that assistance is under that union plan, that they can get a better plan or a better price buying it on their own. So, I'm always willing to sit with a client to consult that type of thing and look at your options for you and guide them.

Amy Braun-Bostich: Yeah, that’s great. I know that some of those teacher plans, too, the best ones are locked now. You can't even get into them. They're just, you know, the older retirees still have them, but the newer retirees can't even get into them.

Cassy Phillips: Oh yeah. The benefits have changed drastically. I actually would sit with clients in exit meetings and whatnot, and I remember being at one, probably at least 10 years ago, where they said, “Congratulations, you're the last retirees to get this level of benefits.” So yes, it has changed for them. It's always worthwhile, you know, don't assume that you're better to go one way or another. It's always worthwhile to talk to somebody. And let them review your options. And hopefully you're sitting with someone like me. I mean, there's been a lot of times I sat with clients and said, “You're better off over here. And hopefully I see you again down the road.”

Amy Braun-Bostich: Well, great. Thank you so much! We’re out of time, but we'd love to invite you back sometime. We really appreciate your expertise and for sitting with us today. Thank you so much! We'll put your contact information in the notes so people can get ahold of you if they need to sit down with you, if that's okay with you.

Cassy Phillips: That would be wonderful! I certainly appreciate it!

Amy Braun-Bostich: Okay, well you take care, and we'll talk soon.

Cassy Phillips: Thank you, bye!