Art by Christian Northeast

Since 2011, the amount of savings Medicare beneficiaries are projected to need to cover program premiums, deductibles, and certain other health expenses in retirement has risen as much as 11% for some Medicare beneficiaries, according to a recent study by the Employee Benefit Research Institute (EBRI).  

At the same time, the figure has actually fallen by a similar amount for others, according to EBRI’s estimates. These diverging figures are derived from the fact that individual workers qualify for and apply for Medicare programs differently, depending on a host of factors such as income and claiming age. Across the board, however, supplemental savings are needed to pay for such things as premiums for Medicare Parts B and D, premiums for Medigap Plan F, and out-of-pocket spending for outpatient prescription drugs.

According to Christopher Ciano, senior vice president for Aetna Medicare, uncertainty about Medicare costs leaves workers and retirement savers wondering about just how much retirement healthcare they will need to pay for out of pocket, versus what they can expect to be covered by federal benefits. For this reason, Ciano says, Medicare information should fit into an adviser’s longer-term financial strategies for their clients.

Ciano says a client’s choice of Medicare coverage can help them save money in various ways. The following are some of the basic factors/goals advisers should consider:

• Protecting clients from out-of-pocket costs. If a client participates in a Medicare Advantage (Part C) plan, they have what is called a maximum out-of-pocket, which can limit the expenses they pay each year for medical services. Other cost-saving options are Medicare Supplement plans (or Medigaps), which, for a monthly premium, cover a portion of health care costs not covered by Original Medicare, including deductibles and coinsurance payments.
• Ensuring the benefits best meets an individual’s needs. If a client chooses to enroll in a Medicare Advantage plan, be sure they leverage the additional benefits these plans may offer. For example, if they are healthy and active, selecting a plan that offers a gym membership can help them save money.  
• Paying attention to Part D: Prescription drugs are not covered under Original Medicare and can be a significant out-of-pocket expense. While many Medicare Advantage (Part C) plans include prescription drug coverage (Part D), it can also be purchased as an addition to Original Medicare.

James Marshall, president of Spectrum Investment Advisors, echoes those points. He says his firm has had strong success in building client rapport though broad discussions of Medicare and Social Security. Expertise in this area is rare even among expert retirement advisers, he notes, so the firm regularly brings in outside speakers to its office and hosts town-hall style meetings where clients of the firm can dive into the weeds and ask their pressing questions about Medicare.  

“We have speakers coming in later this month, in fact, to talk in the open town hall settings about Social Security and Medicare, and we will be discussing in particular whether a client should have a Medicare Supplement plan or should buy Medicare Advantage,” Marshall explains. “We are a big proponent of having all of our participants thinking about their finances in a holistic way that goes beyond just the 401(k).”

According to Marshall, these town hall meetings on topics such as Social Security or Medicare are always standing-room only.

“Our clients tell us all the time how much they value this type of service, and so we also put out summaries of what our speakers say,” Marshall explains. “We turn around and put this information out digitally to more than 23,000 participants. They tell us that it makes our practice stand out, people walk away from these sessions saying ‘Wow.’”

Learning the Medicare Alphabet Is a Good Start  

Aetna’s website hosts a wealth of Medicare claiming information that can help advisers and their clients get up to speed on the most important factors to consider.

One downloadable chart, for example, clearly spells out the Medicare alphabet and cross-references which programs cover what. As the chart explains, Medicare Parts A and B, also called Original Medicare, can be thought of as the core coverage programs. Part A covers services for hospital stays and similar inpatient procedures, while Part B includes coverage for doctor visits and other procedures that don’t require an overnight stay in the hospital.

Part C, also called Medicare Advantage, is made up of plans approved by Medicare. As Aetna’s resources explain, private insurance companies provide and service these plans. Medicare Advantage plans usually include a network of health care providers. Some require clients to use their network of providers while others allow them to go out-of-network, usually for a higher cost.

Part D, finally, is the part of Medicare that provides prescription drug benefits, while Medicare Supplement plans are offered by private insurance companies, which provide plans that work in tandem with Original Medicare.

Another Aetna publication steps through five questions an adviser can ask clients to help them start to identify a claiming strategy across the Medicare alphabet. These questions are, “What do extra benefits, such as vision, dental and hearing coverage, have to do with reaching my health goals? Do I want the flexibility to see any doctor? Do I plan to travel outside the United States? Do I need prescription drug coverage if I’m not taking a lot of medication? Do I want to juggle multiple Medicare plans?”