Don’t turn an 800-lb. gorilla into an elephant in the living room. In other words, mighty Medicare, the biggest component of U.S. health care — and the most complicated – needs to be addressed, discussed, and explained to clients.

Indeed, financial advisors have reason to be Medicare-articulate because as their client-base ages, health care plays an increasingly larger role. Consequently, decisions concerning medical insurance greatly affect their financial future.

So says Medicare expert Philip Moeller, in an interview with ThinkAdvisor. He is author of “Get What’s Yours for Medicare: Maximize your Coverage, Minimize Your Costs” (Simon & Schuster). If that title has a familiar ring, it’s because Moeller is co-author, with Laurence Kotlikoff and Paul Solman, of the bestseller “Get What’s Yours – Revised and Updated: The Secrets to Maxing Out Your Social Security” (2016).

The release of Moeller on Medicare was timed to coincide with the program’s open enrollment period, Oct. 15 through Dec. 7. Since Medicare is an annual plan, recipients have the option each year to re-evaluate their coverage and if desired, change it.

“Dante had nine circles of hell. Medicare has only five,” Moeller jokes in his book. That’s a reference to the inevitable frustration that comes with navigating the exceedingly complex, opaque system. Since it was created a half-century ago, Medicare has grown monstrously complicated with more and more intricate rules, more buzz words to learn, more decisions to make that affect costs.

Moeller, based in Richmond, Virginia, who has covered Medicare for decades, writes about retirement for Money magazine and conducts the online “Ask Phil” Medicare column for PBS NewsHour’s “Making Sen$e.”

Here are excerpts from our interview:

THINKADVISOR: What is “compressed morbidity,” and why is it your mantra?

PHILIP MOELLER: We’re compressing the period of physical decline into shorter and shorter periods. That is, you function at a very high level until you don’t. It’s a great victory for health care. I don’t want a long period of decline where somebody is wiping drool off my chin.

You note that for the last 30 years, so much has been written about retirement planning but that you’ve seen very little about health care planning.

That’s going to change because people will realize that health care should become an important part of the retirement tool. How can you have a great retirement if you don’t have good health care?

What are the most significant points about Medicare that financial advisors should impart to clients?

That unexpected medical expenses are the biggest retirement surprise most people have. So you need to pay attention. You have to sign up for it at the right time, make sure you purchase the right package of coverage for your situation and then use the insurance you’ve purchased. 

What if they don’t sign up at the right time?

You may end up facing what could be lifetime penalties or have no coverage at all for an extended period. 

What do folks need to keep top-of-mind concerning the part of Medicare that covers prescription drugs?

You need to pay particular attention during the [annual] open enrollment [period when coverage changes are permitted] because formularies [lists of covered drugs and prices] change every year. 

(Related: 11 Medicare Mistakes to Avoid)

What’s one big way advisors can help clients with Medicare?

There’s a series of high-income surcharges for Medicare premiums [monthly charges deducted from Social Security payments] called IRMAA [Income Related Monthly Adjustment Amounts]. These amounts can be increased substantially to the tune of hundreds of dollars for higher income individuals. But clients might be able to make some adjustments to minimize them. For tax-planning purposes, be aware that there’s a two-year lag. So, 2016 tax returns will determine 2018 IRMAA.

Why take the trouble to change Medicare plans during open enrollment?

It’s a great do-over opportunity. Health insurance plans change. Drug formularies change. Pricing structure can be different from one year to the next. People can certainly leave money on the table – and possibly end up with an inferior health care product – if they don’t take advantage of open enrollment.

Why should folks consider Medicare Advantage plans? These are private plans that are alternatives to “Original Medicare” Parts “A” and “B.” (“A” covers hospital care; “B” for doctor visits and outpatient care.)

They’re the cheapest by far. You can [even] get a Medicare Advantage plan and pay no premium at all. So if you’re really healthy and don’t take meds, it’s very tempting to get one. And [unlike traditional Medicare] some plans cover vision and hearing, and also health clubs. Maybe more than half of all new Medicare plans are Medicare Advantage plans.

What are the disadvantages to these?

They use health care provider networks. And that allows only a certain number of doctors, hospitals and caregivers in their networks. So if, at some point, the doctor you want to use isn’t in the directory, you could be a very unhappy camper. And if you’re in a hospital because of an emergency, some Advantage plans might say that hospital isn’t in their network – and therefore you won’t be covered. Provider directories can change during the year. That’s another reason to pay attention to open enrollment.

Are Medicare Advantage Plans subject to state rules?

No. Federal. Every year insurers look at the amount of subsidy that the government is offering to Medicare Advantage Plans; and based on the relative appeal of that subsidy and their book of business in various geographic areas, they’ll bid to offer coverage. This can change from year to year.

Part “D” of Medicare covers prescription drugs. Hillary Clinton says that if elected president, she’ll try to reduce outrageously high drug prices. 

That would be a very complex process. Drug companies need financial incentives to discover new drugs; but American consumers shouldn’t have to pay almost the full research and development costs for the global drug industry, as we do. The incentives should be shared more equitably with consumers around the world.

Why doesn’t Medicare itself act to lower prices?

It’s against the law for Medicare to negotiate with pharmaceutical companies to reduce drug prices. Insurers can negotiate; but Medicare, which is the 800-lb. gorilla in health care, can’t use its tremendous market leverage to negotiate lower pharmaceutical prices!

How does the Affordable Care Act affect Medicare?

One of the ways is a provision that will do away with the “donut hole” [coverage gap] by 2020. Everybody hates the donut hole because it’s confusing: Medicare Part “D” plans stop covering drug costs after payments reach a certain level every year and then resume after the recipient’s spending has reached a different set-level. Under the Affordable Care Act, the donut hole is becoming smaller and smaller.

How come vision, hearing and dental care aren’t covered by Medicare?

Those are services that everyone uses, so I’m not sure they can be considered under “insurance.” I believe that’s the reality.

Why aren’t white canes for the blind covered but general canes are covered? Where’s the logic?

Medicare has national coverage determination [NCD]. They also have local coverage determination [LCD]. They can have a different rule in one part of the country than in another. You end up with a layering of rules that makes it very difficult, if not impossible, [for them] to be used by the intended beneficiaries.

What about Medigap supplemental policies that Medicare recipients should buy to cover what Medicare doesn’t cover? It’s obviously important for advisors to inform clients.

Yes. The most popular Medigap plan is Part “F” because it provides the most comprehensive coverage. It’s also the most expensive. You can’t get a Medigap plan without getting Medicare Parts “A” and “B.” And Medigap has its own six-month window that begins after you get “A” and “B.” Make sure clients don’t miss the enrollment period because that’s when there’s guaranteed access to Medigap policies, and you can get the best prices.

What else should advisors know about Medigap?

Be aware of the underwriting terms of the Medigap policy their customer is purchasing because this has implications for the future: premiums are increasing. You have to shop for premiums – there’s substantial price variation. Be aware that Medigap doesn’t work with Medicare Advantage plans.

How important and advisable is it to get long-term care insurance, which is not covered by Medicare?

As long as the client can afford to sufficiently insure themselves, I think it’s stupid not to.

Please talk about the “hold harmless” rule.

This means that [most] Social Security beneficiaries who have Part “B” premiums taken out of their payments cannot be asked to pay a higher premium – when Social Security’s annual cost of living adjustment [COLA] is zero or small – because to do so would cause their benefits to decline. However, other Part “B” users, who are not held harmless, include higher income beneficiaries. Part “B” expenses are going up, and [the very modest] COLA [next year] [probably] won’t cover the increase in Part “B” expenses. Tax payers pay 75% of Part “B” expenses.

What about the hot issue of being admitted to a hospital vs. just being there for observation? What should advisors know?

Hospitals were re-admitting a percentage of patients after they received hospital care, and high re-admission rates were costing Medicare a lot of money. So Medicare hired paid auditors to look at admissions that seemed questionable and said that the hospitals had to pay penalties. However, if they admit people on an observational basis, the hospitals don’t pay penalties. But the rule says you need to be admitted for at least two midnights to qualify for subsequent insurance for a stay in a skilled nursing facility. Medicare has been trying to tweak this rule but hasn’t been able to figure out a solution.

What does this all that mean to advisors’ clients?

When they go into a hospital, they better darn well find out on what basis they’re being treated. Fortunately, a new law requires hospitals to tell you. This really makes a difference because if you’re admitted, Part “A” covers you. If you’re an observational patient, Part “B” covers you. Parts “A” and “B” don’t charge the same rates – one may be cheaper than the other – and they don’t cover treatments the same way.

Seems that advisors would be wise to get clients’ adult children up to speed about Medicare’s many facets.

Yes, it’s clear that they need to start helping their parents understand these things because eventually they’re going to pay the bills one way or the other.

You write of something new that’s upcoming: Curative medical care in hospice. Please explain.

It’s a pilot program starting next year in test markets where you’ll be able to go into hospice but still have efforts made on your behalf to make you better. In contrast, traditional hospice ceases medical care.  Ironically, [research] has shown that people in hospice live longer than those [hospitalized]. The environment is much less stressful.

You’re now 70. Do you personally have Medicare?

No. My wife [Cheryl Magazine] still works — bless her heart — and as long as you have employer insurance on an active plan, you never need to get Medicare. When my wife retires, I’ll switch to Medicare [from spousal coverage on wife’s plan] and will be able to convert with no penalties whatsoever.

You’re the Medicare expert; so you’ll surely do everything right!

Boy, I’d be embarrassed if I didn’t. 

— Related on ThinkAdvisor: