Brian Hanby describes the potential costs of health care for seniors, even with Medicare coverage, as a possible “nightmare” that could bankrupt them if they suffer from a serious illness or accident.
Financial advisors need to be intimately familiar with the ins and outs of Medicare and the additional insurance coverage that can be purchased before advising clients about the government insurance program, says Hanby, who has dealt with Medicare issues for more than a decade.
Although Medicare is a good government program that helps seniors manage health care costs, there are some situations where the costs still could be devastating without the proper planning, he says.
Hanby is a former financial planner who now heads Brian Hanby & Associates Insurance Agency Inc. in Payson, Utah, and specializes in Medicare issues.
“A lot of people do not realize how much health care can cost even with Medicare. It can be a nightmare if you have serious health problems,” he says.
For instance, Medicare Part B, which covers doctors visits, outpatient treatment and emergency room visits, has a deductible and co-pay. There is also a monthly premium of $104.90. The premium is higher for those whose income is more than $85,000 for a single person and $170,000 for couples.
After the $147 annual deductible is met, Medicare pays 80 percent of the Medicare-approved charges. The remaining 20 percent co-pay is paid by the individual and can amount to tens of thousands of dollars if a person needs extensive treatment.
“The problem is, there is no limit to the 20 percent,” Hanby says. “Imagine paying 20 percent of the cost of chemotherapy or open heart surgery or even a knee replacement. That is why only about 4 percent of the people have just Medicare A and B.”
Medicare Part A covers inpatient hospital costs. There is a deductible of $1,156 for each hospital stay of up to 60 days. The deductible is paid for each hospital visit unless it involves a return stay within 60 days for the same condition.
There are three options beyond the basic Medicare Parts A and B.
Medicare Part D, the newest part of Medicare, is a prescription drug plan, which has some co-pays and deductibles. It is purchased separately or as part of another insurance policy. The cost of co-pays and deductibles and which drugs are covered varies from one insurance company to another.
There also are Medicare Advantage Plans (sometimes called Part C) and Medicare Supplement Plans (sometimes called Part F or Medigap).
Advantage Plans are administered by insurance companies but with subsidies from the federal government. They usually include prescription drug coverage. There are co-pays that the individual is responsible for but unlike regular Medicare, there are limits to the out-of-pocket costs that vary depending on the insurance company. Fifteen million people have Medicare Advantage Plans, Hanby says.
Supplemental policies are the most comprehensive, but they can be expensive, as much as $2,000 or more a year. Supplemental plans cover most or all of the co-pays and deductibles and any expenses above what Medicare allows.
Three types of people want a supplemental plan: the ones who can afford the best coverage; the ones who hate paying deductibles and co-pays every time they visit a doctor or hospital, and the ones who are in poor health and are going to require extensive doctor and hospital visits.