• Q3 2024: In Review

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  • Medicare Changes for 2025

    This article was written by Elaine Floyd, CFP® and modified from the original, found here.

    Medicare open enrollment is about to begin

    Over the next few weeks, Medicare beneficiaries will receive their latest plan documents, which explain how the plans will change for the coming year. Those on Original Medicare will want to check their standalone prescription drug plans, while those in Medicare Advantage plans will want to check those plans. If you want to keep your same plan, you don’t have to do anything. If you wish to make a change, you can sign up for a new plan anytime between October 15 and December 7. You can do this directly through the insurance company, through a licensed agent, or through Medicare. Once you are signed up for the new plan, Medicare will take care of dropping the former plan. Changes take effect January 1.

    There are several reasons to look more closely at your plan documents this year. They have to do with a number of changes being brought about by the Inflation Reduction Act as well as certain rule changes that could cause insurers to try to make up for the resulting hits to their bottom line. More than in previous years we could see higher premiums, higher copayments, drug formulary changes, and, in the case of Medicare Advantage plans, narrower provider networks and cutbacks in optional covered services such as dental. As the insurers evaluate their business prospects, there is likely to be wide variation in plan changes across the country depending on where insurers are located and how extensive they perceive the financial impact of the changes to be.

    As explained in this article, Relief From High Part D Drug Costs Starts in 2024, drug plan changes arising from the Inflation Reduction Act started in 2023 with the $35 monthly cap on insulin. In 2024 and 2025 out-of-pocket spending by the enrollee is capped at $3,300 and $2,000, respectively, with drug plans picking up most of these costs. As you can see from the chart below, in 2024 costs above the coverage gap—the catastrophic phase—were covered by drug plans (20%) and Medicare (80%). In 2025 the coverage gap is eliminated and the share of costs covered by drug plans in the catastrophic phase jumps from 20% to 60%, with drug manufacturers covering 20% and Medicare 20%. With insurers covering more costs next year, it is expected these costs will be passed on to enrollees—in one way or another.

    Source: Changes to Medicare Part D in 2024 and 2025
    under the Inflation Reduction Act and how enrollees will benefit

    This is why it will be more important than ever to know how your drug plan will operate next year—and to make sure the plan you have suits your individual needs based on the drugs you take (or not). It will NOT be business as usual for the drug insurers, so please be on alert to these developments. The cap on out-of-pocket costs certainly helps people with high drug spending, but if insurers raise premiums and copayments to make up for it, it could hurt everyone else. It’s also worth noting that drug plans are not required to adhere to the Medicare standard drug plan design; they may offer better, or different, coverage as long as it is actuarially equivalent.

    Related: Original Medicare vs. Medicare Advantage

    The overall generosity (or lack thereof) of a particular drug plan is nearly impossible to assess on the surface. Some may waive the annual deductible and instead charge higher premiums. Some may offer very good coverage for lower-priced generic drugs and make up for it by cutting back on coverage for higher priced drugs. So, rather than trying to analyze how much a drug costs and how much of it the plan will cover, the simpler way to analyze drug plans is to use the Medicare Plan Finder and just look at the out-of-pocket costs. Go to medicare.gov, click on “Find Health and Drug Plans” and follow the prompts. To find the best plan, you will need to enter the drugs and dosages you take. The tool will show a selection of plans and the out-of-pocket costs for each based on zip code and drug regimen. This really should be done every year, but especially this year.

    One more change taking effect in 2025 is a new midyear notification to Medicare Advantage policyholders. In response to a study by the Commonwealth Fund that found that three in ten beneficiaries in Medicare Advantage plans did not use any of their plan’s supplemental benefits in the past year, starting in 2025, Medicare Advantage plans will be required to send policyholders a personalized “Mid-Year Enrollee Notification of Unused Supplemental Benefits” in July. It will list all supplemental benefits the person hasn’t used, the scope and out-of-pocket cost for claiming each one, instructions on how to access the benefits and a customer service number to call for more information.

    If you would like Lane Hipple to review your Medicare plan documents prior to, or during, this fall’s open enrollment period, please call 856-638-1855 and request a Medicare Review.

  • Original Medicare vs. Medicare Advantage

    Understanding the Key Differences

    The second most important decision clients make with respect to Medicare—after they’ve decided to enroll in Medicare in the first place—relates to how they want to get their care. Faced with the choice of Original Medicare and Medicare Advantage, people often fail to understand that this decision can affect both the quality and cost of health care they receive both now and in the future.

    Original Medicare

    Thanks to aggressive marketing, Medicare Advantage plans have firmly established themselves as “the way to get your Medicare.” Completely lost in the shuffle is what Original Medicare actually is. It is health insurance, pure and simple, funded by the U.S. government. From its inception in 1965 Medicare Part B has always been based on the classic health insurance model where the insured pays a monthly premium (taken out of the Social Security check) and when a medical bill is incurred the patient pays an annual deductible plus 20% of the bill. The federal government pays the rest. Implicit in this is that the insured has complete freedom and control over how and where to get their health care. The only requirement is that the provider must accept as payment the amount Medicare has set for any given service (which may be less than what others will pay). Most providers do accept Medicare because it covers so much of the population.

    There has always been a place for private insurance in the Medicare world as a supplement to Medicare. Originally, these policies were designed mainly to cover prescription drugs. When Part D was instituted in 2006, an official public/private partnership was established specifically for drug coverage where private insurance companies offer various prescription drug plans with both the insurers and the federal government bearing the costs. Medigap policies remained viable, however, covering some of the key costs not covered by Medicare, mainly the Part A deductible and the Part B 20% coinsurance.

    A typical insurance plan under Original Medicare involves enrolling in Parts A and B, choosing a drug plan under Part D, and also choosing a Medicare Supplement (Medigap) policy. With Original Medicare a person is free to go to any doctor who accepts Medicare, and there are virtually no prior authorizations or denials of care. If a provider orders a service and Medicare covers it, it will be covered with little or no out-of-pocket costs to the patient.

    Medicare Advantage

    Medicare Advantage, originally called Medicare+Choice, was kicked off by the Balanced Budget Act of 1997. This expanded private health insurers’ involvement in Medicare and now encompassed the delivery of care, not just the payment of bills submitted by providers. Under Medicare Advantage, the government pays private insurers an annual “rate” theoretically equal to what it would cost to insure a person under Original Medicare. In exchange, the insurer promises to deliver all care under Parts A and B. This was deemed a cost-cutting and risk-mitigation effort by the federal government.

    The key difference for enrollees is that Medicare Advantage plans may offer additional benefits and lower premiums, but they also place restrictions on care. Patients must choose a provider within the plan’s network and many services and procedures must be authorized beforehand—and may even be denied.

    There is a lot to say, both good and bad, about how private insurers’ involvement in Medicare has evolved. Most people have an opinion about which is better, Original Medicare or Medicare Advantage, based on their own experience or what they’ve read. But it usually comes down to this:

    • If your main concern is high-quality care and you’re willing to pay higher premiums for the assurance of seeing the provider you want and getting the care you need, either now or in the future, go with Original Medicare.
    • If your main concern is costs and you’re willing to accept an insurer’s assessment of what you need in the way of care, go with Medicare Advantage, understanding that if your health worsens and you do need care, your costs could end up being higher.

    The following table, contributed by Rich Arzaga, illustrates the choice in a simple manner:

    Good Health/Low MedsFair Health/More Meds
    Priority on saving moneyMedicare Advantage
    (save ~$1,000 per year in premiums)    		Medicare Supplement Plan
    Priority on the health care experienceMedicare Supplement PlanMedicare Supplement Plan

    So there you have it in a nutshell. I wish we could say that your decision would not be binding, that you could start with one form of Medicare and switch to the other if you’re not happy with your plan or if your health care needs change. And to some degree that’s true. There are on- and off-ramps for both of these options. But the one hard sticking point in most states is the Medigap Open Enrollment period. If you don’t buy your Medigap policy within six months of enrolling in Part B, you will be subjected to underwriting and may be denied a policy. So, starting out with a Medicare Advantage plan with the intent of switching to Original Medicare after a few years may not be feasible.

    References and further reading

    The History of Medicare Advantage: From Inception to Growing Popularity

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  • SSA Sign-in Process to Change Soon

    In today’s digital age, managing your Social Security benefits has never been easier, thanks to the Social Security Administration’s (SSA) online services. Starting in September, they are transitioning to a new login system. Everyone who set up their Social Security accounts before September 2021 will need to log in with their username and password and follow the prompts to switch to a Login.gov account. People who already have a Login.gov account do not need to take any action.

    The Importance of Establishing an Online Account with the Social Security Administration

    Establishing an online account with the SSA offers numerous advantages that can simplify your financial planning and provide peace of mind. Here’s why it’s essential:

    1. Convenience and Accessibility

    Creating an online account allows you to access your Social Security information anytime, anywhere. Whether you’re at home, at work, or on the go, you can log in to view your benefits, update your information, and manage your account without needing to visit an SSA office.

    2. Real-Time Information

    With an online account, you can view your Social Security Statement, which provides a detailed record of your earnings history and an estimate of your future benefits. This real-time access helps you stay informed about your financial status and plan for retirement more effectively.

    3. Enhanced Security

    Having a Social Security account can also prevent fraud and identity theft, as only one account can be set up for each Social Security number. Once a person sets up their own Social Security account, it would be impossible for an imposter to set one up with the same number.

    4. Efficient Management of Benefits

    If you are already receiving benefits, an online account allows you to manage them efficiently. You can use it to access your benefit verification letter for loan applications or other purposes, update your direct deposit information, change your address, and even request a replacement Social Security card if needed. This streamlined process saves time and reduces the hassle of paperwork.

    5. Access to Additional Services

    Beyond managing your benefits, an online account provides access to a range of other services. You can apply for retirement, disability, and Medicare benefits online, check the status of your application, and receive important updates and notifications from the SSA.

    6. Educational Resources

    The SSA’s online portal offers a wealth of educational resources to help you understand your benefits and make informed decisions. From retirement planning tools to information on disability and survivor benefits, these resources are invaluable for anyone looking to maximize their Social Security benefits.

    Related: Social Security for Divorced Individuals

    7. Environmental Benefits

    By opting for online services, you contribute to environmental sustainability. Reducing the need for paper statements and forms helps decrease paper waste and supports eco-friendly practices.

    Conclusion

    Establishing an online account with the Social Security Administration is a smart move for anyone looking to manage their benefits efficiently and securely. The convenience, real-time access, enhanced security, and additional services make it an indispensable tool for financial planning. Take control of your Social Security benefits today by setting up your online account and enjoy the peace of mind that comes with having your information at your fingertips.

    my Social Security accounts are free, secure, and provide personalized tools for everyone, whether receiving benefits or not. People can use their account to request a replacement Social Security card, check the status of an application, estimate future benefits, or manage the benefits they already receive. For more information visit Create an Account | my Social Security | SSA.

    For more information about Login.gov, including their 24/7 customer phone and chat support, visit Help | Login.gov.

    Read the SSA press release here.

  • Mid-Year Retirement Planning Checklist

    Revisit, Revise, and Strengthen Your Financial Plan for the Remainder of 2024

    Planning for retirement demands a lot from us – and it’s not a one-time job. Whether it be our time, energy, or financial resources, our retirement needs are always evolving, and we must nurture our savings consistently over the years. If you’ve been taking a more hand-off, set-and-forget approach recently, the middle of the calendar year offers a timely opportunity to reflect, reassess, and make any necessary changes so that you can strengthen your financial foundation for the next six months and beyond. If you’re unsure where to start, try using this mid-year retirement planning checklist to kickstart the process.

    Mid-Year Retirement Planning Step #1. Know Where You Stand

    The first step of this retirement planning checklist isn’t focused specifically on retirement. That’s because, before you can strengthen your retirement plans, you must first gain a clear understanding of your overall financial situation. This can be a great source of anxiety, especially if you haven’t closely examined your finances in a while. However, you’ll feel better once you know exactly where you stand. Begin by collecting all relevant documents pertaining to your bank accounts, outstanding loans, debts, and any other elements contributing to your financial landscape. This will help you to compile a detailed list of your assets and liabilities, forming the cornerstone for subsequent steps in our retirement planning checklist.

    Mid-Year Retirement Planning Step #2. Clarify Your Retirement Goals

    Now that you know where you’re starting from, it’s time to determine your desired destination. That means you’ll need to clearly outline your retirement goals. Ask yourself questions such as when you plan to retire, what type of lifestyle you envision, and which activities you want to pursue. Establishing specific and measurable goals will help tailor your savings and investment strategies to meet your unique retirement objectives.

    Mid-Year Retirement Planning Step #3. Review and Adjust Your Budget

    If the first two steps were about determining where you’re beginning and ending, this step is dedicated to constructing a roadmap that will lead you to your final destination – your dream retirement! Regardless of how financially secure you believe yourself to be, adhering to a budget is imperative to remain on the right path to achieving your objectives. If you find yourself uncertain about where to begin or concerned about staying disciplined, there are numerous helpful apps and online resources available to assist you through each stage of the process.

    Mid-Year Retirement Planning Step #4. Maximize Account Contributions

    Now that you’re on your way, be sure that you’re taking advantage of any employer-sponsored retirement plans, such as 401(k)s or 403(b)s, by contributing the maximum amount allowed. These contributions not only reduce your taxable income but also grow tax-deferred until withdrawal. If you’re self-employed or your employer doesn’t offer a retirement plan, consider opening an Individual Retirement Account (IRA) and contributing regularly. Even if you think you have your contributions set, use this step in the retirement planning checklist to assess whether you can contribute more to max-out your options.

    Mid-Year Retirement Planning Step #5. Rebalance Your Portfolio

    While investing is one of the best ways to build wealth, it doesn’t come without risk. Take some time now to diversify your investment portfolio to mitigate risk. Consider a mix of stocks, bonds, and other assets that align with your risk tolerance and retirement timeline. Don’t forget to periodically rebalance your portfolio to maintain an optimal asset allocation and adjust it as needed based on changing market conditions and your risk profile. A financial advisor can be helpful as you navigate this step in the retirement planning checklist.

    Related: New Year, New Goals: Planning Your Money Moves for 2024

    Mid-Year Retirement Planning Step  #6. Fortify Your Emergency Fund

    No matter how prepared you are, there’s always the chance that something unexpected could happen, leaving you with a bill that you weren’t ready to pay. To help protect your retirement savings, it’s important that you have a solid emergency fund set aside. Generally, you want to aim to have at least three to six months’ worth of living expenses set aside in a liquid and easily accessible account. This fund will serve as a financial safety net, preventing you from dipping into your retirement savings in times of unexpected expenses.

    Mid-Year Retirement Planning Step #7. Plan for Healthcare Costs

    Health expenses often increase in retirement, making them one of the biggest threats to retirees’ financial security, so it’s crucial to plan for healthcare costs. Review your current health insurance coverage and consider supplemental insurance, such as long-term care insurance, to provide additional protection. If you’re not yet eligible for Medicare, use this step in the retirement planning checklist to explore other healthcare options to bridge the gap.

    Mid-Year Retirement Planning Step #8. Get Serious About Your Debt

    High-interest debt can erode your retirement savings, so strive to enter retirement debt-free or with minimal debt. To achieve this, develop a plan to pay off outstanding debts, focusing on high-interest debts first. This will free up additional funds for retirement savings and ensure a more stable financial future.

    Mid-Year Retirement Planning Step #9. Choose a Social Security Benefits Strategy

    Social Security benefits can significantly boost your income in retirement, especially when you get strategic about how you claim them to begin with. For instance, delaying the start of your benefits can lead to higher monthly payments. So, take some time to familiarize yourself with Social Security benefits and strategize the optimal time to claim them based on your financial situation. You’ll want to consider factors such as your health, life expectancy, and overall financial situation when deciding.

    Mid-Year Retirement Planning Step #10. Reassess Your Estate Plans

    Estate planning helps you make certain that your assets are distributed according to your wishes, minimizing potential complications for your loved ones. Don’t forget to update or create essential estate planning documents at this point in your retirement planning checklist. This includes wills, trusts, and powers of attorney. Life changes quickly at times, so it’s important that you regularly review and designate beneficiaries for your retirement accounts and life insurance policies.

    Remaining Hands-On with Your Retirement Plan Throughout the Years

    Retirement planning is a continuous process that requires careful consideration and adjustment. By taking time mid-year to use a comprehensive checklist, you lay the groundwork for an enjoyable retirement. If this list gives you anxiety and you would like assistance, reach out to us at Lane Hipple. This checklist is part of our Client Review process, and we are happy to review it alongside you. Remember, the key to successful retirement planning is proactive and informed decision-making.

    Illuminated Advisors is the original creator of the content shared herein. I have been granted a license in perpetuity to publish this article on my website’s blog and share its contents on social media platforms. I have no right to distribute the articles, or any other content provided to me, or my Firm, by Illuminated Advisors in a printed or otherwise non-digital format. I am not permitted to use the content provided to me or my firm by Illuminated Advisors in videos, audio publications, or in books of any kind.