How do I shop for the best Medicare deal?

Editor’s Note: Journalist Philip Moeller, who writes widely on health and retirement, is here to provide the Medicare answers you need in “Ask Phil, the Medicare Maven.” Send your questions to Phil.

Medicare rules and private insurance plans can affect people differently depending on where they live. To make sure the answers here are as accurate as possible, Phil is working with the State Health Insurance Assistance Program (SHIP) and the Medicare Rights Center (MRC).

Janet – Utah: I am doing some financial planning and the next life event for us is Medicare. We currently have a consumer directed health plan (CDHP) through my employer with an annual out-of-pocket maximum of $7,500 and premiums of $400 per month. We always meet the out-of-pocket plan maximum due to my husband’s health issues and prescriptions. I am 60 and my husband is 61. My husband is unemployed and retired. How can I estimate what my premiums and maximum out-of-pocket expenses will be when we go on Medicare and obtain a Medigap policy?

Phil Moeller: Janet, your question is one of the main reasons I am writing an entire book about Medicare! The very logical and straightforward question you ask does not have a simple and straightforward answer. Medicare has grown too complicated for most of us to use. The book won’t be published until the fall of 2016, but that will still be time enough for you.

In the meantime, here is a short primer on shopping for Medicare, which is really what you asked for help in doing. I am assuming your employer does not offer a retiree health plan. If it does, you would need to coordinate how Medicare will work with the plan. I’m also assuming that you or your husband have worked at least 40 quarters in jobs where you had Social Security payroll taxes deducted from your pay. This is the minimum work requirement for you to qualify for free Part A of Medicare. Otherwise, each of you would have to pay up to $407 a month for the Part A premium, which insures stays in hospitals, skilled nursing homes and other covered facilities.

If Part A is free, each of you would pay a monthly premium for Part B of Medicare, which usually pays 80 percent for covered doctor, outpatient and medical equipment expenses. Part B premiums go up every year, and there are income-related surcharges for couples whose modified adjusted gross incomes (MAGI) are more than $170,000 a year (or $85,000 if one is single). These income-related monthly adjustment amount (IRMAA) charges can be a real scourge. Also, a little-known fact is that income-related monthly adjustment amounts are lagged by two years. So if your husband begins taking Medicare at age 65 in 2019, the income figure that will determine his premiums will be based on your 2017 calendar year tax return.

The Part B premium this year is $104.90 a month, but income-related monthly adjustment amount surcharges can increase it up to $335.70 a month. And remember, each of you must pay this. There is no married or family health plan when it comes to Medicare.

Also, there is a $1,260 deductible for Part A and $147 deductible for Part B. Each of you must pay this amount before Medicare coverage begins helping to pay your covered health expenses.

There are 11 different Medigap policies, each designated with a different letter (A, B, C, D, F, high deductible F, G, K, L, M and N). And there are nearly two dozen insurers who sell these policies in your home ZIP code in Utah. The trick with Medigap is to understand that the coverage particulars of each letter plan differ, but the coverages within each letter plan are identical, regardless of which insurer sells it. For example, all type F plans are the same, all type C plans are the same, etc. What’s not the same is the premiums charged by different insurers. They can and do vary wildly, so careful shopping is a must. Fortunately, Medicare has a very helpful Medigap Plan Finder that reflects these different premiums.

The most comprehensive Medigap plan is generally thought to be Plan F. Now, you and your husband may not need or want such a comprehensive plan, but if you do, the range of 2015 monthly premiums for such plans in your ZIP code is $114 to $232 a month. Again, this would be for each of you. Medigap, as I’m thinking you already know, can effectively cap your maximum Part A and Part B expenses.

So, assuming you get free Part A, pay only $104.90 a month (times two) for Part B, and $114 a month (again times two) for Medigap, we’re up to $2,626.80 a year for both of you. To this, we should add your Part A and Part B deductibles ($1,260 for A, $147 for B), which would total $2,814, bringing you to about $5,440 a year.

Unfortunately, you’re not done yet. Your question did not mention prescription drugs but neither Medicare nor new Medigap plans cover these drugs, so each of you will need a stand-alone Part D drug plan. Most Part D plans are bundled with Medicare Advantage health plans. But Medigap does not work with Medicare Advantage. In fact, it’s illegal for an insurance salesman to even try and sell you a Medigap plan if he or she knows you already have a Medicare Advantage plan.

Medicare has a Plan Finder for drug plans as well. I don’t know what drugs the two of you take, of course. But entering your home ZIP in this Plan Finder, I was at least able to find some general cost information. Medicare set a ceiling of $320 for Part D deductibles in 2015. Most plans don’t charge this much. You’ve got nearly 30 different insurance company plans to choose from. I used a feature of Plan Finder that estimates annual drug expenses, including any Part D premiums, deductibles, copays and charges for over-the-counter medications and other drugs not covered by the plan.

You will need to enter your own meds into the tool to get accurate results. But, in ballpark terms, projected annual retail drug expenses of these plans range from $1,328 to $2,828 a year. Many plans offer mail-order prescription options that often are cheaper than retail prices. Also, you can sort the plans by their Medicare quality ratings (1 to 5 stars). Your two highest-rated plans each have 4.5 stars and average about $2,500 in estimate annual out-of-pocket retail drug costs for each of you (or $5,000 for both).

Adding these together brings you to nearly $10,500 in maximum out-of-pocket health expenses for both of you for the year. However, as anyone with Medicare who has used their policies will tell you, there always seems to be uncovered charges cropping up that will boost this total in the real world.

I hope this “short” answer helps. Please do check back in a year for the long answer!

Lil – N.J.: My 87-year-old mother is showing signs of early dementia. She has TRICARE for Life and Medicare. How do I find out if she is eligible for home health care?

Phil Moeller: I am so sorry to hear about your mom, and I wish the best for both of you as you deal with what can be a very challenging time. The major issue likely to determine whether home care is covered is whether your mother requires skilled or custodial care. Usually, but not always, dementia patients do not need skilled nursing care. They do need custodial care to help them with what are called activities for daily living (ADLs). Neither TRICARE nor Medicare cover custodial services in the home, and while you didn’t ask, the absence of a long-term care program within Medicare is a large and growing problem.

You can call TRICARE for Life at 1-877-TRICARE (1-877-874-2273) and most likely get this question answered. Before doing so, however, you should consider whether there is a possibility your mother does and will require skilled home care. Here are the four qualifying requirements under both TRICARE and Medicare rules, courtesy of SHIP counselors:

• They must be homebound, which means that it takes a considerable effort to leave the home.
• They must require skilled care at least once every 60 days. Physical, speech, and occupational therapy meet the requirement for skilled care.
• Their doctor must sign a home health certification that states that a plan of care has been created and that the doctor has had a face-to-face visit with the patient.
• Finally, they must receive care from a Medicare certified home health agency.

If your mother’s doctor believes these four requirements are met and that she requires skilled in-home services, Medicare would likely be the primary payer and TRICARE the secondary payer. If it turns out your mother requires extensive skilled services, TRICARE has a special program called Extended Care Health Options (ECHO) Home Health Care. If you think she may need these services, ask TRICARE when you call if she is registered for the ECHO program.

Best of luck.

Steve – Cal.: I’m turning 65 in August and don’t want or need any Medicare coverage, as I’m covered 100 percent under my wife’s employer policy, including drug coverage. She was a County of Los Angeles employee but is now on County permanent disability. This will convert to a retirement health plan when she turns 65 in eight years, and I’ll be covered under that plan, too. Medicare tells me that as she is on disability and therefore separated from her job, I won’t have “continuous coverage” if I delay in signing up, and there will be a 10 percent penalty for each year I delay. Why am I being forced to pay for Part B of Medicare when I don’t need it? Do I just gamble and wait eight years and pay an 80 percent penalty, or do I pay for something I don’t need?

Phil Moeller: Steve, I share your frustration. Unfortunately, Medicare’s rules are very clear here and not negotiable. Looking at the very big picture, Medicare works with retiree health plans in a way that makes sense to most employers and retirees. I mention retiree plans here, because in Medicare’s eyes, that’s the way you will be regarded. The only way to avoid Part B when you turn 65 is to be in an active employer group health insurance program. Because your wife is no longer an active employee (even though she is still covered), you will not be considered a participant in an active employer plan when you turn 65.

Under nearly all retiree plans, Medicare is the primary payer for covered health services, and the retiree plan is the secondary payer. The retiree plan often picks up expenses that Medicare does not cover, which helps retirees. And because Medicare is the primary payer, employer retirement costs are reduced, which pleases employers. Well, actually, no one ever appears pleased by any dollars they have to pay for health care, so perhaps the best thing we can say here, a la Mary Poppins, is that a spoonful of sugar helps the medicine go down.

Unfortunately, the big picture does you no good here. If you are regarded as a retiree under your wife’s plan, you will need Medicare, because the retiree plan will not be the primary payer any more. So, if you gambled, as you put it, you will not only be exposed to big Part B late enrollment penalties in the future, you also will not have primary health coverage should you need it. Medicare normally pays the first 80 percent of coverage services, so you would in effect be self-insuring for these expenses, and you would later get socked with penalties.

You also should touch base with your wife’s benefits folks to make sure you’re still OK with drug coverage and do not also need to sign up for a Part D plan. These plans have their own set of late enrollment penalties, and at the risk of seeming to pile on, you should avoid these if you can.

If your prescription meds are still covered by your wife’s plan, I’d sign up for Part B and swallow the medicine. If, for any reason, her employer says you also need a Part D plan, then perhaps you might just want to leave her plan altogether and explore Medicare-only policies. If her employer charges you to be covered under her plan, perhaps there is a cheaper alternative.