Avoiding Medicare Penalties

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Enjoy it and please share it around with all your friends. Thanks for listening and thanks for choosing the Truth Podcast Network. We'll examine both biblical and practical knowledge to assist families in finishing well, including discussions on managing social security, Medicare, IRAs, long-term care, life insurance, investments and taxes. Now let's get started with Finishing Well. Finishing Well is a general discussion and education of the issues facing retirees. CardinalGuide.com, Cardinal Advisors and Hon Shile CFP sell insurance.

This show does not offer investment products or investment advice. Welcome to Finishing Well, a certified financial planner, Hon Shile and today's show, really interesting topic, avoiding Medicare penalties. And so, you know, we're always concerned about penalties and, you know, they just did a video on this series, which I had a chance to watch.

And at the end of the video, I believe it was Hans and Tom that were doing this video. And Hans said, you know, the real problem is like being without insurance is a problem. And so as I heard that, I thought to myself, gee, being without assurance is a problem. You may have heard the term like blessed assurance because it's one thing for your head to know that you're going to be in heaven, but how about your heart, right? And those who know that they know that they know are going to be in heaven, those people have what they call blessed assurance. And so I'm hoping this helps you because it sure has helped me with this verse from the 119 Psalm. It's verse 165 that says, great peace, that's Shalom, great peace have those that love thy law and nothing shall offend them. And the idea of that is the psalmist was writing that was as you spend time in God's word, right? If you love, love, love the Bible, you will be reading it every day. In fact, the more you read it, the more you love it. It's kind of like the manna. It's made for your taste and it gives you everything that you need. And as you eat it, it transforms your mind so that you now know that you know that you know that Jesus did pay for your penalties and you got permanent fire insurance.

I'm just telling you so that you could have blessed assurance. And so we're hoping that by listening to the show today, right, Hans, that people will get an idea of some kind of a blessed assurance about not having Medicare penalties. This is the number one question that people that are coming in that are turning 65 have about the whole business of signing up for Medicare. They don't even bring it up in the beginning because people say like this, you know, I'm still working, I've got group insurance, or my spouse is still working, he or she has group insurance, I'm a dependent. And then I ask them all the questions, you know, like is it a group of 20 or more?

Is it a big employer? So that it will be creditable coverage. Are you happy with the coverage?

How much do you pay for the coverage? And then I show them how much Medicare is going to cost them and show them what the coverage is, just in general terms. And we make a decision. And a lot of these people, we end up saying, you know, essentially from our perspective, we're not going to sell you anything right now. I mean, nothing.

Because you don't need to do anything other than just stay right where you are. Perhaps we could have a little discussion of whether you're going to sign up for Part A, which you can do, and not Part B and not Part D, as long as you have that group insurance. And what they'll do is then they'll sit and listen to all that, and then they'll say, well, what about those penalties? And I could just sense the fear. They haven't even looked at how much it is. They're just terrified of it, and they don't want to do something wrong right now. Well, I think you said something really important there that I don't want people to just jump ahead of the—because in my case, you know, it really is helpful to sit down with somebody and look at all the options of this as you're turning 65, right? Because in my case, I did have—I am working. I did have group health coverage, but by going on Medicare, I increased my coverage significantly and reduced my cost, okay? And so, you know, just because you're on a group health insurance doesn't mean, oh, yeah, you need to stay on that. Don't even look at this because I know that there are going to be a lot of people that are in my boat that went, oh, wow, look, I'm getting better coverage and I'm paying less for it by switching to Medicare. And so glad that I did on so many different levels. It saved me a ton of money that first year on being on Medicare. So it's definitely something you need to spend some time looking at, right, Hans?

Well, absolutely. And so we, you know, when somebody comes in at 65 and they're approaching it or it's nine months out, four months out, or their spouse is there, I mean, a lot of people, they're just confused and they're terrified about more than just the penalties or concerned or worried or whatever word you want to use. They've had the status quo with health insurance and, you know, to this point it's worked out okay for them. Maybe they haven't been sick, maybe they have, but they just view that our health insurance is okay. And now I've got this 65 coming up, I've got all these people calling me, I've got all this junk mail coming in, I've got, you know, friends the same age and they're telling me all different things, and I've got to change something.

I've got to do something. You know, this is going to be changed no matter what. And so people are naturally don't like change and they're going to be scared of change and upset with change. And then, you know, they're going to go right in and start buying insurance is what a lot of people do because that's all the people calling on them have to offer. The person like me just comes in and says, oh yeah, you're going on Medicare, you're 65, sign up for it and then buy this policy from me and you're going to be great.

And we don't do things that way. I mean, so the first thing we want to do is assess do you want to get Medicare, do you need to get Medicare now or not. So if you remove the work, if you don't have work insurance as an alternative, then the answer is yeah, you need to get Medicare now, okay. But if your group insurance is there, now we've got to go through a little more work.

I mean, we've got to decide. Number one is like in your case, Robbie, I was the one advising you, your group insurance was expensive. I mean, you had to pay quite a bit, you personally, and then your employer paid quite a bit, but you had to pay quite a bit for that. So that's a problem. And then the next problem is you had a pretty good deductible on that, that if you had gotten sick, you would have had a lot of out of pocket.

Like $5,000, yeah. Yeah. Yeah, that was a deductible. And then you really didn't have the option because your group didn't have 20 or more people on it anyhow, but I didn't even need to get to that because the situation you were in when we compared it to getting on Medicare and buying a supplement, you were better off going to Medicare and getting a supplement, and just what we did. And we never spent much time on penalties because you're not going to face them, okay.

Right. Now, what I want to tell people is the penalties are really the least of your problems, and that's what you picked up on the video, so that if you don't sign up for Medicare Part B and Part D when you're supposed to, which is at 65, and then you later want to get on it, you are going to pay a penalty. And that penalty, once it starts, it's going to go on for the rest of your life.

You can't do anything to get rid of it. So, of course that scares people without even looking at the amount of it, but that's not even the biggest problem, is if you're all of a sudden 68 years old and you just discover that the group insurance you are relying on is not creditable coverage, or maybe you just stayed on your Obamacare plan, or your Affordable Care Act plan, or you were just on whatever, you didn't sign up for Medicare and what you've had is not a suitable substitute for the government, and you now just discovered this, or maybe your group plan ended or something, and then, you know, sure, yeah, when you get on Part B, you're going to pay a penalty, but if that happened right now in August of 2022, you couldn't even get on Part B of Medicare until July of next year. And let me tell you how that works, is that the only time they accept applications for Part B for late enrollees is January, February, and March.

So sometime in those three months, you need to apply for Part B, and then once you do that, you've got to wait until July of 2023, July 1st, and that's when your Medicare Part B will start. So you've had to go for it without it for 11 more months after you wanted it, and that's where you got no insurance, and I have some people white-knuckling it through that. Yeah, that's the real, real deal, but again, the idea, the crux of it is you got to have, a lot of people are not getting on Medicare at 65, but they have credible coverage, and so therein lies the big deal is do I have credible coverage, right?

That's exactly it, and I can help you with that prospectively. I mean, if you're turning 65, we can sit down, we can look at your group insurance, and I can tell you whether your group insurance is going to prove out to be credible. The people where we got difficulty is when they come to us when they're 68, and now they want Medicare, and we're going to help them get it, and we have lots of ways to weave in and out of these regulations without telling the government a fib.

So we have ways to fix this, but it's a problem, and sometimes we can't fix them, because when you want to get on Medicare later, you're going to need to prove to Medicare that you had credible coverage during this whole period of time. So we're going to go through in the second part of the show what all that is so that you'll understand it a little bit better if this is in front of you. Absolutely, and so this is a good time to mention that this show is brought to you by CardinalGuide.com, and so if you go to CardinalGuide.com and you look on the seven worries tabs across the top, one of them is going to be Medicare, and if you click on Medicare, under that there's going to be resources, and the resources include the show notes, both for the video and today's radio show that actually even have the Medicare forms on credible coverage and information, all sorts of resources along those lines that all have to do with what we're talking about today. It's all at CardinalGuide.com as well as Hans' book, The Complete Cardinal Guide to Planning for and Living in Retirement, and so when we come back, we'll get more into the nitty-gritty of how to avoid these penalties. We'll be right back. Well, welcome back to Finishing Well with certified financial planner Hans Scheil, brought to you by Cardinal Guide, of course, and today's show, Avoiding Medicare Penalties.

So, Hans, we've got to get down to the nitty-gritty here. Yeah, and I'm actually, now that we're doing the show, I'm more interested in the blessed assurance and everything that you put me on to go read than I am the insurance, but I'm here today to talk about the insurance. So, what we're talking about is penalties and the people, again, we're not even on today's show going to identify the monetary penalties, but just understand is from the day you turn 65 or from the first of the month that you turn 65, for the rest of your life, you're accountable to have Medicare. In other words, the government wants 100% of the people to sign up for Medicare that are entitled to it or eligible for it. It's a participation thing, and that's the reason for the penalties, is they want everybody to sign up at 65 so they don't just have sick people signing up and the healthy people are not enrolled yet, and so they put a penalty there. And what we have is a lot of people who, that are working beyond 65, and yet they get these messages that if you don't sign up for Medicare at 65, you're going to be penalized later, and although that's a true statement, there's a way to get out of the penalty, and the way to get out of the penalty later is to prove that you had creditable coverage elsewhere, so the government made a provision in there that says, look, if you don't want to sign up for Medicare at 65, go ahead and stay on your group insurance, stay out of the Medicare system, and then when you do want it later, like you or your spouse retires or they get sick or for whatever reason, they get laid off, they lose their insurance, now you're going to go to Medicare and you're going to open a special enrollment period. We'll help you do this, and then they're going to ask you to have your employer sign form CMS L564, which we have right in the show notes. It's a form that your employer is going to sign, and it's going to give accountability for you having other health insurances creditable for the period from your 65 on. We're going to send that in along with the application for Medicare Part B, and they're going to enroll you right away, and they're going to waive all the penalties. So if you can't send in that form, in other words your coverage wasn't creditable or you just didn't have anything else, you're going to pay a financial penalty, a late enrollment penalty on your Part B for the rest of your life. And that's not even the worst problem. The worst problem is you're going to face a delayed enrollment where it's going to take you some period of time to get into the Medicare system.

And that's the real penalty. And so what we want to do is help you avoid this. At the same time, we don't want you sitting around worrying about it as you have everything in order. And I want to tell you another place that people get in this same problem is the people that lapped their Part B. I've got a few clients, and they're usually the well-to-do clients, because well-to-do people have a lot of money in their account. They don't pay attention to their bank drafts.

They're looking at something else. And I had this guy that lapsed his Part B. Now for a lot of us, they're going to take it out of your Social Security check, but this guy is 67 years old, still working. He's self-employed, so he needed Medicare. He bought a supplement from me, but he lapsed his Medicare. And then he was blaming it on Medicare, because they were sending bills to his old address or whatever.

It doesn't really matter. With the government, he had a period of time where he was lapsed. And it took him until last month, July 1st, to actually get back on Part B. And he's now paying a lifetime penalty for the rest of his life, probably not a huge amount, 20, 30 bucks a month, so he can afford it. But the real issue is he had no insurance for, I don't know, 6, 8, 10 months. If something would have happened, fortunately it didn't.

Nothing serious. But any way, shape, or form, if you're not covered under Part B and you don't qualify for an exception for some period of time, you are going to pay a lifetime penalty and you're going to face delayed enrollment getting back on. Wow, and that's the same for Part D as well, because I have a friend that didn't realize with a Part D plan that the drafts weren't going through, and the same kind of thing, that that lapsed, and so they're Part D, they have a penalty for the rest of their life, right?

They do. So it's a different formula, same thing, monetary penalty, and then delayed enrollment. They're not going to let you say, oops, they're not going to let you back in. You're going to have to wait until the annual enrollment period and come to somebody like me, and then we'll re-enroll you and it'll start January 1st. So again, the big problem here is the delay to enrollment is worse penalty than the penalty itself, and it doesn't matter whose fault it is. You just got to keep current on Part A, because once you're on it, there's no premium. But Part B, you need to keep current on that. You need to make sure that premium is paid.

If it's deducted from your Social Security check, no problem, but if they're sending you a bill or taking it out of your bank draft, you need to make sure that thing's paid. And then Part D, the same way. And if you have a period of time that you can't account for having substitute coverage or creditable coverage, you got a world of hurt. There's absolutely nothing we can do about it for you other than consult you and explain the rules.

So this is not something you want to take lightly. No, and so again, for those who are not as familiar with it, the Part D is a drug plan that we're talking about. So that's a different thing than your Part B, which is your doctors and that kind of stuff, where your Part A is your hospital. And so the Part A comes with the deal, but the Part B, they're taking a pretty good amount out of your – that you got to pay every single month.

What is it, $120? The Part B is $170 a month that they – again, they take out of your Social Security check if you're getting one, but if you're a delayed person like you are, then you got to pay this thing. And they can do a bank draft or whatever, but it's your responsibility to see that they get the money. That's how the government works. It's like telling the IRS, well, gee, I forgot to send in the check.

You never sent me a bill. They don't care about that. They say, yeah, we did, but you sent it to the wrong address.

Well, we don't care. You owe us this much tax money. It was your responsibility to pay us. So, I mean, Medicare works the same way.

Those people are all in good hoots together. And so we try to set people up with the consulting that that kind of stuff doesn't happen. Like I recommend putting your Part B on a bank draft.

And I do that so that you can just see and every month they're taking it out. And if they fail to make the deduction, then you maybe have a little bit of a case with the government. But if they're sending you a bill to your post office box and you're just relying on receiving that and then mailing a check back in, something goes wrong. It's your fault. So, we set people up on bank drafts.

We like that. And then the other thing I was going to mention with Part D, I get people that just dump their Part D because they're mad at it. And I just say, well, I don't get anything out of that. I think it's ridiculous to pay this premium when I can go to a good RX and get them for less, okay? That's fine if you're not taking many drugs. But what's going to happen five years from now when you've got something serious and you've got expensive drugs and you can't get them a good RX and you want to get back on Part D, now you're going to have a problem, the same thing as the late enrollers. You're going to have a penalty, which you could live with, but you're going to have this delayed enrollment.

You're going to have to wait a while before you can actually get a Part D plan. And so, what we do for those people is we put them on SilverScript, which is $6, $7 a month. So it's almost like you could say, here's a plan, let's just assume you get nothing out of it. Because you'll probably get something out of it, but let's just assume you get nothing. It means you're paying $84 a year to just comply with Medicare if it's $7 a month. And that's well worth it. So, you know, if we got some of those people out there that are thinking of...