Jason Stevens:
Yeah, absolutely. So Medicare does—it breaks into a number of different parts that are all lettered out, and there are even plans that are separate from that are all lettered out, and it always throws everyone off. But a lot with Medicare, it generally starts with these various different parts. And a lot of people don’t know what is Part A or what is Part B or Part C or D, etc.
The two main parts of Medicare are A and B, which break into hospitalization for Part A. Medicare refers to Part B as medical. I always tell people that the service is rendered by Medicare. But those two parts are what’s actually hosted by the federal government. Everything else that you hear about is hosted by private insurance companies. And they’re either as a replacement of or benefits in addition to Part A and Part B. So Part A and Part B together generally covers about 65 to 80 percent of the bills hosted by the federal government. All the other parts are different types of plans you could go into for in addition to or in replacement of Medicare.
Mike Rankin:
Got it, got it. So when—I know, for example, we get calls from clients where people are looking at the Medicare website, and it’s a little confusing. And there’s a lot of insurance companies that are running ads on TV, and then you’re getting phone calls at the house. How does one kind of navigate all of that? It can certainly be overwhelming.
Jason Stevens:
Yeah, yeah, definitely. And especially during this open enrollment, annual election period. You know, it’s difficult because the market tends to drive or make it easy to drive towards Medicare Advantage. And so there’s just so much marketing out there and so much of all this—these robo-calls and what people say are scam calls. And it’s just—there’s so much drive to move to that market but not necessarily always in the benefit of the consumer.
Mike Rankin:
Exactly. Sorry for jumping in there, but my mother-in-law was in a situation where she got switched, I think, three or four times in a six or eight-month period from different Medicare Advantage plans. I mean, it went from insurance company A to B to C and then back to A and then C again. It was relentless, and it was really hard for us to stop it.
Jason Stevens:
Yeah. Bill after bill and regulation after regulation added. I know CMS is trying to counteract this a little bit and, consequently, they’ve made things more difficult for agents, I think, that aren’t doing that. But it hasn’t stopped. And so I think the best advice to give in this is just to keep a close eye on that, pay attention, and know during this time that’s going to happen. And maybe just try to connect with a trusted someone you can trust that can get you that accurate information instead of just a random call that comes in.
Mike Rankin:
Yeah, one of the things that we did, actually, is we had the mail for my mother-in-law redirected to our house. And so while that was a certain burden, let’s say, at least we were able to catch it. We’d receive a new notice from whether it’s Anthem or United Healthcare saying, “Congratulations, here’s your new insurance card.” And we would call at least within the grace period where we could get it canceled and reverted back. Just an idea, but we really had no way of proactively stopping it. And so I guess, you know, word to the wise, it just be on the lookout for that.
But while we’re on the topic, so what’s the fundamental difference? I mean, usually, I always like to say follow the money, right? And that’s what’s driving all this marketing to Medicare Advantage. What’s the fundamental difference between a Medicare Advantage and the traditional components of Medicare?
Jason Stevens:
Okay, good. Yeah. So Original Medicare, or traditional Medicare, that’s actually holding Part A and Part B as a primary insurer. And then placing, forcing the insurance company to sit under Medicare and after Medicare, which means they don’t really have any power. They can’t say yes or no to a doctor or require prior authorizations or deny, approve any type of procedure.
But in a Medicare Advantage, it’s very different. It’s not sitting as secondary. You’re actually signing over—you’re leveraging Medicare. So you’re really signing over your rights to Medicare to the insurance company. So they take over as primary and host the benefits. And that’s kind of like what you’re saying. It’s what happens behind the curtains there is that Medicare pays a stipend. And it’s a pretty healthy stipend to these insurance companies. So they’re not paying claims anymore. They’re paying to the insurance companies. And now the insurance companies will either define networks or set benefit structures or whatever they need to do to see a profit there.
Jason Stevens:
So then the more efficiently—or even the more tightly—the insurance company manages that care, the distribution of that care, that can increase their margins because they’re getting paid a certain stipend from Medicare for that enrollment, that membership.
Mike Rankin:
Yeah, I mean, really the main difference between these two is that Medicare Advantage is very focused on the price of the plan and will make accommodations in the benefits and provider networks or whatever else they need to, to try to maintain that price of the plan. Traditional Medicare with, like, a Medicare supplement or Medigap, that’s more about control, right? And stronger benefits that can’t change. So that’s usually just very different goals—where you’re focusing on your benefits and your access to care and your control or on the price of that plan.
Jason Stevens:
Exactly.
Mike Rankin:
One of the questions that we always get from our corporate clients—you know, we have a commercial plan, right? You have a business, it’s architecture, engineering, construction. Maybe they’ve got 100, 150 employees. They’ve got a certain number of participants that are 65 or older. And they always get these messages that, you know, “Gee, don’t delay because you’re going to have penalties if you don’t go on Medicare right away.” Yet they’re on a commercial plan. And let’s say that their Part D is creditable, which I want to get to in a second. But, you know, for somebody who’s working at a company that has good benefits and wants to stay on that, do they have to enroll in Medicare, or can they wait?
Jason Stevens:
Great question. And yes, this always is a huge confusing point for most everyone on group benefits. No, it’s completely optional to go on to Medicare. You might see a lot about penalties that you might get if you don’t go into Medicare. But as long as you are actively employed and you maintain benefits through that employer, you’re an eligible opt-out. So you are OK to stay on those group benefits.
Mike Rankin:
Got it. The one thing that does come to mind is to make sure, if you are Medicare-eligible and you go to retire, do not go on COBRA from your employer because that’s not considered to be creditable coverage, as I understand it.
Jason Stevens:
Correct. Yeah, that one gets tricky too. There’s a bill that’s actually pushing to try to correct that. It hasn’t got enough traction yet to get passed. But COBRA is not considered technically creditable coverage with Medicare because you’re no longer actively employed.
Mike Rankin:
Right.
Jason Stevens:
Although the coverage is the same, you wouldn’t think that there would be that big of a difference there.
Mike Rankin:
Yeah.
Jason Stevens:
And I mean, most of the rest of the market sees it as creditable—it’s just Medicare’s eyes. But, you know, sometimes people would get maybe a severance if they—maybe they didn’t retire but they were let go—and they get six months or 12 months or whatever paid by COBRA. And sometimes people might use some of that, but you definitely want to make sure you’re getting into Medicare as well.
Mike Rankin:
Right, right. That’s a key differentiator and something that we always try to communicate. But again, occasionally you just run across it—somebody doesn’t know. They’re 66, and they separate coverage from their employer and get a COBRA notice. And it’s what they know. Their doctors are all set up. And so, yeah, occasionally we run into that.
So we’ve been using this term “creditable,” and it makes me think of Part D. Can you share a little bit about what is Part D, first of all? And what does creditable coverage mean, and what are some of the changes that are happening in 2025?
Jason Stevens:
Okay. There was a three-part, and I can repeat them back. That’s a big one. Yeah. No, so Part D first—what is it? Even though it is labeled as a part of Medicare, it’s the prescription drug coverage, which is hosted by private insurance companies. You choose a plan—it’s just regulated by Medicare. So this is the actual prescription drug plan benefit.
But how it works is now starting to move towards what looks a little bit more similar to what employer group plans look like, where you would have fixed co-pays and things like that. For years now and going through the end of 2024, there’s a little bit higher out-of-pocket costs generally, and there’s a donut hole to face, which a lot of people hear of and just say, “I don’t want it. I’ve heard it’s not good, but I have no idea what it is.” And it’s good not to know if you don’t. But at that point, you’re generally paying 25% of your medication cost.
The big changes—that’s corrected—but it’s in these massive steps that’s sort of positioning and moving the market rapidly. We’re going down to a $2,000 maximum out-of-pocket for prescriptions, the donut hole being completely wiped from the market, eliminated.
Mike Rankin:
The out-of-pocket max could have been, what, $7,000 or $8,000, and now it’s going down to $2,000?
Jason Stevens:
Actually, yeah. Prior to 2024, there was no maximum out-of-pocket. People would pay to no end on prescriptions. Starting January of 2024, it’s set to $8,000 out-of-pocket maximum. And now, January 2025, it will be pushing to $2,000 out-of-pocket maximum.
Mike Rankin:
So those are pretty significant leaps. Are you seeing the premiums for Part D also jump up?
Jason Stevens:
Unfortunately, yes, for a lot of the plans—not for everyone. But the insurance companies have been forced into a corner a bit. To save face for them a little bit here, they don’t really—they can’t just lose money on it. So there’s some aspect there. But they either have to raise the prices or they have to, as they’ll say, apply cost-saving measures. But that could be reducing, cutting medications off the list, applying further prior authorization requirements, denying prior authorizations—it could be a lot of things.
Mike Rankin:
So they’re ratcheting up the management of care, making it more challenging to get through to that prescription, perhaps.
Jason Stevens:
Exactly.
Mike Rankin:
And the other thing that always fascinates me about the Part D market—it seems, and you can jump in and correct me where I’m wrong—but if I have a particular, let’s say I’m on three different prescriptions, and maybe my spouse is on four different prescriptions entirely, the plan that I might pick would perhaps be different than the one that she’s going to pick. Because it kind of depends on the formulary that they’ve selected and, therefore, the drugs that we have that makes this particular Part D plan more attractive to me and a different one more attractive to her. Is that an accurate assessment?
Jason Stevens:
Yeah, absolutely. It’s actually pretty uncommon to see both spouses in the same plan unless maybe neither of them actually happened to be taking medications or something.
Mike Rankin:
Right.
Jason Stevens:
But yeah, a lot of it has to do with the medications, pharmacy preference, even what other medications are likely possibilities as alternatives that could live in the future into that year, right? Because you’re choosing that prescription drug plan for the entire calendar year—there is no changing that plan, even if your medications change.
Mike Rankin:
Yeah.
Jason Stevens:
So it’s important to get into what’s most appropriately set for that individual.
Mike Rankin:
Yeah, and that’s what I was thinking. Certainly, somebody that is battling cancer, let’s say, and they’re on a particular type of chemotherapy, and that changes in May—what do they do at that point if the new drug is perhaps not covered? Maybe there’s some approval process in that particular case?
Jason Stevens:
Yeah, yeah. So all the plans out there—on average, state by state for 2025—it’s going to be 16 different plans to choose from for prescription drugs, and not a single one of them covers every medication under the sun. So you’ve got that chance. But if you run into that, then yeah, there is an appeal process that can go forward because you can’t change the plan. When you do appeal, depending on the medication and the need for it, you may actually be able to get a one-month supply at usually a Tier 3 or Tier 4 copay level, just so they have some time to go through that appeal. And then the insurance company can still deny that appeal. But at that point, even if you run into that, there are further appeals you can file to try to combat that and get that medication covered.
Mike Rankin:
Medically necessary, for sure.
Jason Stevens:
Exactly.
Mike Rankin:
So let’s talk about a couple of best practices, right? So one that we talked about is if somebody is actively at work and on a commercial plan with their employer, they can stay on that plan. It’s just when they go to retire, probably, what, two to three months in advance of that, they should start working with someone like you or engage a Medicare expert. What’s the timing on that if you’re getting ready to retire from a company?
Jason Stevens:
Yeah, so at first, I’d say it doesn’t hurt to get involved and just get to understand it at least, or meet with someone and plan it out, no matter how early—even if it’s six months out, you know, however long that might be. But usually, you want to take action at about that two-month mark if you can. That’s sort of like the golden rule.
Mike Rankin:
Okay, perfect. Okay, so that’s a good one. And then how does somebody go through sort of the decision-making process around whether they want to go traditional Medicare with maybe a Medigap policy as one option versus the Medicare Advantage as an entirely different option? What are some of the decision-making points that you see that are really important there?
Jason Stevens:
So a lot is cost. But as the same route I mention to everyone is, you have to try to factor in costs at all levels, right? Not just what you’re paying for the plan, but what you might be paying in copays or coinsurance and what that might be down the road. Right. If you are going into a Medicare Advantage plan, if something becomes costly, you have to qualify medically to shift that market.
So usually, the decision there is looking between if you’re comfortable giving up a little bit of that control, allowing the insurance company to manage your healthcare a bit to drive that cost down, and you’re comfortable to stay in that position if something big happens, then that’s when people may start looking into the Medicare Advantage plans.
Otherwise, if you’re looking just to have stronger benefits or to have more control, or you don’t want the insurance company in the middle of making those decisions, then that’s usually when you’re looking on the supplement side.
Mike Rankin:
I also think about it too—perhaps if somebody wants to do a lot of travel, they don’t want to be hemmed in by a particular network. You know, they just want a little more freedom and flexibility. This is probably an oversimplification, but I think about it a little bit like, in the commercial market, the PPO versus the HMO. And traditional Medicare is a little more free, and then the HMOs, which should be akin to Medicare Advantage, should be a little tighter on the management of the care. Is that a fair thought process?
Jason Stevens:
Yeah, actually, excellent point. And traveling is one of the big things that we always check into because it is a huge factor that steers people toward Medicare supplements. But you’ll even see it in some regions where there is a such thing as a PPO for Medicare Advantage. And the vast majority of those cases, they’re referred to as a regional PPO because it’s not like you see from your plan that you had or whatever else—it’s not the same.
Mike Rankin:
Yeah, interesting. And then the next one would be for Part D, the prescription drug coverage. Somebody thinking about going on to that—what’s kind of the best way to figure out, “Hey, these are the medications I’m on, which is the best plan for me?” Are there tools out there, or how do people go through that process?
Jason Stevens:
Great, yeah. There are a couple ways to be able to do it. This is something I would say is really not a bad place to be talking to an agent or an advisor. There are tools that are available, but the types of tools that we have access to, and what our team has built, is so much more involved and robust. It allows us to look at more than just what that total cost ends up landing at in the end, which is important.
But there is a tool that Medicare does actually make available to the public. And if you just go onto Medicare.gov, you can punch in your medications, and you can see what every single plan is for your region and what your cost would be, including those copays for the medication. So it gives you at least a general idea of what that would be.
Mike Rankin:
Yeah, fantastic. Awesome. Well, Jason, thank you very much. This has been really illuminating. And I sure hope that people were able to get some good takeaways. And if anybody needs any direct advice, feel free to send me a note. Find us at relational.com, or you can reach out to Jason and his crew at Stevens and Associates up in sunny Santa Barbara.
Jason Stevens:
Well, not always sunny—sometimes a little cloudy there by the coast, but here and there.
Mike Rankin:
Yeah, being a Gaucho, I’m quite familiar with it. Well, Jason, thank you very much. Really, really appreciate your time.
Jason Stevens:
Of course. Yeah, thanks. Thanks for having me.
Mike Rankin:
Yep, absolutely. Thanks.
