Optimizing Medicare Decisions

Commentary November 18, 2024 at 04:09 AM
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What You Need To Know

  • Start with the needs.
  • Look at health concerns.
  • Think about lifestyle.
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As a financial professional, guiding your clients through the complexities of Medicare is crucial to helping them achieve long-term financial success.

With the intricacies of Medicare plans, coverage options, and associated costs, being equipped with strategies that align with your clients' unique long-term retirement goals can help make you their go-to resource.

Selecting Medicare Plans

1. Evaluate the client's health status and medical needs.

The first step in choosing the right Medicare plan is to assess your client's current and anticipated health care needs in retirement.

Review health history: Analyze your client's past and current health conditions, prescription drug requirements, and preferred health care providers. Clients with chronic conditions may want to consider Medicare Advantage Plans that offer additional coverage for specific services.

Consider future health care needs: Understanding potential future medical expenses is crucial. For instance, if a client has a family history of specific illnesses, it might be beneficial to choose a plan with comprehensive coverage to avoid unexpected out-of-pocket costs.

Review plans: Compare the benefits and drawbacks of Original Medicare (Part A and Part B) with Medicare Advantage Plans (Part C). Clients who prefer flexibility in choosing health care providers might lean toward Original Medicare, whereas those who prefer a bundled plan with additional benefits might opt for Medicare Advantage.

2. Understand the financial implications.

It's important to evaluate the financial aspects of each Medicare option, with consideration to premiums and deductibles.

Key considerations include:

Medicare Part D (prescription drug plans): It's important to assess whether your client's current medications are covered under the plan. High medication costs can significantly impact a client's long-term retirement plan.

Medigap plans: If a client opts for Original Medicare, a Medigap policy (also known as Medicare supplement policy) may be necessary to cover additional out-of-pocket costs. You may want to help clients compare the cost and coverage of different Medigap plans to select the one that best fits their retirement goals.

Annual changes: Medicare plans and costs can change annually. Schedule regular reviews of your client's Medicare coverage to ensure it continues to meet their needs and financial goals.

3. Incorporate client lifestyle and preferences.

A client's lifestyle and preferences can influence their choice of Medicare plans.

Travel considerations: Clients who frequently travel within the United States or abroad might benefit from plans that offer broader coverage. Original Medicare, often supplemented by a Medigap plan, might be more suitable for clients who travel often, as some Medicare Advantage plans have limited networks.

Provider preferences: Some clients may have long-standing relationships with certain health care providers. Verifying that the selected Medicare plan includes these providers in its network is essential.

Convenience and simplicity: Some clients may prioritize the simplicity of managing their health care. Medicare Advantage plans, which often bundle services including vision, dental and prescription drugs, may appeal to clients seeking a more streamlined approach.

Paying for Medicare Plans

Your clients can use various sources of retirement income to pay Medicare costs.

Social Security benefits: Most Medicare Part B premiums are automatically deducted from Social Security benefits. You should factor this into a client's overall retirement income planning.

Required minimum distributions (RMDs): For clients over age 73, RMDs from IRAs and other retirement accounts can be used to help pay Medicare premiums.

Pension income: If applicable, pension income can also be allocated to cover Medicare expenses. You should review your client's pension plans and help them structure payments to align with Medicare costs.

Create a pension-like income: Review your client's assets to see if you can find an income stream suitable to pay for health care costs. Evaluate the annual out-of-pocket costs for health care, then determine the amount of assets needed to generate that income.

Products such as annuities with living benefit riders may be a way to align assets to pay for out-of-pocket liabilities such as health care costs.This is a strategy known as liability-driven investing.

Cost-Saving Considerations

Review and optimize prescription drug coverage (Part D): Prescription drug costs can be a significant financial burden, but clients can potentially save money by taking a close look at coverage options.

Annual plan review: Encourage clients to review their Part D plan annually during open enrollment. Drug pricing can change, and switching plans could result in substantial savings.

Promote preventive services: Medicare covers a range of preventive services at no cost to the beneficiary.

Schedule regular checkups: Encourage clients to schedule and attend regular checkups and screenings. Early detection of health issues can lead to lower overall health care costs.

Planning Is Key

You play a pivotal role in helping your clients navigate Medicare, ensuring they make informed decisions that align with their financial goals.

By employing these strategies, you can provide valuable support that enhances each client's financial security in retirement.

Tyler De Haan is director of advanced sales at Sammons Institutional Group.

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