1. Getting the Most From Medicare Benefits
Medicare is a topic that every person nearing retirement age needs to understand.
Today we’ll learn:
Why Medicare planning is a critical component of a retirement plan.
About the nuts and bolts of Medicare— Parts A, B, C, and D.
How to help make better informed decisions about Medicare.

2. Agenda Retirees Top Concerns Household Healthcare Costs Medicare
Medigap
Medicare Pros and Cons
Costs
Enrollment Period
Things to Consider
Resources
Let’s start with the basics—what’s Medicare?
A federal health insurance program for individuals age 65 and older or who are disabled. People can receive health care services under the Original Medicare Plan (Parts A & B) or by joining a Medicare Advantage Plan (Part C). Prescription drug coverage is also available—that’s Part D.

3. Retirees’ Top Concerns
Reduced Medical Benefits
Reduction in Social Security
Market Volatility
Insufficient Retirement Savings
Paying for health care is one of retirees’ biggest worries. In fact, the most commonly selected retirement threat was reduced Medicare benefits. That was ahead of reductions in Social Security, market volatility, and insufficient retirement savings.
0% % % % % % % %
Source: Principal Well-Being Index, Fourth Quarter 2013

4. Typical Household Health Care Costs
Average household spending
Age: 65-74
Average annual health care cost per person: $5,956
Percentage of total average annual spending: 12.2%
A retired couple with average prescription drug expenses would need $261,000 to have a 90% chance of meeting their health care costs during retirement.
Those are just out-of-pocket costs beyond Medicare coverage.
Employee Benefit Research Institute, October 2015.
In 2010, the most up-to-date figures available, the average amount spent on health care by couples age 65 to 74 was approximately $5,000. However, it’s estimated that those same couples will need $261,000 to have a 90 percent chance of covering all their Medicare premiums and out-of-pocket health care costs over their lifetimes. It’s not just about what health care costs today… it’s about what health care will cost tomorrow.
Source: Consumer Expenditure Survey, U.S. Bureau of Labor Statistic, September 2014

5. What is Medicare? Federal health insurance program
For people age 65 or older (or the disabled after 2 years)
Three main health care options: Parts A, B, and C
Prescription drug coverage is Part D
Medigap or Medicare Supplement
Let’s start with the basics—what’s Medicare?
A federal health insurance program for individuals age 65 and older or who are disabled. People can receive health care services under the Original Medicare Plan (Parts A & B) or by joining a Medicare Advantage Plan (Part C). Prescription drug coverage is also available—that’s Part D.

6. Eligibility Must be age 65 or older or disabled for 2 years
Must qualify for Social Security benefits (elected or not)
May be eligible based on spouse’s or former spouse’s eligibility
Now let’s talk about some of the most common questions we hear from folks getting ready to sign up for Medicare.
Typically, people qualify for Medicare benefits if they’re 65 or older and qualify for Social Security benefits (even if they haven’t elected Social Security benefits). They become eligible on the first day of the month in which they reach 65.
If they don’t qualify for Social Security, they may still be eligible based on a spouse’s, ex-spouse’s, or deceased spouse’s eligibility. Eligibility may also be based on government employment.

7. Medicare Parts A and B Original Medicare Part A (Hospital Insurance)
Hospital stays
Skilled nursing care
Home health care
Hospice care
Part B (Medical Insurance)
Doctors’ services
Outpatient medical/ surgical services
Diagnostic tests
Outpatient therapy
The original Medicare program was composed of two parts: Part A, which covers major medical hospitalization, and Part B, which covers everyday doctors’ services. Over time, each part has expanded to provide more coverage. Parts A and B are still the mainstays of coverage today.

8. Medicare Part D Prescription Drug Coverage
Helps cover prescription drug costs
Provided through private companies
Voluntary enrollment
Must be enrolled in Parts A and B
Enroll during the initial enrollment period
Medicare helps pay for insurance coverage for outpatient prescription drugs. Insurance companies and other organizations are approved by Medicare to sell this coverage.
Part D is voluntary, but enrollment in Parts A and B is required to enroll. Part D enrollment is required within 3 months of being eligible for Medicare or there’s a penalty. The one exception to that is if the enrollee has prescription coverage under an employer or union plan that’s at least as good as the coverage under Part D.

9. Medigap From a private insurance company
Premiums vary by company, coverage, and state
Generally doesn’t cover long-term care, vision, dental, hearing aids, eyeglasses, or private-duty nursing
Buy during a six-month open enrollment period
Any standardized Medigap policy is guaranteed renewable even with health problems
Medicare is a great benefit, but it doesn’t pay for everything. That’s why most people get some kind of gap coverage. If without supplemental coverage from an employer or union an enrollee may buy a Medigap policy from a private insurance company. This will help pay for many expenses not covered by Medicare, as well as deductibles and coinsurance.
These policies are regulated by state insurance authorities within guidelines set by the federal government. But since they come from different companies, they may provide different levels of coverage. The premiums can also vary by company, coverage, and by state. And, Medigap doesn’t cover everything; for example, long-term care, vision, or dental care aren’t covered. Neither are hearing aids, glasses, or private-duty nursing.
There’s a six-month open enrollment period to buy a Medigap policy. This starts the first month you reach age 65 or over and have enrolled in Medicare Part B. If not enrolled during this time, enrollment may be restricted later and policy choices limited—or it might be at a higher price.

10. Medigap Ten standardized plans: A, B, C, D, F, G, K, L, M, and N
Plans cover costs like copayments, coinsurance, and deductibles
Standardized plans must all offer the same benefits
Cost is usually the only difference between policies (with same letter sold by different companies)
Some states (MA/MN/WI) are standardized in a different way
Read slide.

11. Medicare Part C Medicare Advantage
Coverage provided by private insurance companies
Get all of coverage in Parts A and B
May also get other benefits to help cover costs
“Bundled” version of Original (a la carte) Medicare
Cost vary by plan
Another option for supplemental coverage is Medicare Part C, also known as Medicare Advantage. This program is still a part of Medicare, but coverage is provided by private insurance companies. For that reason, pricing and some aspects of the coverage may vary.
Those who join a Medicare Advantage plan get all of the medical coverage covered by Part A and Part B. In addition, some plans may provide additional benefits to help cover costs.

12. Medicare Part C Medicare Advantage Plans HMOs PPOs PFFS SNPs MSAs
Health Maintenance Organizations
Preferred Provider Organizations
Private Fee-for- Service Plans
Special Needs Plans
Medical Savings Accounts
There are five types of Medicare Advantaged Plans. They’re:
HMOs
PPOs
Private Fee-for-Service Plans
Special Needs Plans, and
Medical Savings Accounts
Each plan type has its advantages, so careful consideration is required before deciding on which type of plan is best.
Currently 83 percent of Medicare Advantage Plans are either HMO or PPO Plans.

13. Original Medicare Pros and Cons
Flexibility of doctors and hospitals
Pick and choose the coverage:
35% of Americans purchase Medicare Supplement
Portability
Cons
80/20 Plan:
Unless Medigap is purchased
More coverage = higher premiums
No dental or vision
Let’s take a look at some of the pros and cons of Original Medicare. Some of the advantages are that Original Medicare allows you to pick and choose what coverage you like. Want more coverage? Then pay more in premiums. Another advantage is that most doctors and hospitals will accept Original Medicare as a form of payment. This allows more access to health care across the county. If enrolled in Original Medicare and then move to another state, the coverage remains the same.
Some of the disadvantages of Original Medicare is that it’s an 80/20 plan. Which means that Medicare only picks up on average about 80 percent of the cost of care. You’re on the hook for the rest of the 20 percent unless you’ve purchased an additional Medigap plan. This additional coverage results in higher monthly premiums. Also, dental and vision insurance is not included in Medicare and has to be purchased outside of original Medicare.

14. Medicare Advantage Pros and Cons
All health care in one package
Dental and vision can be included
Out of pocket maximums can be included
Cons
If doctor or hospital is out of network:
Additional out of pocket cost may be incurred
Limited to PPO or HMO networks:
Unless a PFFS, SNP or MSA plan is purchased
Limited to what the plan allows
Now we’ll look at some of the pros and cons of Medicare Advantage. Medicare Advantage is the private insurances companies version of Medicare. It has all the same components of Original Medicare, but the U.S. government allows private insurance companies the ability to add additional benefits and sell them to the general public.
Some of the pros of Medicare Advantage are that you get all your health care benefits in one package. These Medicare Advantage Plans can also include dental and vision insurance along with other health care benefits not available in original Medicare. Another advantage is that some Advantage plans can include out of pocket maximums.
Some of the cons to Medicare Advantage plans are that if you go to a doctor or hospital that’s out of network additional out-of-pocket expenses may be incurred. In order to keep costs within the plan you must go to a doctor or a hospital that’s in your HMO or PPO network. Another disadvantage is anything outside of what the plan allows will cost additional out-of-pocket expenses.

15. Original Medicare Costs
Part A = $0 premium (if met 40 quarters)
Part B = $134 (higher if subject to IRMAA)
Part D = $43 (natl. avg. monthly premium)
Medigap = $200 (natl. avg. monthly premium)
Cost are one of the biggest questions on individual's mind. Let’s take a quick look at those associated with Original Medicare. If like most individual's modified adjusted gross income (MAGI) is below $85,000 for filing individual and under $170,000 for married filed jointly, then the above scenario is typical. We’ll discuss what happens later in the presentation if the MAGI is higher than those numbers.
Part A is premium free if enrollees earned for 40 quarters. Part B, for those below the MAGI levels will be around $134 per month. If buying a prescription drug benefit, the Part D premium will be in the neighborhood of $30 to $60. The amount will be determined by how robust coverage is and also the state lived in.
The final option is purchasing a Medigap policy. Only about 35 percent of Americans purchase one, and depending on the plan purchased and how much of the Original Medicare coverage gap is covered, the costs can range from $50 to $250 a month. These cost can also vary by state.
Purchasing all of the above and looking to cover as much of the Original Medicare gap as possible, is around $350 per month per individual. Again these costs can vary by state.
Total = $377 monthly premium
May not include co-pays or deductibles
(Depends on your Medigap Plan)

16. Medicare Advantage Costs
Part C base premium = $134 (higher if subject to IRMAA)
Additional plan premium = $37 (natl. avg.)
Medicare Advantage costs vary as well. Depending on the extra benefits added on to base coverage, and the state, will determine the overall monthly premium costs incurred. The base amount paid will be determined by the Part B premium. For most individuals that’ll be $134 a month. Then depending on the additional benefits, deductibles, out-of-pocket maximums, and state will determine the final costs paid for Medicare Advantage.
Total = $171 monthly premium
Varies by state and by plan
IRMAA: Income-related monthly adjustment amount

17. File Individual Tax Return
Part B Premium
Modified Adjusted Gross Income
File Individual Tax Return
File Joint Tax Return
Monthly Payment
$85,000 or less
$170,000 or less
$134.00
$85,001 – $107,000
$170,001 – $214,000
$187.50
$107,001 – $133,500
$214,001 – $267,000
$267.90
$133,501 – $160,000
$267,001 – $320,000
$348.30
Above $160,000
Above $320,000
$428.60
Part B premiums are based on reported personal income. The higher the income, the larger the premium until it reaches the maximum amount.
(Read from slide for specific examples.)
Important note:
If not enrolled when first eligible, premiums will increase 10 percent for each full 12 months until enrolled.

18. Part D Premium Prescription Drug Plans Premiums set for policy offered
If income above certain limit, an income-related adjustment amount (IRMAA) is paid in addition to the premium
There may be an additional premium cost
Read from slide

19. File Individual Tax Return Additional Monthly Premium
Part D (prescription drug plan) Premium
Modified Adjusted Gross Income
File Individual Tax Return
File Joint Tax Return
Additional Monthly Premium
$85,000 or less
$170,000 or less
$0.00
$85,001 – $107,000
$170,001 – $214,000
$13.00
$107,001 – $133,000
$214,001 – $267,000
$33.60
$133,001 – $160,000
$267,001 – $320,000
$54.20
Above $160,000
Above $320,000
$74.80
Part D premiums are determined by the policy offered. If personal income is above a certain level, premiums will be subject to an adjusted amount paid in addition to the standard premium.
Please note there’s a late enrollment penalty at any time after the initial enrollment period ends.
MAGI from 2016 Tax Return.

20. Costs Part D (“Donut Hole”) Coverage gap
Pay higher cost while in the “donut hole”
Between $3,750 and $5,000 total retail prescription costs
Assistance for those who reach the donut hole in 2018:
65 percent discount on brand-name drugs
56 percent discount on generics
Much has been said about the Part D “donut hole.” The Part D drug benefit provides initial coverage up to a certain level. But in most cases there’s a gap in benefits before coverage kicks in again. This gap is known universally as the donut hole.
The health care reform law of 2010 gradually closes the coverage gap. From 2006, when Part D began, through 2010, falling into the gap meant having to pay 100 percent of the costs. But starting in 2011 and forward, it’s much less. It works like this:
Once total drug costs (what the plan pays plus the deductible and copays) exceeds a certain amount ($3,310 in 2016) from the beginning of the calendar year, the gap opens. While in it, the enrollee pays 45 percent of the cost of brand-name drugs and 58 percent of the cost of generic drugs (in 2016). (The 55 percent discount on brand-name drugs is paid by the companies that manufacture them. The 42 percent discount on generic drugs is paid by the federal government.) In subsequent years, these costs will reduce until, by 2020, enrollees will pay no more than 25 percent of the cost of any drug in the gap. Enrollees get out of the gap when out-of-pocket costs during the earlier part of the year (deductible and copays) plus anything paid for drugs in the gap reach a certain dollar limit ($4,850 in 2016). Manufacturers’ contribution for brand-name drugs also counts toward this limit. But the government’s contribution for generic drugs doesn’t count toward the limit. If the limit is reached, catastrophic drug coverage kicks in automatically and the plan pays 95 percent of remaining costs.

21. Real Life Examples of Original Medicare Costs
Georgia , retired, age 65, $70,000 annl. income
Original Medicare with Part D and Medigap:
$0 for Part A
$134 for Part B
$34.00 for Part D
$180 for Medigap plan
Medigap covers co-pays and deductibles for Part A,B, and D.
She pays for dental, vision, and any long-term care costs
Read Examples
$348 total premium per month

22. Real Life Examples of Medicare Advantage Costs
David, retired, age 68, $60k annual income:
Medicare Advantage with prescription drug coverage.
$0 for Part A
$134 for Part B portion
$37 (Ave. plan premium)
His out of pocket expenses include:
Co-pays on the services he uses and prescriptions
He pays for dental, vision, and any long-term care costs
He pays out of pocket for services outside his network
Read Examples
$171 total premium per month

23. Real Life Examples of Medicare Advantage Costs
Patricia, retired, age 71, $120k annual income:
Medicare Advantage with prescription drug coverage.
$0 for Part A
$ for Part B portion
$37 (Ave. plan premium)
Her out of pocket expenses include:
Co-pays on the services she uses and prescriptions
She pays for dental, vision, and any long-term care costs
She pays out of pocket for services outside her network
Read Examples
$ total premium per month

24. Initial Enrollment Period
If receiving Social Security:
Auto enrollment at age 65
7-month enrollment window:
3 months before 65th birth month
3 months after 65th birth month
If enrollment deadline is missed:
Must wait until general enrollment period: January 1 through March 31 of each year
Now that we’ve covered the basics of Medicare coverage and costs, here’s how to enroll:
Parts A and B - If eligible when turning 65, sign up can happen during the 7-month period beginning 3 months before the month one turns 65. This includes the month you turn 65 and ends 3 months after the month you turn 65.
If not signed up for Part A and/or Part B when first eligible, it’s possible to sign up during the General Enrollment Period between January 1 and March 31 each year.

25. Special Enrollment Period
If covered by a qualified group plan:
Sign up for Part A or Part B anytime
During an 8-month window after employment ends:
Qualified group coverage is lost
COBRA and Retiree plans:
Don’t count as qualified coverage
If covered under a group health plan based on current employment, there’s a Special Enrollment Period to sign up for Part A and/or Part B any time as long as the enrollee or the spouse (or family member if the enrollee is disabled) is working, and covered by a group health plan through the employer or union based on that work.
An 8-month Special Enrollment Period to sign up for Part A and/or Part B that starts the month after employment ends or when the group health plan insurance based on you current employment ends, whichever happens first.
Note: COBRA and retiree health plans aren't considered coverage based on current employment. Recipients aren’t eligible for a Special Enrollment Period when that coverage ends. This Special Enrollment Period also doesn't apply to people with End-Stage Renal Disease (ESRD).
Important additional notes:
If not enrolled in Medicare Part B during the initial enrollment period, the enrollee will have to wait until the next general enrollment period to do so--between January 1 and March 31 each year.
The Medicare Part B premium may go up 10 percent for each 12-month period that a person could’ve enrolled in Part B but didn’t.

26. Medicare Supplement Enrollment
A one-time, 6 month Medigap Open Enrollment period:
Starts the first month you’re 65 and enrolled in Part B.
This period provides a guaranteed right to buy any Medigap policy regardless of health status.
Once this window is closed, can change plans but underwriting may occur.
Another thing to keep in mind with enrollment in Medicare Supplement plans or Medigap Plans. A Medigap plan may be purchased without underwriting when enrolled during the first 6 months of age 65 AND having been enrolled in Part B. If this window is missed, or there’s a desire to change plans during the annual enrollment period from October 15 to December 7, it might be subject to underwriting.

27. Prescription Drug Enrollment
During the Initial Enrollment Period (7-month window)
Can change plans each year from October 15 to December 7
Late enrollment penalty:
Multiply 1% of “national base premium” times number of months without coverage
Enrolling in Prescription Drug Plans is fairly similar to Medigap Plans. It must happen during the initial enrollment period or face a penalty. There may be a penalty if enrolled at any time after the period is over, and there’s a period of 63 or more consecutive days without Part D or other creditable prescription drug coverage. That penalty is: multiply 1 percent of “national base premium” times the number of months without coverage.
You can change your prescription drug policy each year during the fall window from October 15 to December 7.

28. Open Enrollment Period
Once covered under Medicare:
Enrollees can change plans:
Original Medicare to Medicare Advantage
Medicare Advantage to Original Medicare
Medicare Advantage to Medicare Advantage
Part D to another Part D
Annual Enrollment Period is from October 15 to December 7.
Every year there’s an option to switch policies during the open enrollment period from October 15 to December 7.

29. Enrollment Period Summary
When to enroll
Considerations
Initial Enrollment
Special Enrollment
Open Enrollment
7 mos around 65th birth month
Within 8 mos
October 15 to December 7
Avoid penalties for late enrollment
Still working and covered beyond age 65
Shop for better plans, lower cost, more coverage
Enrolling in Prescription Drug Plans is fairly similar to Medigap Plans. It must happen during the initial enrollment period or face a penalty. There may be a penalty if enrolled at any time after the period is over, and there’s a period of 63 or more consecutive days without Part D or other creditable prescription drug coverage. That penalty is: multiply 1 percent of “national base premium” times the number of months without coverage.
You can change your prescription drug policy each year during the fall window from October 15 to December 7.

30. Things to Consider Evaluate health care needs
What plans cover needed services
Have any other coverage
Costs: premiums, deductibles, and co-pays
Choice of doctors or hospitals
Prescriptions drug coverage
Quality of care
Convenience
Travel
A few things to consider when deciding which Medicare Plan to enroll in. They can include but aren’t limited to:
Health care needs
What plans cover needed services
Have any other coverage
Costs
Choice of doctors or hospitals
Prescription drug coverage
Quality of care
Convenience
Travel

31. Resources
Center for Medicare & Medicaid Services medicare.gov
State Health Insurance Assistance Program medicare.gov/contacts
Eldercare Locator eldercare.gov
Social Security Administration socialsecurity.gov
If you have questions there are several resources: the Center for Medicare and Medicaid Services, the Social Security Administration, and the State Health Insurance Assistance Program.
Before we finish, does anyone have any questions?

32. Thank you
Thank you for attending this presentation.

33. The content of this presentation is based upon reliable source material and is believed to be correct as of the time of creation; however is subject to change at any time without warning. Investors should consider consulting with their tax professionals prior to making decisions due to their unique circumstances..
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