October 2024
Here are some key takeaways from their discussion:
- Starting in 2025, Medicare Part D will see significant changes, including a $2,000 annual out-of-pocket cap on drug costs, aiming to provide relief for beneficiaries with high prescription costs.
- Insulin users will benefit from a $35 monthly cap, which began in 2023, and this will continue under the new changes to reduce financial burdens on those with diabetes.
- The confusing coverage gap in Part D, known as the "donut hole," is being eliminated, simplifying the cost structure for enrollees.
- Adjustments to how premium subsidies are calculated mean that those with lower incomes might qualify for more assistance in paying their Part D premiums.
- Pharmaceutical companies will now cover a portion of costs in the catastrophic phase, which previously required the federal government and beneficiaries to bear the bulk of these expenses.
- Those enrolled in Medicare or planning to enroll should review their options during the annual election period, as the changes may significantly alter their cost-sharing responsibilities.
- Chris and Brian recommend listeners to consult with a Medicare advisor to navigate these changes and select the most appropriate plan for individual health and financial needs.
Watch previous episodes here:
Ep. 105 How a Family Business Can Build Generational Wealth
Ep. 104 What the Next Generation Should Know About Financial Literacy
Hello, everyone, and thank you for joining us for another episode of The Financial Commute. I'm your host, Chris Galeski, joined by Design My Medicare specialist, Brian McArthur. Brian, I love having you on this episode today for a number of reasons. Number one, you make our clients lives a lot easier throughout, helping them with make decisions around this process with Medicare and the decisions that they have to make.
You're an incredible resource not only to us and our clients, but our firm, and it's just been great getting to know you over the years and having you as that resource. Because as you know, you work with a lot of financial advisors and their clients. Clients come to us for a lot of things, and we're there to help them and we want to help them.
Medicare is one of the most challenging ones because as financial advisors and certified financial planners, we know enough to be deadly, but it's very difficult for us to be in the room helping them make those decisions on the right plan.
So I just love having you on here to be able to talk about the Medicare process, how your team can best help our clients, and interesting things that people should know. So thank you for joining us.
Oh, thanks for having me. I'm I'm delighted to be here. And it's been great getting to know everybody at Morton Wealth as well. And, and, you know, I always make the joke that they keep this Medicare thing just complicated enough that we always know we'll have a job tomorrow, which is a terrible thing to say out loud to be grateful for.
But it's great, a really nice synergy with, between our firm and great, financial planning firms like yours.
Yeah. Thank you so much, Brian. I mean, we were joking just a minute ago about how you best help clients throughout this process. And obviously, when somebody turns 64, they start receiving tons and tons of paperwork around Medicare. Typically they'll put it in a shoe box or, and ignore it. But obviously you help engage with clients around that age.
But it's not just limited to that. I mean, if somebody has already been signing up for Medicare for a number of years and they have questions about it because it's very confusing, your team will still work with them at that point, too.
Yeah. We do annual reviews, whether it's someone who's a client of ours or not, are our, part of what we do. They're not too difficult to do. And, you know, sometimes we tell people to be grateful for what they have. And, of course, if there's an opportunity to, improve their situation, we can bring that to their, attention.
But, you know, everything we do is designed to feel like an extension of the financial advisors financial planning process. So, you know, yes, at the end of the day, our we're a Medicare insurance agency, but, our higher calling is to make sure that any interaction that anybody who you send to us, gets the answers they need.
Even if that answer is to be grateful and stay put. And that, any advice we give to them, like I said, feels like, an extension of the comprehensive financial planning process that we know you have.
Yeah. So let's talk a little bit of a bit about Medicare. Medicare. We've seen costs go up over the years. We've seen changes to the supplemental policies. What does it look like when you engage with the client? How do you best help them make decisions about, you know, which supplemental plan they should enroll in? How they pick the right, you know, drug coverage, all that.
Let's talk a little bit about your process and how your team works with one.
Sure. So we always communicate to the financial advisor community is, you know, this is the one part of the financial planning process with no animosity. Chris, your clients are not stabbing voodoo dolls at Chris Gillespie, saying this son of a gun is not talking to me about Medicare, but it's the one part of the financial planning process where the client's looking away from you for advice and to the clients in your benefit.
How nice might it be to get them looking back towards you? So everybody's eligible at 65, especially with your clients at Morton Wealth. That does not mean everybody's going on Medicare at 65, for reasons I'll explain in a moment. But, at 65, everybody's eligible. Pardon me, at 65, everybody's eligible for Medicare. And one year before at age 60, for the whole Medicare industry and Medicare insurance industry knows who the 64 year olds are.
And they send tons of mail. There's nothing wrong with marketing, Chris, but a lot of it's fear based marketing deadlines, penalties, consequences. I know for a fact that's not the way you run your practice or the way anybody runs their practice here at Morton. Well, but it also creates this nice, welcomed opportunity for you to engage clients at the height of their confusion, which you do so well.
And just say, hey, how much mail are you getting? Client laughs, you know, and and you just say, throw it out. You know, we, we actually, have a solution for this part of your financial pro financial planning process. And that's typically where you and your team make a low friction introduction to us. And the client has full autonomy on when and if to engage us.
But a few things I always like to impress upon, clients and advisors are like Medicare is usually good news. It's probably going to be the best health insurance clients ever had. Not everybody knows that. So there's plenty of room for optimism. That being said, it's complicated and it's messy and it changes all the time. And and it requires a, you know, pretty focused skill set.
So what we've just found over the years is that clients at age 64 really appreciate you reaching out to them at the height of their confusion. They engage us when they're ready. And then we cover kind of, you know, what Medicare is, what it isn't, what they have to do by when. A lot of clients of Morton Wealth surprise, surprise, have higher income that can drive up their part B premiums, we uncover their exposure to those higher premiums in the first ten minutes.
A lot of times we can appeal our way out of it or, or even if not, just prepare them for it. And then ultimately, whether it's months or years after that first meeting, once they're ready to go, either partially or fully on to Medicare, we guide them through how to enroll in parts A and or B through the Social Security Administration.
And then everybody buys some type of insurance either by Medicare supplement or Medicare Advantage. I'm not going to bore you to tears. What? The difference between those two? They're both good news. Pardon me. They're both really good news. But, you know, there's no utopia. There's trade offs, and we just agnostic lay out the trade offs. And we find it's better when the client.
If we do a good job of explaining it, the client tells us what they want rather than asks us what they should have. And then we actually, you know, execute that insurance. Like I say, it could be years after we first met them, under your, under your watchful eye. And, now at this point, we have a result, you know, so it was the one part of the financial planning process where there's, you know, a bit of anxiety and you were able to swoop on in and, and, lay out that this is, in fact, part of your process.
Reduce the anxiety, get a good result under, under your watchful eye. And, so that you can move on to other topics in the financial planning process.
Well, it's been great having you as a resource not only to help, you know, have these conversations with clients and figure out what the right plan is for them to enroll in. But you've also helped evaluate retiree medical coverage, either from their company and other plans. And so, you know, you guys are just a great resource for us to figure out, like, hey, what's the best thing for this client?
Depending on their situation, do they have retiree medical because they work for a government or a large corporate corporation, or even they were a teacher, or do they not have it? And it's just great having you guys be able to do that. What are some of the biggest changes that are going on with as it relates to Medicare?
These days, I know a number of years ago when plan F was closing, it was forcing people to go to plan G, which is like the Cadillac of, you know, Medicare insurance. And you think it's a great solution. But what are some of the changes that are happening to that?
Yeah. So I look, I will tell you every single year the Medicare insurance industry is going to market in a way that suggests there's big changes every single year. And in reality, every year there's changes. But they might be, you know, more client situational. They're usually not kind of top down changes. Not to say that can never happen, but that typically it's overblown.
This year in particular, there are big changes. Okay. So the Inflation Reduction Act is being basically fully phased in January 1st, 2025. And it's going to impact everybody on Medicare, specifically on their drug coverage. So the intention of the legislation was to basically reduce out-of-pocket drug costs for people on Medicare. And look, it doesn't matter how you look at the world, Chris, any legislation you know, Will it's like squeezing a balloon.
It'll benefit some people. It'll it will it won't benefit others. And this is no different. Definitely for people who are on expensive meds, they're going to benefit from this legislation. It's definitely a good thing. Maybe to give you some context, Medicare Part D never had an out of pocket maximum before, which sounds scary in reality. And I'm just going to use the C word cancer meds are usually the most expensive.
So historically if a client was dealing with cancer and was on expensive meds on the best part D drug plan we could find for them, they'd probably still pay 7 or $8000 a year out of pocket for their meds. Now there's going to be a $2,000 out of pocket maximum, due to the Inflation Reduction Act. So anybody holding everything costs and everybody who's paying over $2,000 stands to probably benefit from the legislation.
Additionally, the government can now start negotiating prices directly with manufacturers on a small but growing number of medications. I'm going to say, no matter how you look at the world, that's probably a good thing. But then there's other some other things that donut hole, which was this kind of wacky deductible that showed up halfway through the year, and that's really when most of the money got sucked out of your pocket.
That's going away. Additionally, when medications get really expensive, you wind up going in what's called the catastrophic stage of Medicare Part D. Again, I won't go into details, but to tell you that historically, once you got there and if you got there, you were on expensive meds. Medicare used to pay 80% of the retail costs, and it was very expensive meds.
Now they're going to pay 20%. So really what the legislation is doing and this isn't an exhaustive analysis of it, but as it relates to somebody who's on Medicare or going on Medicare, you know, the legislation says, hey, you can only charge Chris $2,000 at the Walgreens pharmacy counter this year. That's the most that you can take out of his pocket.
Additionally, when meds get really expensive, we used to pay 80% of the bill. Now we're going to pay 20. So the messaging on the legislation is we're going to stick it to the insurance companies, make them pay their fair share. You and I know as we sit here in California, like with gas taxes, if, if the if something comes out and affects everybody, it all gets pushed to the consumer.
So the insurance the part the drug plan insurance companies are basically responding to this legislation. Maybe they'll take it on the chin a little bit, but they're passing a lot of the cost of this legislation on to the end user. So for people who are on a Medicare supplement plan with a separate part D drug plan, in a lot of cases, those part D drug plans are going up by 100% in monthly premiums.
30 bucks might go to 80, 40 might go to, you know, or pardon me, $30 a month might go to $60 a month, $40 might go to $80 a month. There's definitely outliers that are keeping their premiums low, but, you know, then the amount of covered meds are shrinking. So ultimately things are changing. This is a year more than more so than most years that it's important to just put some amount of eyeballs on your Medicare plan.
In the last three weeks, anybody who's on Medicare got their annual notice of change. It's actually as clunky and difficult to read as anything from an insurance company is. It's actually a pretty good document for those who take the time to read it. It basically says, hey, here's what your Medicare Advantage or, or part D drug plan did last year in 2024.
This is what we'll do in 2025 and at what cost. It's more important this year than in the last decade to read that side by side. Comparing and and get an idea of who whether you think you need an annual review.
But you think that people need to have an annual review and you're trying to have as many as you possibly can between you and your team with clients.
Yeah. This year, I mean, we take pride in that. No news is good news sort of, approach a lot of times, like, you know, we tell our clients like, oh, we'll make some moves here and there, but we're not looking to put you through that every single year. We're trying to pick a horse and ride it.
When we see historically reasons to do an annual review, we reach out to clients and they're always welcome to reach out to us this year. So, you know, Q4 of 2024, in anticipation of the Inflation Reduction Act phasing in in 2025, it's more important that than ever, for everybody to at least read their annual notice of change.
And if there's any question as to whether you need a fresh set of eyeballs, it's probably a better idea this year than in previous years, more so this year than in previous years to just to have somebody review your, your Medicare supplement, your part D drug plan. And also for those people who are on Medicare Advantage plans, where the part D drug coverage is built in, it's not quite as consequential, but the cost of providing that part D drug coverage in the Medicare Advantage plan is higher.
So even on Medicare Advantage plans, the prices aren't going up, but a lot of benefits are going down.
So I think insurance in California is a very touchy topic for a couple of reasons. I mean, if you're a homeowner in Southern California, you're just getting killed by the insurance companies in terms of cost because of fire coverage. Obviously, we've seen a, you know, car insurance, you know, go up. And so now they're getting hit with Medicare increase costs.
Well, what are some of the reasons why people's Medicare plans, continue to become more expensive every year? You talked a little bit about, hey, it's not just the fact that, you know, these insurance companies go to Sacramento and say, hey, I need increase this. There's some conversations, but it's just sort of the fact of life.
Right? I mean, every year the big Medicare supplement insurance companies, they move in lockstep. There can be pricing disparities over time that warrant maybe going from Blue Shield to UnitedHealthCare or something like that. But a lot of them move, you know, up there they're they're looking you get their premium increases and stay competitive relative relative to their competitors.
But one of the things worth pointing out. One of the things worth pointing out is while now we know why part D drug plans are going up, Medicare supplement rates seem to be going up, more precipitously lately. And the reason for that is that there was a lot of surgeries that were scheduled or needed during Covid.
But if they weren't life threatening, they were put off. So there was this huge backlog of surgeries, which is probably the most expensive bills that get created through Medicare coverage. And now people are starting to actually have these surgeries, and surgery centers and physicians are starting to do them. So the Medicare utilization nationwide has gone up quite a bit in the last two years as people actually get these surgeries done.
So, you know, that that, has created higher claims for Medicare and of course, higher claims for Medicare is higher claims for the Medicare supplement plan. So that's that's a big reason. I don't know, for the last forever. I mean, you know, at some point, if they catch up on those surgeries, maybe we the, the annual increases may moderate.
But but again, you know, there's it certain companies have larger amounts of exposure to people on Medicare in certain geographies. And sometimes that can create a bit of a pricing disparity.
And you're a big fan of the supplemental policies through Medicare, like a plan G, for example, and working with clients to figure out who's the right provider, being able to get them access to doctors to where they don't have to, you know, get a referral, they can access anybody throughout the country. The costs are relatively low considering, for those clients, anything else you'd like to add from the benefit of having a supplemental policy?
Well, so we like I said, there's two ways to skin this cap Medicare supplement, Medicare Advantage. We stay agnostic. Both have their merits. Without painting too broad a brush stroke, most clients of Morton Wealth are going to lean towards a Medicare supplement plan without spending their money. It's really the height of flexibility, and it doesn't cost a whole lot for what you get.
So we explain both because if we don't explain both, I always joke around with the client and say, then you'll hang up the phone, you'll see Joe Namath on TV and say, Brian didn't tell me about that. Right. So but most of your clients will lean towards Medicare supplement. Because like I said, it's going to be the sexiest PPO they've ever had.
It's even better than a PPO. And you basically go anywhere you want, never see a bill. It's terrific. But, but I think it's important to, understand both sides, just almost from a bookend scenario. Just it's nice to have some something to compare it to. The other thing I always caution people on is, I don't spend a lot of time thinking about this, but again, if we just remove emotionality and look at, you know, economics and how people behave, the revenue to the insurance industry, insurance agencies, insurance agents on Medicare supplement, which costs your client more, is actually a bit less to the insurance industry than a Medicare Advantage plan
that may have no monthly premium. So it's just wacky world where the one that doesn't cost somebody anything may have more revenue to the insurance agent, and the one that actually has a monthly premium has, you know, less revenue to the insurance agent. We stay agnostic. Pretty much everybody we deal with comes by way of their financial advisors.
So, we go through both sides. And I think, you know, if for some reason somebody was speaking to a different insurance agent, I think it's one of the great litmus tests is just to make sure that the person you're speaking to was telling you about both. And again, everybody's situation is different. But if we line up 100 Morton Wealth clients, you know, even after just having us agnostic Lee, explain the difference from the two more of those clients are going to lean towards Medicare supplement.
So, you know, I think a good litmus test as to whether you're speaking to an insurance professional that's giving you the the full answer is just to make sure that they're giving equal attention to Medicare supplement.
I think that's a great point. And, Brian, you and your team are going to be busy between now and the end of the year. When's the when's the final enrollment for, Medicare? Need to be done.
Right. So December 7th is the deadline. The the technically we say we're an open enrollment now because we finally got 2025 plan visibility on October 1st. We cannot submit applications to make changes until October 15th, which is fast approaching. And then we've got that seven week window where anybody who needs to make a change or needs a fresh set of eyeballs that, you know, we can we can make those changes between October 15th and December 7th.
And so if somebody wants to engage with you and or Alex or Jen on your team to have questions or get enrolled, what's the best way for them to, get access to you? And then what's the cost for working with you?
So if they have regular interaction with somebody from Morton, well, I always think this flows better. If you reach out to your financial advisor and just ask for a low friction introduction to us. But even if you went right to our website, which is designed by medicare.com and you just clicked on book an appointment, the the electronic form will ask you, you know, yeah, who your financial advisor is.
So either one of those work, we like to, you know, just make sure that the financial advisor is aware, of any meetings that we're having. And, you know, we'll report back anything that's meaningful. There's no cost to work with us. Because, I think for, for good reason, these plans are all standardized. They all have a little bit of revenue built into them.
I always joke around and say, we don't get rich in any one, but they pay monthly. And our incentives are to keep your clients happy from 65 to 105, and make sure this whole thing also reflects well on you. So, you know, we kind of serve two masters, we serve the client, but we also, you know, act are constantly asking ourselves, is everything we're doing reflecting well on the financial advisor?
And if the answer is yes to those two questions, and, you know, typically we're probably doing our job pretty well. And there's there's no manipulation of costs. Like, I tell people, if I told you, you know, you should do Blue Shield Plan G, and you hung up the phone and you said, Chris, I never want to speak to Brian again.
You can call up Blue Shield and buy blank. I have a sneaky suspicion. If you call Blue Shield, they'll probably tell you to buy Blue Shield. I might come to the same conclusion, but we're going to look across the whole market and I can't mark it up. They can't discount it. So it's total neutral pricing. We look across the whole market and then, you know, a large part of what we do is try to uncover current and future and recent income dynamics with your clients because, you know, a lot of a lot of your clients have income spikes that happen at the very end of their career, and that can drive up their part B premium. And then we have to find out, you know, was that an anomaly? Is it going to happen forever? Can we appeal our way out of it? So a lot of what we do is, especially the very front end of any interaction with us is going to feel, you know, if it wasn't me, they would say, you know, this is something I can imagine Chris walking me through.
Yeah. So, you know, we're not as deep into financial planning as you are. Of course, that's you're the quarterback where we're the, you know, the tight end, maybe, but, but a lot of what we do is just try to guide them through turning complex topics into something simple, help them meet the deadline, understand the income dynamics, so that we don't overpay or you know, just hit in between the eyes at reality, and then the insurance stuff is necessary.
But, you know, we don't run around like four legged predators thinking, I can't wait to sell the Medicare supplement. Like, that's just the natural right ninth inning of the process. But there's a lot of things that we do that feel kind of financial planning ask in this little corner of the world.
Awesome. Brian, thank you so much. You know, it's been great having you on on the show today. And if you have questions around Medicare and enrolling and getting information, please reach out to us.
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