How to Use Medicare Planning to Strengthen Client Relationships

Even for your wealthier clients, Medicare is perhaps the most important component of their health care planning in retirement. These clients may feel the need to look elsewhere for this advice if you are not providing it.

So said Christine Simone, CEO and co-founder of Caribou, a firm offering health care planning software for advisors, at the spring conference of the National Association of Personal Financial Advisors in San Diego.

Caribou’s planning tools cover not only Medicare planning but lifetime health care planning for clients. There are no commissions involved, and no insurance or other financial products are sold. Advisors set up the client in the software, but the client updates their own information in the system.

Using Medicare for Growth and Retention

Simone cited data compiled by Edelman Financial Group regarding Medicare planning as a tool for practice growth and retention. The data she cited shows that 22% of unadvised clients are seeking Social Security and Medicare advice. This ranks just behind retirement income planning (27%) and is tied with help in developing a financial plan.

She also cited data from E-Trade Advisor Services as to why millionaire investors leave their current financial advisors. The top two reasons were:

• Not being proactive in contacting the client: 53% of those surveyed cited this reason
• Not providing me with good ideas/advice: 48% cited this reason

Both of these reasons for leaving their advisor could be tied to advisors not being proactive in providing Medicare advice to current clients.

Original Medicare vs. Medicare Advantage

Simone discussed the two main options for clients to consider, as well as the advantages and disadvantages of each.

Original Medicare includes Parts A and B, as well as drug coverage, Part D.

Generally, a Medigap policy is recommended to fill in any coverage gaps not covered by Parts A and B. There are 12 lettered options for Medigap. It is important that clients choose a Medigap option during their initial enrollment period to ensure they won’t face medical underwriting to obtain coverage, unless they are granted a special enrollment period after a qualifying life event, like retirement.

Medicare Advantage (Part C) bundles everything together and generally includes Parts A, B and D. These plans are offered by private insurance companies, with the same company usually offering the drug plan as well.

Advantage plans often have lower fixed costs, but as Simone pointed out, there can be limitations, including which providers are included in the plan’s network. Advantage plans may also face an added risk in the form of higher out-of-pocket costs.

How and When to Talk About Medicare

Simone indicated that based on their data, clients generally want to start planning for Medicare at least two years prior to transitioning to coverage. She stressed that your client’s education about Medicare is important, but so is yours.

Statistics from Nationwide indicate that only 17% of all advisors are very confident in their ability to discuss health care planning issues with their clients.

Medicare.gov and SSA.gov are two excellent sources of information for both advisors and their clients. She suggested that advisors have “fun” educating clients and prospects using vehicles such as blog posts and webinars.

Supporting Health Care Decisions

Simone made the point that many Medicare cost estimating tools get the cost wrong by a wide margin. Often the variable that throws an estimate off is the client’s drug costs. She suggested using a more comprehensive tool that factors in all of the client’s health care planning variables.

One of the presentation slides illustrated how even comprehensive cost calculators can yield vastly different estimates with a slight change in one or two variables.

Even an incorrect estimate of only a few thousand dollars can lead to a reduction in disposable income of tens of thousands of dollars over the course of a client’s retirement. This can have a dramatic affect on the quality of their lifestyle in retirement.

When to Take Another Look

Simone discussed that the initial review of Medicare options and selection of a plan is not the end of your client’s need for support. In fact, it is just the beginning. She emphasized that the annual Medicare open enrollment period runs from Oct. 15 to Dec. 7 each year.

During open enrollment, it makes sense to review any changes to a client’s situation to determine whether they need to adjust their coverage for the coming year. Simone listed a number of events that should trigger a review. These include:

Household Changes

• New marriage or pending marriage
• Divorce, marriage annulment or the death of a spouse

Employment changes

• The client is planning to retire soon or has recently retired
• Reduction in the number of hours worked

Health Changes

• Additional medications or changing from one medication to another
• A new health condition diagnosis

Change in Residence

• Moving to a new home in a new zip code or county

Changing Employer Retiree Health Benefits

• Retiree health benefits are ending, either due to their initial eligibility for Medicare or the employer ceasing contributions to the plan
• Retiree health benefits are terminated by the employer (or former employer)

Other Issues

• Dissatisfaction with current coverage
• Desire for less expensive health coverage options
• The client wants to explore additional coverage options
• Loss of current non-Medicare health care coverage from an employer or through a spouse
• Changes in the client’s income

Reviewing Clients’ Coverage Annually

You should take advantage of the annual Medicare open enrollment period to review and optimize your client’s Medicare coverage each year, especially for:

• Clients who need to revise their Part D drug plan if they are on original Medicare.
• Clients who need to revise their Medicare Advantage coverage.
• Clients who are new to Medicare and are still learning about their coverage.
• Those with recent changes in their overall health, their medications, those who have relocated or whose income has fluctuated significantly.
• Any client who is unsatisfied with their coverage.

Simone noted that 70% of Medicare beneficiaries don’t review their drug plans annually and 95% are on a drug plan that is not optimized to their current prescription drug list.

Conclusion

Your clients want and need help in choosing the best Medicare option for their situation and in ensuring they are on the best plan for them each year. Referring clients out to a broker isn’t always a good solution. You have no oversight into the process, and some brokers may recommend products driven by commissions versus what’s best for the client. If you don’t provide this service, clients may look for another advisor who does.

(Image: Adobe Stock)