As a nation, we face significant challenges during this holiday season: a global pandemic, a strained economy, and a tense political climate. Yet, for the more than 60 million Americans over the age of 65, this holiday season may feel all too familiar as they are bombarded with Medicare mailers and advertisements. Choosing Medicare coverage has always been complicated. This year, the typical senior has nearly 50 Medicare plan options from which to choose, with little guidance or support.
For many seniors, choosing Medicare coverage is one of the most significant financial and health decisions they will make. With studies showing that the majority of seniors pay more than they need to for fewer benefits than they could have, financial advisors can play an important role in ensuring that their clients receive the right Medicare guidance.
Although a significant number of seniors make their Medicare selection decisions near the end of each calendar year, Medicare beneficiaries, and financial advisors who are not health insurance agents or brokers themselves, should be aware that there are a variety of enrollment periods throughout the year. During the Open Enrollment Period that lasts from January through March, for example, Medicare enrollees retain the flexibility to change their Medicare plans, particularly if they are dissatisfied with their coverage. Additionally, those who are turning 65 or who are new to Medicare have special enrollment periods that vary by person. There are a host of other enrollment periods that provide opportunities for groups of seniors to improve their coverage.
The risks of choosing the wrong Medicare coverage
A suboptimal Medicare coverage decision can pose enormous risks. Insurance carriers charge different premiums, even for policies with identical benefits. And many plans provide varying benefits; cover different doctors, hospitals, and prescriptions; and charge different prices to see those doctors, visit those hospitals, or fill those prescriptions. Importantly, these benefits, costs, prescriptions, and covered doctors change every year, and sometimes even more frequently.
Suboptimal coverage can also threaten hard-earned savings. Indeed, the all-in cost of Medicare coverage can be difficult to calculate. Even when monthly premiums are low or $0, individuals frequently face significant out-of-pocket exposure for various types of acute care and hospitalization. In 2021, some Medicare Advantage plans subject enrollees to $7,550 for in-network out-of-pocket costs, in addition to the Part B premium.
The Problem: Finding the Right Medicare Plans Is an Arduous Process
Seniors remain unaware of the full set of options available to them. Just as mutual fund documents are difficult for individuals to wade through, it’s similarly unwieldy to decipher hundreds of pages of plan benefit documents to understand the health and financial tradeoffs. Because of this complexity, many people opt to forego considering potential plan improvements each year, even when they could save thousands of dollars and receive more robust coverage.
Most Americans choose their coverage based on the advice of Medicare advisors, whether large corporations or small ‘mom-and-pop’ operators. Large Medicare organizations, known as “e-brokers,” tend to recommend only insurance companies that pay them commissions. In addition, most provide poor customer support, as evidenced by low customer retention. On the other hand, smaller Medicare brokers (and, of course: if you’re one of the smaller Medicare brokers, you may be one of the exceptions) frequently succumb to similar conflicts of interest. The smaller brokers may lack the technology and resources to find the best-fitting plan for their clients.
The government does not make the Medicare selection process simple. Federal and state regulations vary based on geography and circumstance, and enrollment periods are challenging to understand. Indeed, the “Medicare & You” handbook produced by the government is 124 pages long! The government even imposes lifetime penalties on individuals for missing certain sign-up deadlines. All of this is exacerbated by misinformation and opaque advertising in what by all appearances is a highly competitive market.
As trusted advisors to so many Americans, financial advisors can play a critical role in facilitating Medicare plan selection for their clients. Financial advisors should refer their clients to licensed Medicare professionals who search every plan available, not just those plans that pay advisors. That means working with Medicare advisors who recommend the right plan for each person, even when the Medicare advisor doesn’t have a financial relationship with the best-fitting insurance carrier.
Evaluating every Medicare coverage option available and making data-driven recommendations is challenging without the right technology. Financial advisors should further ensure that their clients’ Medicare advisors use high-quality data and technology that allows them to match clients with the right Medicare plan based on numerous factors tailored to the client’s needs.
With support from trusted financial advisors, seniors can be well equipped to choose the right plan each year without the hassle that most face today.
Cobi Blumenfeld-Gantz is the chief executive officer and co-founder of Chapter, a concierge Medicare advisor.