Medicare Complicated

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This is the Truth Network. Welcome to Finishing Well, brought to you by cardinalguide.com, with certified financial planner, Hans Scheil, best-selling author and financial planner, helping families finish well for over 40 years. On Finishing Well, 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. Well, welcome to Finishing Well, certified financial planner, Hans Scheil.

Today's show, how fun. Why is Medicare so complicated? I know you probably wondered that yourself, and so we're going to give you a little history, a little context to all that. But, you know, as I was thinking about this, Hans, what I had noticed is that disciples—and we're hoping you're listening—are disciples. Like God said in Matthew 28, right, go ye therefore and make disciples. And disciples are enthusiastic learners, people that want to learn about God, that want to sit across the dinner table from God face to face, look into his eyes, and, you know, get to understand him better. In order to do that, it's like if you're sitting down with your wife at dinner, you've got to ask great questions, like, you know, what did you do this week that made your heart come alive, or things that were really good questions. Because disciples, you know, in order to learn something, their glass has to be empty. And unfortunately for me, you know, if I sit down with my wife, I've got to remember, she's a different person than I sat down to dinner with last night, and really I need to learn what's going on in order to do that.

I've got to empty out my glass, and I've got to be able to ask great questions. And so from my standpoint, when it comes to Medicare, to get this context, it's going to be really helpful for me to understand why, John, is Medicare so complicated? Well, it didn't start that way at all. I mean, this program started, the law was passed in 1965. It started in the year 1966, which is almost 60 years ago. Actually, it's more than 60 years ago, it's going on 70 years.

No, I take it back going on 60 years. So it just a little bit at a time. And through the years, we've ended up with, you need a matrix analysis to really go through how Medicare works for any one person. So that's, for starters, is just because of all the changes. So if we go back to 1966 and you look, the part A deductible, you had part A and you had part B. You had the two parts, you still have part A and part B today. Part A is hospital, part B is doctor.

It's just that simple. And the part A of hospital, today's day and time, it's $1,600 as your deductible for two days in the hospital, for 20 days, for 50 days, no matter how long you're in there, up to 60 days. You only pay $1,600, but you pay $1,600 if you don't have supplemental insurance. In 1966, that number started at $40. So the first people on Medicare and for the first few years, you could go on and back those days, you went to the hospital for like two weeks and you were in there two weeks, you're on Medicare, you came out, you owe the person at the front desk $40. Wow. Those were the days.

Those were the days. Now, your doctor that came to see you, well, you were in there, which was every day back then, or maybe multiple doctors, that doctor would charge you separately. And then when they would run lab tests, there'd be different things that would show up on the different side of the bill, which is the medical and surgical, and that would fall under part B.

So you had part A, hospital, part B, medical and surgical. And with that, back in the day, $50 deductible annually. And so when you're on Medicare, the first 50 bucks in the year was on you. And then after that, Medicare paid 80%. And then you would have to pay 20%. Plus, if a doctor overcharged you or charged you more than Medicare allows, you had to pay that too. And there was no cap or no limit on it.

Guess what? It works exactly the same today. The only difference is the deductible is a little bigger. It's $226 is the annual part B deductible in 2023. So that's from 50 to 226. But after that, it's 80%.

You owe 20% plus you owe the excess charge. So that wasn't that hard to keep track of. It was concerning, and that's why they invented the Medicare supplement real quick. Several companies came out with this, and it's just the Medicare supplements, for the most part, paid what Medicare didn't pay. So the Medicare people had, between Medicare and the supplement since the beginning, and it's still true today, just about everything was paid by one or the other. So people all along, once they get on Medicare, have been pretty happy with it. But then they had to start changing it.

So we're going to get in on the show today, and we're going to talk about some of the big watershed events that happened. But understand, they mess with this every year, and where we've gotten almost 60 years later is to a pretty confusing place. Yeah, well, when you think about it, look at the difference just in the medical field to what it was 60 years ago, right? As you were describing that, I thought, well, no wonder they had to change it along the way so much, because like you said, when you went in the hospital, it was never for like a day.

There was nobody anxious to get you out of the hospital. It was like to make sure you were there until you got better. That was in the old days. And when you think about medications in those days, I mean, you never heard about a drug that would, you know, cost the kind of money that it costs today, but then again, they didn't have the medications that would do the things that medications do today. And so there's just been so many different things that have happened in the medical field. Of course, the government trying to keep up with that would have to make changes. And wow, the structure is all, like you said, watershed moments. Well, let's look at 1976. So you know what the watershed moment in 1976 was?

Hans entered the Medicare Supplement Insurance Business at 18 years old. Right. Okay. And so now the Medicare deductible has grown part A to $104. So when I was first doing this, we had a pad of paper, you know, a tablet. And on the one side of the thing was the Medicare part A and Medicare part B, what it paid and what it didn't pay.

Okay. And then out to the right was the supplement, really the only supplement we sold. We just had one. And it paid what the Medicare didn't. So that was on one sheet of paper. And then the prices were down below to buy the supplement.

And then you flipped it over. And that was the application. It was a one-page application.

It had a few questions. And then, you know, we just had a pad of those. That's all you needed when you go in to see somebody, was that and a pen and a little piece of scratch paper. And we were good to go. And so just out of curiosity, you know, how much was, did they call it Medigap back then? I think they maybe did.

We didn't call it that. We called it Medicare Supplement, 20 bucks a month, 15 bucks a month. And that was a big sale back then, especially you get a husband and wife. I'd get 40 bucks a month, you know, 20 bucks each. Yeah, but what it protected them against, oh my goodness, the 20% of that doctor bill?

Oh yeah. And plus it paid for the doctor bill when they overcharged them or they balanced billed them. And the Plan G pays for that today. It was very similar to the Plan G. It was similar to the Plan F. So the Part A deductible was $104. The Part B deductible was 60 bucks. But the coverage was still 80% after that.

So I don't want to get too much talking about me. The Part B cost $7.20 a month out of your social. We never even talked about it because it was just, it cost you $7.20. And people didn't even miss that out of their Social Security check. When it started in 1966, it was $3 for Part B, $3 a month. And of course they'd take that out of your Social Security check.

And so people didn't even miss it. So the next big watershed event, 1990. And so let's just follow the deductibles. The Part A deductible is now $592.

Wow. That's 14 years after I started, 24 years after Medicare started, 1990. 592 bucks. And the Part B deductible is $75, same 20%. And the supplement all along is going to pay your Part A deductible. It's going to pay the Part B 20%. Some of the old ones paid the Part B deductible.

And then it'd pay the excess charge. And there were no drug plans. Even then Medicare didn't cover drugs in 1990. Medicare didn't cover drugs till 2006. And so the first 40 some years of Medicare, no drug coverage, but it really wasn't needed because drugs were like six bucks a bottle or 10 bucks a bottle or something. And it started to be needed in the 90s just because it would have changed.

From the beginning, the drugs weren't covered under Medicare. Okay? What happened in that watershed moment that caused a change? Okay.

Well, we're going to go to 2006 in a sec. But in 1990, what really happened to Medicare is they came out with Medicare 10. Okay? Medicare 10? Medicare 10.

Wow. Let me tell you what they named the policies of Medicare 10. They named them A, B, C, D, E, F. And you got to remember that there's a Part A and a Part B of Medicare, but they decided to name the standardized policies of the letters of the alphabet. And you think that doesn't confuse people.

I mean, there's a big point of confusion right there that's still there today. So what you're saying is, in that year was when the government stepped in and said, okay, if you guys are going to sell Medicare supplements, they are going to be standardized. And they're all going to be the same thing with the same coverages.

And these are the plans that we are going to set out. A, B, C, D. Right? Correct.

Correct. And it stopped us salespeople from going in there and saying, oh, you got that. Well, you got to see what I got over here. I got the whiz-bang, whatchamacallit whiz-bang Medicare supplement. And it's got this rider that comes in and pays for your wheelchair or something. And then I was part of that, too. We were out selling our company and we'd go in to see people. And we'd have some benefit on our policy that you just got to have that you don't have with the other one. And so we'd change you into ours. And the government could see right through this. And it created a lot of problems in the business.

This needed to be done. And so they said, these policies are pretty much all the same anyhow. So we're going to come out with this chart. I just wish they'd have named them something different, OK?

Like level 1, level 2, level 3, or something. Something other than green, red, blue, black, or something other than plan A, plan B, plan C, plan D. Because it just creates many years later tons of confusion. But anyhow, he had 10 policies. And for the most part, we only sold one of them once they came out with them, which was the F plan, which had the highest benefits.

I mean, that's just what people want to buy. Once you're going to buy one of these Medicare supplements, people want to buy the best. So and it's helpful to know, because to me, if you know the foundation of something, you can build on it.

But if you don't understand the foundation as far as the story, you can't build on it. And so that's why we're so glad you're listening today to why is Medicare so complicated? Again, we have so much information in Hans' book, The Complete Cardinal Guide to Planning for and Living in Retirement. It's there at the website, cardinalguide.com, where you're going to find the seven worries tab. Of course, today we're talking about Medicare. And in those show notes are all sorts of pieces information on what we're talking about today. So it's all there at the seven worries tab, you know, Medicare there at cardinalguide.com. We're going to be right back with a whole lot more of why is this so complicated, hopefully straighten it out so it is at least be palatable for you.

We'll be right back. Hans and I would love to take our show on the road to your church, Sunday school, Christian or civic group. Here's a chance for you to advance the kingdom through financial resources by leveraging Hans' expertise in qualified charitable contributions, veterans aid and attendance, IRAs, Social Security, Medicare and long-term care. Just go to cardinalguide.com and contact Hans to schedule a live recording of Finishing Well at your church, Sunday school, Christian or civic group. Contact Hans at cardinalguide.com. That's cardinalguide.com.

Darrell Bock Welcome back to Finishing Well, certified financial planner Hans Scheil, again brought to you by cardinalguide.com. Today we're talking about why is Medicare so complicated, especially it comes to this idea of plan A, plan B, part A, part B. That's what we're talking about.

Hans Scheil Oh yeah, and part D and plan D and drugs and penalties and it's really the ABCs. People are so confused by this stuff by the time they come into me and that's the only reason I'm making this video. I don't like to add to confusion.

Many times you don't even want to acknowledge it. When I'm just dealing with one person, I'm like, can we set all that stuff aside and just sit down with a blank piece of paper and you can tell me about you and then I'll tell you as much about Medicare as you need to know or want to know. But I'm really, I'll just get in and I'll make a recommendation based on your situation and we can be done with it. Because people, there's so many armchair quarterbacks out there, people that have had an experience with it or know-it-alls or what you want to call it.

It's just, it amazes me the place that I meet a lot of people in. So back to the show, we were on 1990 and we were talking about Medicare 10 coming out and the policies are standardized. So if you walk away from this show with one thing today, get this, is that what most people are buying these days in the Medicare supplement is plan G, like gum, plan G. And you say, well, why plan G?

Well, it has the most benefits. So anything that's other than plan G has knocked off some of the benefits and somebody that's trying to sell you something other than a plan G is going to tell you, you don't need that and you don't need that and you don't need that. And for whatever reason, and maybe they've determined that for you, but I'm just telling you that the plan G has the highest level of benefits. And I want you to walk away with is the plan G from Mutual of Omaha is identical to the plan G from Blue Cross Blue Shield, which is identical to the plan G at any other company, Aetna, Cigna, Banker's Fidelity. I mean, they're all the same since 1990 has been the law that a plan G is a plan G is a plan G now they have different prices. So the different insurance companies can charge different prices at different ages for their plan G. And we're not going to get into why that is today. Just understand. So you can still shop this.

You don't have to pay a lot attention to the benefits. You just look, how much do you charge for a plan G? And so get that. They came out with that in 1990 and that's still news to people on Medicare 30 some years later.

Okay. Now the other thing Medicare 10 did is they came out with open enrollment. And what that was really saying is before somebody be turning 65 and they'd say, Oh yeah, I want a Medicare supplement. I'm getting Medicare. Great.

And I'd sit down. Now, do you have any heart trouble, cancer, diabetes, go down the list. And we'd have people, they couldn't buy a policy from my company because of their health conditions.

That wasn't good either. This needed to be fixed. So the government said, look, when you're first on Medicare, part B specifically, and it's still true today, you have a six month open enrollment period where you can buy any policy sold by any company in your state, no health questions asked, no nothing.

You're guaranteed acceptance. So you've got a six month window and that's still true today. Yeah. That's like critically important, right?

Yeah. It was just passed by the federal law and companies were all kind of freaked out. We got to take everybody. We're going to have line. And it really, it worked out.

It really was a non-event just cause they get spread around all the companies. But you know, it just, you should see the look on some of these people's face when, you know, they're, they're in really bad health and they're in a bad way. And then they're turning 65. They call us thinking, you know, we're not going to get them.

We're not going to take them. And then I explained that to them. And I said, not only are we going to get you the coverage, but we're going to get it at the best price because they have to take you. Which is all the more reason, by the way, when you're turning 65 and you're in that open enrollment, that six month period, if you know, you need to move while the getting's good because that time is when you need to get signed up before they ask any health questions.

Sure they do. And so that was 1990 big changes. Probably nobody noticed that was on Medicare, but people in the business like me, it was a big point.

Um, now I'm going to jump ahead to 2006. So what happened that's 16 years later, let's go over the Medicare part a deductible is now $952. The part B deductible is $124. And it's the same 20, 20 coverage after the part B deductible. And, but now people are all getting their stuff outpatient.

When you go get surgery. Now, a lot of stuff you don't check into the hospital. So there's really no part a it's all under part B it's 80, 20, and you better have some good supplemental coverage going in. Now, what they did in 2006 is they came out with Medicare advantage. Now it existed before that, but it was just in some test areas, Louisville, Los Angeles, San Francisco, a few places.

But in 2006, it was went all the way across the country. And what Medicare advantage is, is you the Medicare beneficiary by choice saying, I don't want original Medicare anymore. I want you to take the money that your government that you're spending on me on original Medicare, and I want you to send it to Humana or to UnitedHealthcare or to Aetna or to, and behind the scenes, these are big monthly payments or annual payments that are going from the government to these insurance providers. And now they're going to give you Medicare under a managed care plan.

That's with a private insurance company. It's different than original Medicare. And so since 2006, every person that's on Medicare had to make a choice. Do I want to stay on original Medicare, get my stuff straight from the government and buy a supplement? Or do I want to go on this what was new thing in 2006, Medicare advantage, and have to deal with the network, which for some people, that's fine. And then I'm going to probably get zero premium, because a lot of these cost nothing. So there's no cost. And then what you also get thrown in there is a drug plan, a part D drug plan.

So people get confused. And then it's bye bye to the regular Medicare deductibles. And now you've got smaller co payments on everything.

Then they throw in a little basic dental coverage, some of them and a little basic vision coverage, maybe even a gym membership, but there's a lot of enticing things. So the and it didn't start out that way in 2006. But they've really evolved into where there's now more people going on Medicare Advantage plans than there are staying on original Medicare and buying a supplement, or it's about 5050. It's pretty close. Well, the advertising, oh, my goodness, which is somewhat misleading, in my opinion, you know, seeing for what it is, in fact, actually, this morning, I got a call from what was said, Mocksville.

So I took it because I have so many friends in Mocksville. And it was somebody trying to sell me Medicare Advantage. And so that's just the meta, the insurance companies, you know, they're hammering on that stuff. And they're no doubt in my mind that there's a big reason that that a lot of these regulations, believe me, they're for the insurance companies and the insurance agents, you know, which I'm one of, and they're for the hospitals and doctors. And it's a whole big regulatory thing. So to answer the question, why is it so complicated?

Yet? Look, it's it's you're in the US you're dealing with it started out simple. And the government's providing health insurance. And the government's providing health insurance through taxes, for everybody 65 and over who there used to be a lot of people were dead by the time they were 65. Johnson, who signed it into law at 58.

He never even made it to Medicare. I checked the ages and stuff. And I'm looking through this history lesson. So you know, it's complicated. And there's a bunch of rules to try to keep only there's a bunch of penalties, enrollment periods, you got all kinds of things going on. And it's the government's attempt to try to regulate control, whatever you want to keep it paid for, right? Because obviously, hospital costs are nowhere near what they were.

Oh, yeah. And then there's this thing, I just want to get in before we run out of time, the Irma, you know, an Irma is the Medicare tax on well to do people that came out in 2007, the year afterward, after Medicare, and it wasn't too penal yet, right in the beginning, but then they just built on that to where now, that's a factor if you've got a higher income in retirement, that's going to be defined as more than 95,000 as a single and more than 190,000 as a couple filing jointly. If you're significantly or just a little bit above that, you're going to face Irma, which is more of the financing of Medicare. And so, you know, the whole gig here is, it's not necessarily bad that they made all these rules and regulations. They're pretty complicated. But the net result is you need a matrix to really make decisions, or you need haunts, or you need somebody like me, we work in all 50 States, and the District of Columbia, we now have zoom, we now have telephone, we have E applications, we don't have to come see anymore.

So I can serve people all over the United States and do. And I'll be glad to sit down and try to make sense of this mess. It is complicated. I mean, there's no, you know, but you can kind of understand that clearly, you know, that the government was trying to cover the costs, which skyrocketed undoubtedly, and they wanted to make sure that they, you know, currently could cover people, but by the same token, you know, the medical profession has changed. And oh my goodness, the pharmaceutical profession has changed. And so you can see all the changes happen that six years in this particular sector of the country. And then the fact that everybody's living, you know, into their 80s, and in some cases, 90s.

And all those things, you know, have got to be adjusted for. And so it's kind of cool to me to think, wow, you've got somebody here who, number one, isn't an outsider. In other words, Hans has specialized in this stuff since he was 18. He said this as we were getting ready for the show. Who else do you know that when they were 18 years old, was paying attention to this stuff? Well, I assure you, I was never, you know, when he was 40, he was still paying attention to this stuff. So he understands the ins and outs and the foundation of it, which is what you need, because really when it gets down to it, I like the idea of Hans, you know, my situation, you know what my income is, you know what my wife's situation is, and you know where I live, which all those things factor into whether or not you need a Medicare Advantage or you need Medicare with a supplement. And so all those things figure into, wow, you know, maybe it's more important you think about who's going to help you with this than necessarily which plan you need, because, you know, having with many advisors, plans succeed.

I couldn't agree with you more. So, again, this show is brought to you by cardinalguide.com, and at cardinalguide.com is where you can see how to get up with Hans. His book, of course, The Complete Cardinal Guide to Planning for and Living a Retirement has tons on this stuff, as far as Medicare, even a picture of Linden signing it there with Truman, you know, that's it's in the book. So we're hoping you'll go to cardinalguide.com for more answers. Great show, Hans. Thanks.

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