The 1.3% Solution

     I just got an email from Social Security notifying me there is a message for me on My Social Security. I signed up for the online account a couple of years ago, and now all my records are available on the website. B has not opened a My Social Security account. She still gets her information on paper, in the mail, which will probably arrive sometime next week.

     The message included a statement of my new benefit amount for 2021, before deductions, with a list of deductions for Medicare and taxes, and then the amount to be deposited in my bank account. Why, it's just like getting a paycheck! There's your gross salary, then all the  deductions, then your take-home pay, which is a whole lot less than your salary.

     Social Security benefit is going up by a paltry 1.3% for next year. The basic premium for Medicare Part B is going up by 2.7%, from $144.60 to $148.60. So our take-home will be something less than a 1.3% increase. Then if your income is above $88,000 for an individual, or $176,000 for a couple, you pay a surcharge, and that's going up, too. Or ... what Social Security giveth, Medicare taketh away.

     The threshold for being taxed on Social Security benefits is not going up. It remains at $25,000 for an individual and $32,000 for a couple. Anything above that is subject to federal income tax.

     These tax limits were set in 1985, back when you could live on $25,000 a year. If the limits had been adjusted for inflation, Social Security beneficiaries would only begin to pay tax starting at $60,500 for an individual and $77,400 for a couple. And so today, what Social Security giveth, the IRS taketh away.

     For comparison, in 1985 the premium for Medicare Part B was $15.50, not $148.60. However, there was no Part D to cover drug costs back in 1985. So that's definitely an improvement.

     Another point to consider. When you get health insurance through an employer your premiums are tax deductible. When you pay them on your own, such as through Medicare, they are not tax deductible -- making them more expensive.

    We may complain about the small increase in benefits -- that may actually prove a decrease for some people because of higher Medicare costs. Still, as we all know -- but don't always appreciate -- Social Security is a vital financial asset for retired Americans. What makes the asset so valuable? For one thing, the value of Social Security does not gyrate up and down like an IRA or 401K that's invested in the stock market. For another, as paltry as a 1.3% increase is, it's still a better rate than what you'd get from, say, a 10-year government bond which pays an even more paltry 0.8%.

     A bond is not exactly the same thing as Social Security, but it provides a relevant point of comparison. The bond rate determines the rate for an annuity. According to Jeff Sommer in the New York Times, the average 65-year-old man receives a Social Security benefit of $1,375 per month. An annuity paying him that much would cost almost half a million dollars. So that $1,375 per month is the equivalent of a half-million-dollar asset.

     There's one problem with Social Security. The system pays out more than it takes in via taxes -- a problem made worse by Covid, which has thrown a lot of people out of work, which means they are not contributing payroll taxes. The Social Security trust fund is projected to run out of money in less than 15 years. If nothing is done, benefits would be cut by more than 20%.

     We all assume that something will be done to shore up the system. But who knows what it might be. Some people suggest raising the retirement age to 68 or 70. Others want to raise the payroll tax, currently at 12.4% (half paid by the employer, half by the employee).

     Currently the tax only applies to incomes up to $137,700. President-elect Joe Biden has proposed adding the payroll tax to income above $400,000. That would raise some extra money. However, it would create a donut hole for incomes between $137,700 and $400,000, which some people might consider unfair. But more importantly, applying the payroll tax to income over $400,000 would only close about half of the deficit. 

     And Biden is also talking about expanding benefits by setting higher cost-of-living adjustments and increasing benefits to lower income retirees and to widows and widowers. Who would argue against giving poor people more money? But wouldn't it just make the Social Security funding problem worse? 

     It seems there are no easy answers. But there's one thing we'd all agree on: Social Security must be preserved and if anything, strengthened.

Part 2: Review Your Supplemental Plan

     I read last week that our Social Security increase for next year will be 1.3%. Will that be enough to even cover the increase in our health-insurance premiums?

     Last week I decided to review our medical insurance, because open enrollment is about to start. And I thought maybe I could find a way to save a little money. My wife and I have the same supplemental Medicare plans. Plan N. But we have them with different companies, and it turns out I pay $190 a month, while she's only paying $120 per month 

     That didn't seem right to me, so I decided to look into it. I also wanted to see if Plan N is still the best option for me. I checked several websites and found that the cost of the premium depends on the insurance company, as well as where you live (but B and I live in the same house!), your age, your gender, your marital status, and the way you answer some key health questions.

     I found out that men pay a higher premium than women. Is that fair? It seems to me that women go to the doctor more often than men, so they should pay a higher premium. But maybe men have more expensive problems like heart attacks and strokes.

     And that brings up the fact that men don't live as long, either. According to the Social Security life expectancy table, the average life expectancy of a female, at birth, is fully five years longer than it is for a male. Isn't that the ultimate sex discrimination? Even if a guy like me makes it to age 70 (by avoiding dangerous jobs, the military and risky male behavior) his life expectancy still falls more than two years short of the average woman.

     Anyway, I really couldn't get any specifics on the websites, so I called my Supplemental carrier, which is United Health Care through AARP. Yes, there was a phone tree, but before long a friendly young woman answered the call, and she seemed fairly knowledgeable.

     First, we went over the various plans. I have original Medicare Supplemental Plan, not a Medicare Advantage plan. It's slightly more expensive. But I don't have to stay in network. I like having the option of going to any doctor I want -- especially if I end up getting some complicated disease that my local doctors don't know too much about.

     There were less expensive plans, and one that was more expensive. Plan F. The less expensive plans didn't cover enough and made me feel insecure. Plan F pays for more deductibles, as well as "excess charges above Medicare approved amounts." But Plan F is another $80-some a month. I decided it wasn't worth it. I'll stick with Plan N.

     Then I asked the United Health Care woman about the cost. Was I eligible for any discounts? I mentioned that my wife has Plan N with another carrier and pays much less than I do. She took a minute to check for me, but then came back and told me: No, you've got the lowest rate.

     So I said: I'm married now. I wasn't when I first signed up for the plan. Do you offer any marital discount that could save me some money?

     No, she said. If my wife and I were on the same plan we'd each get a 5% discount. But just being married doesn't qualify for the discount when my wife has her insurance from a different company.

     The young woman went on to explain that I already have one discount, one that I got when I first signed up. But the discount decreases every year. I started out at age 65 with a 39% discount. But every year since then the discount has gone down by 3%.

     I thought about that for a second. In other words, I asked, in addition to whatever usual price increases are involved, the insurance company tacks on an extra 3% every year just because I get older?

     She laughed. Well, I guess that's another way to put it.

     B is four years younger than I am. So if her insurance company works the same way, that accounts for 12% of the price difference between her policy and mine. Add in the male surcharge, and probably a few other hidden fees, and -- bottom line, I'm just keep my same Supplemental Plan.

    Together, B and I pay almost $1000 a month for medical insurance, when you count Medicare, Plan B, Plan D, plus a relatively modest dental plan. But I think it's worth it, when you consider how expensive medical care can be. But clearly, anyone who suggests that Medicare for All is the same as free medical care doesn't know what they're talking about.

      Anyway, I guess the only real strategy to save money is to keep away from the doctor. So I'll eat my vegetables, get some exercise, avoid too much stress, get plenty of sleep, wear my mask and keep my distance. And the hardest part . . . try not to do anything stupid!

Part 1: Medicare Just Got Cheaper

     Okay, Medicare is not getting cheaper for everybody. But it is for us, because there's been a screw up. Yes, it turns out that Medicare can make a mistake, so it's best to pay attention.

     Medicare uses your 2018 tax return to figure out your Medicare premiums for 2020. If you make too much money, there's a surcharge on both your Medicare Part B and also Part D. For example, if you're single and make over $87,000 and less than $109,000, you pay a $57.80 surcharge every month for Part B, plus an extra $12.20 for Part D.

     B and I got married in 2018. Once you're married, as a couple you can make up to $174,000 per year before the first surcharge sets in.

     All this year I've been paying my basic Medicare premiums, no problem, no complaints. But this past week I decided to review our medical insurance, because open enrollment is about to begin.

     I thought I'd start by checking our Medicare payments, and that's where I found the problem. B's Medicare premiums were more than mine. She was being hit with a surcharge. That didn't seem right. We filed a joint tax return in 2018, so shouldn't our payments be the same?

     I searched the Medicare website for an answer then, finding nothing relevant, called the main Medicare number. After negotiating the phone tree and waiting 40 minutes on hold, I finally got a very nice man on the phone.

     It was a little hard to explain, but after 20 minutes of going back and forth he discovered the problem. Medicare never received B's 2018 tax information from the IRS. Medicare had mine for 2018. But not hers. Even though we filed jointly, and they were on the same tax form!

     Therefore, Medicare was using B's 2017 taxes to base her Medicare premium. She was single in 2017, and her income was over the threshold of $87,000. So she was getting a surcharge.

     The man from Medicare sent me to the IRS to straighten out the issue. After another 20 minutes on hold, I got a real person who . . . turned out to be no help. The IRS representative said I should talk to Social Security, and gave me the main number.

     By that point I could not abide sitting on hold on the telephone for another 40 minutes. So I got an idea. I found the number for our local Social Security office. A real woman answered the phone. I told her my problem, and she put me through to the man who handles these things. Surprise, surprise. He had access to our records!

     He could see the problem right away. Yes, Medicare was using B's 2017 tax form instead of the 2018 tax form to base her Medicare rate. So he told me to send him a copy of our 2018 Form 1040 along with a copy of our marriage license. And he would take care of it.

   "You'll get a refund," he said. "But it may take a while because it has to wend its way through the bureaucracy." So if everything works out, we'll get a refund of several hundred dollars; plus, B's Medicare premium should go down for 2021, because they'll be using the correct information, now from our 2019 tax form. A double win!

     He said the situation should be corrected for next year and beyond. But I should double check. When I receive the notice for my 2021 Medicare premium -- sometime around Thanksgiving -- I should check and make sure the premiums are based on our 2019 married-filing-jointly tax forms.

     The takeaway? Sometimes it's a good idea to check Medicare, especially if you've had a life-changing event in the last few years. Things change, and what you had when you turned 65 may be different by now. Also, if you have to deal with the government, don't call the main 800 number. Find a number for your Social Security office. That might save you some time and aggravation.

     We all love Medicare. And it usually works pretty well. But -- as they say -- pobody's nerfect, not even the government.

What Does Medicare Cost?

     I was surprised when I read in a recent poll from eligibility.com that about half of the people surveyed believe Medicare is free. Is that what you thought?

     We who are retired know it's not true. So for the uninitiated -- or the forgetful -- here's a run-down of how much Medicare costs us.

     Part A covers hospitals, nursing and other medical services. This is the part that's free -- as long as you've met the work-related requirements to qualify.

     Part B covers outpatient care and medical supplies. The standard rate for Part B is currently $135.50 per month. The rate is graduated by income, so higher earners pay more. If an individual earns more than $85,000, or a retired couple makes over $170,000, the rate is $189.60 per person per month. And it goes up from there. For individuals who earn more than $160,000, or couples above $320,000, the rate is $433.40 per person. For most of us this charge is automatically deducted from our Social Security benefit.

     Part B also comes with a deductible of $185.00. And after the deductible is met, Medicare only pays 80%, leaving us responsible for 20% of the cost.

     Parts A and B do not cover drug costs. So there's a Part D for prescription drugs. The cost for Part D varies depending on how comprehensive the plan is, but the average cost runs around $33 per month. And again, higher earners pay higher premiums.

     Since Medicare doesn't pay for everything, most retirees also purchase a supplemental plan of one sort or another from a private insurance company. How much it costs varies with how much coverage you get and the company you buy it from. Just by way of example, I get mine through AARP and United Health Care, and currently pay $184.34 per month. B has her own supplemental plan through Cigna. Some retirees (not us) can still get this coverage from their old employer.

     You can also sign up for a Medicare Advantage Plan which typically packages Part A and B with a drug plan. These offerings are often less expensive, but may restrict which medical providers are available to you.

     One Medicare pitfall is that if you don't sign up right away, at age 65, you face penalties that will increase the premiums for the rest of your life. If you're already enrolled in Social Security at age 65, then you will automatically be enrolled for Medicare Parts A and B. But if you're not taking Social Security, then it's up to you to sign up. (However, if you're still working and covered by an employer plan, you may be able to delay Medicare without the penalty.)

     There is another option for people who can't afford to pay for Medicare. Medicaid provides health coverage for certain low-income people, including the elderly and people with disabilities. Check out HHS.gov to you want to see if you qualify.

     One last thing to consider in planning for medical bills in retirement is that neither Medicare nor Medicaid covers everything. Medicare doesn't cover dental work, glasses or contact lenses, over-the-counter drugs, or long-term care. Other policies are available to cover at least some of these expenses. But long-term-care insurance is increasingly hard to find and complicated to negotiate.

     Who said there's no free lunch? Some attribute the quote to Depression-era New York City mayor Fiorello La Guardia, others to economist Milton Freeman. Still others say it goes back to the 1800s practice of offering a free lunch in bars to entice people to buy more drinks. Who knows? But at least so far, there's no free medical care.

Medicare for All?

     I think I'd be in favor of Medicare for all . . . if somehow we could make it work. But it's important to realize that, despite the claims of some politicians, Medicare for all is not the same as free medical care for all.

     And Medicare is not that simple. There's Part A which we get for free. That covers hospital stays and a few associated health services. However, there is a deductible of $1,364, as well as some caps on benefits.

     Part B covers, typically, 80 percent of outpatient care and medical supplies. This costs us $135.50 per month, per person -- or more. If you're single and your income is over $85,000 per year, you pay $189.60 per month. And it goes up from there, as a person's income level goes up. And Part B also has a deductible of $185 per year.

     And neither of these pays for drugs. For that we need a drug plan, which we can get through a Medicare Advantage Plan or else a supplemental Part D plan. The cost for the drug plan varies, but ranges from $30 to $40 per month and up. (Again, higher premiums begin for singles with incomes over $85,000 a year.). And the drug plan also hits us with a deductible.

     Plus, Medicare Part B only pays 80 percent of outpatient costs. For the other 20 percent we need some kind of supplemental insurance, which could be Medicare Advantage or something else. Also, Medicare does not pay for glasses, dental bills, hearing aids, non-prescription drugs. Some supplemental plans cover a portion of these costs, others do not.

     So you see, Medicare is not free. It doesn't cover everything. And it's also complicated.

     Still and all, most people on Medicare are glad to have it (I know I am) . . . because while it doesn't provide medical care for free, it does make it reasonably affordable. And besides, other medical insurance options are very limited for us since we're no longer working.

     Do you think most younger Americans would like to be on Medicare? Would they be willing to pay for it? Would they support the mandatory enrollment that would be necessary to make it viable?

     And then, what happens if people have Medicare, but they don't sign up and pay for a supplemental plan? What happens when they have a real medical problem, and their 20 percent comes to several thousand dollars?

     The obvious problem is that most people want top-notch health care, but they don't want to pay for it. The Sanders single-payer experiment in Vermont, for example, failed when people found out it would raise the payroll tax by 11.5 percent and the income tax by 9 percent.

     And a recent poll from the nonpartisan Kaiser Foundation found that some 70 percent of Americans approve the idea of Medicare for all that would "guarantee health insurance as a right for all Americans." But when the question included the reality that any new system would raise taxes, or that people would not be able to keep their current insurance or could potentially face delays in medical tests, the level of support fell to just 30-something percent.

     I hope you don't expect a simple retirement blog like mine to provide all the answers. I sure don't have them. But if you're interested, you can go on to read Bernie Sanders's Medicare for All Explained, and related articles in the New York Times. À votre santé!

The 0.3 Percent Solution

     The Feds just announced the increase for Social Security benefits for next year. The increase is 0.3%. So in 2017 the average beneficiary will see an extra $4 in their monthly benefit.

     Of course even that measly $4 -- and more -- will likely be taken away from recipients to pay for Medicare. So far as I know, Medicare has not announced any increase for next year. But wait . . .

     I can't say that this post is primarily designed to be informative; it's simply meant to further the discussion.

     The typical reaction I've seen around the Internet reads something like this:  I worked all my life and paid Social Security taxes for almost 40 years, and now Social Security gives us virtually no increase to help us pay our bills. They say the reason is because there's no inflation, mostly because the price of gas has gone down. Well, that's great for truck drivers and uber drivers. But what about the seniors who actually rely on Social Security? Food prices are going up, medical costs keep climbing, and pretty much everything else (except for gasoline which we don't even use much anymore since we don't commute) is more expensive than last year. What are we supposed to do?!?

     Well, to revive an old Clintonism, I feel their pain. I just paid the latest installment of the tax bill on my condo. I noticed it went up $100 from last year. That  doesn't seem too bad. Except it comes to 3.5% -- or more than ten times the rate of the Social Security increase. My sewer tax went up from $300 to $330 for the year. That's a 10% jump!

     Honestly, I do not follow my own budget that carefully, so I can't really portray myself as a good judge of how much "real" inflation is, compared to the official figures. I do remember the 1970s, when prices seemed to increase every month. Inflation these days is nothing like that. And yet, we're planning a trip to South Carolina in a few weeks. The hotel prices seem huge! And prices on airbnb and homeaway don't look much better. Predictions for the death of inflation may be premature.

     My medical insurance has not increased. And when I moved to Connecticut from New York, the bill for Medicare advantage actually went down by a few dollars. That's good news!

     But then I went to the doctor yesterday for my annual physical. It seems that, instead of raising prices, Medicare may be stealthily cutting services. I used to get an annual physical, complete with blood tests and an electrocardiogram. But now, I'm told, Medicare will only pay for a Wellness visit. The Wellness visit does not include a blood test for cholesterol, triglycerides or other factors -- unless you already have a history of heart disease. In other words -- in a switch from the previous situation -- Medicare will pay for a pre-existing condition; but it will not pay to diagnose a new condition.

     That seems kind of backwards, doesn't it? Fortunately, I don't have a lot of medical issues, so it's not a big problem for me. But the doctor did prescribe one drug. I'm going to pick it up at the pharmacy later today. I'm holding my breath, wondering how much it's going to empty my pocket.

News on Medicare and Social Security

     Last week's agreement on the federal budget brought two new developments for retirees -- one about Medicare, the other on Social Security.

     According to a report in the Washington Post, the premium increases for some Medicare customers will not be as punishing as previously reported (see my Oct. 13 post Who Pays More for Medicare).

     Under the first proposed plan, most people who do not have their Medicare premium deducted from their Social Security benefit would have seen a 52 percent increase in their premium for Medicare Part B, from $104.90 to $159.30. (The exception: individuals making over $85,000 a year, or couples making over $170,000 a year, who pay more.) Medicare recipients who do have their premiums deducted from their Social Security payment were "held harmless" -- in other words, they were protected from any increase at all.

     The reason for the disparity: a federal rule says that Medicare rates in a given year cannot increase more than Social Security checks. Since Social Security benefits are not going up next year (because inflation is judged to be zero) Medicare charges cannot go up. That meant people who are on Medicare, but who do not receive Social Security, had to pick up the difference. That would have punished approximately 16 million people, or 30 percent of Medicare recipients, with the 52-percent increase..

     The new agreement still holds harmless anyone who has Medicare deducted from their Social Security. But it limits the increase for the rest to some 17 percent, raising their premium from $104.90 to about $123 per month. The extra money to cover the difference will come from "a loan from the U.S. Treasury to the Medicare trust fund." The loan will presumably be paid back over five years with a $3 per month "surcharge" embedded in the new premiums.

     Please don't ask me to explain any further details, because I do not have the wherewithal to dig deep into the weeds of Medicare financing. Do any of us? But personally, as one of the 16 million, I do appreciate the financial shenanigans that will save me $30-some per month next year.

     And speaking of shenanigans, the New York Times reported yesterday that the federal budget deal also closes two "loopholes" in filing for Social Security. One is called the "file and suspend" strategy. This maneuver allowed two-income married couples to boost their benefits. One spouse would file for benefits, then immediately suspend them, allowing them to collect while the spouse's benefits continued to grow at the Social Security rate of about 8 percent a year.

     The other loophole was known as "restricted application." This allowed married people who reach full retirement age (66 for most of us) to collect a spousal benefit while their own benefits continued to increase -- again, at the 8 percent rate.

     Starting in 2016 filers will no longer be able to utilize these strategies. But don't worry. If you took advantage of either of these methods in the past you will be grandfathered in. Apparently, there aren't that many -- something less than 1 percent of Social Security recipients used one of these strategies to boost their benefits. But, presumably, it will save the Social Security system billions of dollars in future obligations. And, assuming the file-and-suspend people were not the neediest among us, that's probably not a bad thing.

Who Pays More for Medicare?

     Medicare premiums are going up 52 percent next year. But only for 3 out of 10 people. The other 7 beneficiaries have no increase at all.

     Before you panic, here's the background. The experts have told us that we should wait as long as we can before signing up to take our Social Security benefits, even to age 70 if we can last that long.

     The idea is that the longer you wait, the bigger your monthly payment. You can start Social Security as early as age 62, but you take about a 25 percent pay cut compared to what you'd get at full retirement age, which for most of us is 66. Or you can hold off past your regular retirement age and collect a bonus. Every year you wait, up until age 70, you get almost 8 percent more in your check.

     Of course, you give up the income in the meantime; but still, an 8 percent raise every year. Where else can you get that?

     And then Social Security pulls a fast one on you.

     First of all, the government says there will be no increase in Social Security benefits next year. Benefits are tied to inflation; and the government claims there has been no inflation for 2015, so the increase for 2016 is zero.

     But medical costs have gone up, and Medicare needs more money. So, as reported in USA Today, as well as a follow-up article, here's what happens next year. Everybody who's already receiving Social Security benefits -- who has Medicare payments deducted directly from Social Security -- will be "held harmless" from an increase, because Social Security is not going up.

     But everyone else on Medicare will face premiums that will be raised high enough to make up the difference. Those are the people who will pay the 52 percent increase. That includes people on Medicare who have not yet signed up for Social Security, as well as anyone who first enrolls in Medicare next year. Altogether, about 30 percent of Medicare beneficiaries will pay the higher amount.

     So for example, if you're on Medicare and make less than $85,000 a year as an individual or $170,000 as a couple, you paid $104.90 this year for Part B of Medicare. For 2016 you will also pay $104.90.

     But if you've taken the so-called expert advice to delay Social Security, then your Medicare premium will jump from $104.90 to $159.30 -- for the 52 percent increase.

     There are a few ways to get around the increase, as outlined in this Kiplinger report. One way is to quick, sign up for Social Security before the end of October. But before you do, make sure you know what you're giving up, which is all those future 8 percent annual increases.

     So of course I'm one of the 30 percent. Am a sucker for not signing up for Social Security sooner? Well, here's what I'm trying to remember. The reason for the increase is because there's a mandate that premiums cover 25 percent of the actual cost of Medicare. Think about it. Those of us on Medicare only pay a quarter of the actual cost of our care.

     Even at $159 a month, we're still only paying a little more than a quarter of the cost of what the medical insurance should really be. If you'll still be paying $104.90, you're getting an even better bargain, paying less than 25 percent of the actual cost.

     So I can't complain (even though it sounds like I am). But as mystery writer Michael Connelly says, "Can't complain, because nobody listens."

     Here's a chart of 2016 premiums, courtesy of Medicare.gov, Boston College and USA Today:

I've Got Medicare ... Now What?

     As I described over three previous posts -- summarized in Tips for Enrolling in Medicare -- I recently signed up for Medicare.

     I never had to try to sign up for Obamacare. I've been spared that exercise because I became eligible for Medicare just in time.

     Before Medicare, I had my own medical insurance that I purchased through a professional association I belonged to. That's one of the several problems the Affordable Care Act promises to solve: Until recently it was breathtakingly expensive for early retirees to buy individual health insurance ... if they could get it at all. When I left work and had to get my own health insurance, I could not find an insurance company that would carry me. The only way I got coverage was to search around and find an association I was eligible to join, then purchase a plan through the group. It still was expensive, but at least I was able to get it.

     Anyway, a couple of months ago, I signed up for Medicare, along with the AARP Medicare Supplement plan through United Healthcare. But, like many people, I didn't really know what I was getting into. Who reads all that material they send you?

     So I'm here to report some preliminary results -- not on how much it costs, but on what benefits you get.

     I went for my annual physical a few weeks ago. It was free (to me anyway), just like my old plan. I received a flu shot, also for free, just like my old plan.

     Subsequent to that, I had to fill a prescription -- nothing that resulted from my physical, but a drug I've been taking on occasion for the past year or so. How do I say this? It's a performance-enhancing drug, if you get my drift. I'm not embarrassed about it. After all, women use plenty of cremes and lotions and "estra-fem" type products. So why can't men take advantage of modern medicine for their own issues? Anyway, my old private insurance plan offered a modest discount for a bottle of six pills. It cost around $140. However, the AARP drug plan did not cover the drug at all. The same prescription cost me $194 ... which seems ridiculous, but what are you gonna do? Maybe the AARP plan doesn't cover this drug because the issue doesn't come up that often among elderly Medicare patients?

     Anyway, for almost two months, I've been suffering a terrible cough, with some mild pain in my chest. I actually told my doctor about it during my physical. He was not concerned; he said it might be a touch of post-nasal drip, or else a bit of acid reflux. He suggested a couple of over-the-counter remedies.

     Over the past three weeks it got worse, until it finally broke out into what seemed like a cold. Except I didn't get a stuffy nose, just a horrible sore throat and congestion in my throat, and a cough that wouldn't let me get to sleep at night without taking something like Benadryl or NyQuil.

     So I finally decided to go back to the doctor. Saw him on Tuesday. Did I have a copay? I asked. No copay, I was told. My old plan would have required me to pay $35.

     The doctor measured the oxygen in my blood and listened to my chest and peered into my throat. His conclusion: my lungs are fine; I have post-nasal drip, aggravated by the change of season, the dry air and possibly a slight infection.

     But the point is, he prescribed two items for me. One is an antibiotic. The Medicare drug plan paid a portion of the bill. I paid the rest, which was $10. He also prescribed a special cough suppressant. The Medicare drug plan did not cover that at all. Cost to me: $25.

     So what am I to make of my new Medicare plan? It may be too early to tell, but preliminary results say that the coverage for doctor visits is very good, but the drug coverage leaves a lot to be desired. Does this square with other people's experiences? I guess I'll find out more as time goes on.

Tips for Enrolling in Medicare

     I don't pretend to be an expert on Medicare. But I recently went through the process of signing up for Medicare, so I'm trying to pass along some basic information . . . to get you started.

      The first thing to know about Medicare is that . . . it's not just you, it is, indeed, incredibly complicated. As the doyen of senior blogging, Ronni Bennett, said on Time Goes By, "We all know that Medicare is not perfect. My biggest pet peeve is that it is way too complex. There are so many rules to understand both when signing up for Medicare for the first time and when choosing or updating a supplemental plan that hardly anyone can understand it without help."

     So here's some help.
    
     As you'll find out if you go to the Medicare website, there are several parts to Medicare. (For your further reading pleasure, Medicare also offers an information booklet.)

     Part A covers hospital bills -- in general, 80 percent of the cost. Part A is free. If you're already enrolled in Social Security, you should be enrolled in Medicare automatically. If not, you have to do it yourself. Some people receive mailings and reminders from their current insurance company to sign up for Medicare. But not everybody gets those mailings. So don't be complacent. When you turn 65, the age you're eligible to go on Medicare, make sure you get signed up, and if no one is doing it for you, then call Social Security at 1-800-772-1213, or Medicare at 1-800-633-4227. (Yes, there's a phone tree, but if you persist you can get a real person.) Or, go to an office in person. Or, you can enroll in Medicare online. That's what I did. That part is not so terribly complicated.

     Part B covers your doctors bills, ambulance service, some medical equipment and mental health services. You sign up separately for Part B, and it costs, currently, $104.90 per month (or more, if your income is over $85,000 a year, or $170,000 for a couple). If you don't sign up for Part B when you first become eligible, you may be subject to an ongoing penalty if you sign up later on. So, do it now!

     Part C . . . wait, see below.

     Part D covers your drugs.You must sign up for Part D separately, and the cost varies depending on your plan and your income. And again, if you don't sign up for Part D when you first become eligible, you may be subject to an ongoing penalty if you want to sign up later on.

     Okay, now here's the thing. Medicare does not pay for all your medical bills when you get sick or injured. Typically there is a deductible for you to pay. Then after that, Medicare pays 80 percent of your bills, with some variations for different procedures. Therefore, it's recommended you buy some sort of Medicare backup plan . . .

     There are two basic options for your Medicare backup plan. One is to purchase a Medicare Supplement plan, also called a Medigap plan, from a private company. It covers most of what Medicare doesn't cover, like the other 20 percent of your hospital and doctor bills. Advice: If your old employer offers a retirement health-care plan, that's probably your best bet. Many people who don't have the employer option go to AARP, where they get a Medicare Supplement plan through United Healthcare.

     And now ... Part C. This part of Medicare is actually something separate. It is a Medicare Advantage plan. This is an insurance plan supplied by a private company that works directly with Medicare. The Medicare Advantage plan consolidates all your other Medicare options into one overall plan.

     So, with a Medicare Supplement plan (which does not count as Part C), you pay separately for Part B, Part D, for the supplement plan itself, and for any other insurance you might want -- like a dental insurance plan, for example.

     With a Medicare Advantage plan, or Part C, you pay one bill that includes your drug plan, and also typically offers a dental plan. However, the Medical Advantage plan is either an HMO plan, or a PPO plan. With an HMO, you must go to a doctor in the insurance company's network. With a PPO you also go to a doctor in network. You can go to a doctor that's out-of-network, but the insurance will only cover a smaller portion of the bill that Medicare doesn't pay -- leaving you exposed to unknown and perhaps very high medical costs.

     Advice: If you want the convenience of a Medicare Advantage plan, and you want to stay with your current medical practice, you should call your doctor's office and make sure the doctor is in the network of that particular plan.

     Personally, when I was signing up, I thought I'd choose a PPO plan. I'd go to my doctor on a regular basis. But then, if I needed some kind of specialist that was out-of-network, I could go, and I'd just have to pay more.

     Then I found out that my current medical group does not accept the Medicare Advantage plan of my old insurance company, which was HIP. That would mean I'd be paying out-of-network fees every time I go to the doctor.

     It didn't make sense to me that my medical group would accept regular HIP; but not accept HIP Medical Advantage. But that's the policy. And my medical group is the biggest, most comprehensive medical group in my area. I did not want to change.

     Then I researched the AARP offering, through United Healthcare. My medical group accepts the United Healthcare Medicare Supplement plan. But, for some reason, it does not accept the United Healthcare Medicare Advantage Plan. Therefore, again, with the Advantage plan every time I'd go to the doctor, I'd be paying out-of-service fees.

     So I chose the AARP United Healthcare Medicare Supplement Plan. I do not have my insurance wrapped up into one policy. I pay a separate bill each, for Medicare Part B, Medicare Part D, and the Medicare Supplement plan. And then, since my supplement plan does not include dental, I purchased a separate dental plan through AARP, with yet another bill, for another $40-some per month.

     I pay four separate bills. The good news is that altogether they are about a third less than what I was paying through my old medical insurance plan, as of two months ago.

     I have yet to actually use Medicare. I haven't been to the doctor yet. I sure hope the process becomes a little easier.

     Meantime, I know there are lots of people with more Medicare experience than I have. So if I've got anything wrong here, I hope you will correct me. Or if there's anything to add, which could help the Medicare neophyte, I hope you won't hesitate to append your advice. Thanks and good luck!

I Apply for Medicare, Part II

     The other day I received an envelope in the mail from the Social Security Administration. I opened it up. I got my Medicare card!

     I feel like I've been accepted into an exclusive club. Better than AAA; better than AARP; better than my America the Beautiful senior pass to the National Parks.

     Now, if I only knew what Medicare covers. And what other medical coverage I should get.

     I went through one round of trying to figure out how Medicare works, apart from Parts A and B, as I recounted in I Apply for Medicare, Part I. I did learn some information; but not enough to make me think I could find an appropriate backup plan.

     So I phoned my sister. She's older than I am and has been on Medicare for a couple of years -- and I know she's used the system, so I thought I could ask her how it works.

     "You haven't gotten any information in the mail?" she said, incredulously. "I think I got several mailings. But to tell you the truth, I wasn't paying attention." She knew she was going on her husband's medical plan to supplement Medicare. It's a good plan and, as she said, "It's almost free," and so she didn't research other options. Some people are lucky. And she was happy getting whatever she would get.

     My ex-wife had mentioned that she'd gone to an insurance agent specializing in Medicare plans. The agent had assessed her situation, come up with several options for her and explained the details of both coverage and cost. I googled Medicare insurance agents in my town. The nearest one is a 40-minute drive. Maybe I'd go see him, I said to myself, but let me try to figure this out on my own. I really didn't want to have to drive that far, on speculation that the agent would know what he was talking about, and know what would be best for me.

     Of course, I'd neglected to ask my ex-wife what plan she'd decided on. So I called her back. She told me she's using a United Health Care plan she got through AARP. That was the one recommended to her by her agent; and so far it was working just fine.

     Meanwhile, I'd received two thick envelopes from my own insurance company. I opened them up; and the contents were both intimidating, and discouraging. Oh man, I really didn't want to read all that mumbo jumbo!

     Nevertheless, I gamely opened up the package and started to read through the material. There were several HMO plans. But I want to reserve the option to go to a doctor outside my network, in case I ever need a certain specialist. So I turned to the PPO plans.

     I tried to compare PPO I and PPO II and PPO III and PPO "High Option." I focused on PPO II and PPO III, figuring I didn't want either the cheapest or the most expensive plan. But it looked to me, as I inspected the columns of benefits, that PPO III is more expensive but offers fewer benefits. That couldn't possibly be right. So I threw up my hands and gave up. For the moment, anyway. I knew I'd have to go back to it.

     Then I thought, I should contact AARP. If it was good enough for my ex-wife, it would probably be good enough for me,

     I went to the AARP website. After searching through the site (the insurance plans are hard to find) I found a reference to several AARP Supplemental plans. And I also found a recommendation for Medicare Advantage plan. What's the difference between Medicare Supplement, and Medicare Advantage? I didn't know. I'd also seen reference to Medicare Gap plans. What are they?

     I decided to call the 800 number. I then spent about 45 minutes on the phone with a woman who explained all about the AARP Medicare Advantage plan that was available in my area. There are several advantages, she explained. It takes the place of Medicare Part C. It includes the Part D drug plan and some dental insurance and some other ancillary benefits.

     Then she finally allowed as how the Medicare Advantage plan is an HMO plan. "Oh," I said. "That means I have to stay in a network?"

     "Yes, that's right. But we have a lot of doctors in the network."

     "Wait a second," I said, as it finally dawned on me. "Are all Medicare Advantage plans HMO plans?"

     "Yes, that's right."

     "So how can I tell if my medical group accepts this AARP Medical Advantage plan?"

     "Oh, I can look it up for you."

     So she put me on hold for a minute. She came back on the line. It turns out my medical group accepts several other United Health Care options. But not this United Health Care Medical Advantage plan. So unless I changed to another doctor in their network, every time I went to the doctor it would be out of network, costing me a fortune.

     Were there any other options available to me? I wondered. What about that AARP Supplemental plan I saw on another page of the website?

     "Oh, I don't handle those plans," said the woman. "They're administered through someone else."

     So . . . 45 minutes down the drain. But at least I learned that a Medical Advantage plan is an HMO plan, requiring you to go to doctors in their network.

     I was drained. No more research today. I quit . . . knowing no more than I knew before -- which is that it is easy to sign up for Medicare, but hard to find out exactly what you're signing up for. But I will figure it out, for sure, for my third and final installment of how I applied for Medicare, coming up (hopefully) next week.

    

I Apply for Medicare, Part I

     My ex-wife is a year older than I am. Last year she turned 65 and applied for Medicare. I remember at one point asking her about the whole process of signing up for Medicare. How do you apply? Is it complicated? How do you know what coverage you're getting?

     She told me not to worry. A few months before you turn 65 you start receiving all kinds of information in the mail. She'd looked over the basics. "Then I was able to sit down with an insurance agent who specializes in Medicare," she told me, "and he explained the whole system to me. He said he gets paid by the insurance companies, so it didn't cost me a thing."

     So I didn't worry. And now this year, in advance of my own 65th birthday, I expected to start receiving lots of literature in the mail, inviting me to join Medicare, showing me how to do it, and explaining all the benefits. I didn't know who it would come from. The government? My insurance company? It wouldn't be from my employer. I no longer have an employer. My company started shedding employees in the 1990s, and got around to shedding me in 2002, so I've been on my own for the last decade.

     The calendar turned over, and the months came and went, but I heard not a word from anybody. Maybe my ex-wife was wrong, I thought. Maybe she got information in the mail, because of where she lives, or because of her insurance company, or because she's a woman. But that doesn't necessarily mean everyone gets information in the mail.

     I started worrying. Maybe, somehow, I've dropped off the the Medicare "membership" list. Maybe my name got lost in the computer. Maybe they forgot about me!?!

     So I finally decided I'd better find out. I realize that for many of you this is "old hat." You've been through all this already. But anyway, like the modern tech-savvy person I am, I typed "How to apply for Medicare" into google. I found lots of general information. There's Part A which is free, and it "helps pay" for inpatient care in a hospital. There's Part B which you pay for, and that "helps pay" for doctor services.

     Well, that's pretty good, I thought, but also pretty vague. I found a link for Medicare Premiums and found out my premium for Part B would be $104.90 a month, as long as my MAGI is $85,000 or less. I know what MAGI means (Modified Adjusted Gross Income), although I'm not sure how to calculate it. But I'm pretty sure my MAGI is less than $85,000 so I'm not going to worry about it.

     This is getting awfully complicated, I realized. And since I really couldn't find out any specifics, I decided to call the Medicare 800 number, which is 1-800-772-1213. I understood what Parts A and B are, at least in theory. They pay for the majority of your doctor and hospital bills. But I wanted to know some of the particulars. Would they pay for my next colonoscopy? What if I needed surgery on my bad knee? Would it make a difference if I went to the hospital, or had it done in the doctor's office? Could I go to a specialist if the specialist wasn't in my medical group?

     Plus, what about Parts C and D? What's the difference between the various Medicare Advantage programs, and the Medigap program?

     I negotiated the Medicare phone tree. I finally got to the option to talk with a real person. Then an automated voice announced the wait would be 10 minutes. Arghh! I must admit, I was too impatient. I didn't want to wait and so I hung up.

     I called my own current medical insurance company. Maybe they could help.

     I negotiated the phone tree and eventually got a very nice lady on the phone. She spoke with a fairly heavy accent, but I understood most of what she was saying. Yes, my insurance company could provide me with a backup plan. There's a PPO plan and an HMO plan. Actually, there are four different PPO plans, and a couple of HMO plans. "What''s your i.d. number?" she began.

     The woman stayed on the phone with me for a good 15 or 20 minutes, trying to explain the basics of the different plans. But I had plenty of questions. How do I find out if my doctor is in the HMO network? She gave me a link on the website. How much would it cost? It depends what plan I picked, and what county I live in. Does the plan cover drugs? One of the plans does; another doesn't. She wasn't sure about the others. Are there any dental benefits? Again, it depends on the plan.

     What if I moved? Like many retirees and pre-retirees, B and I are thinking of moving in a few years, probably to a different state. She told me that their plan was only good in my state. If I moved I'd have to switch plans.

     I confess, I got tired of the conversation before the woman did. She must be used to people asking dumb questions. She finally offered to send me some published materials that would provide me with all the details. It would take about ten days or two weeks to get to me.

     The woman did tell me one concrete and crucial thing. Regardless of what else I did, I should apply for Medicare Plans A and B. And I should do it right away, because if I waited and missed the deadlines, then there are restrictions about when you can apply, and I may be subject to higher rates ... for the rest of my life.

     You can apply by telephone (at the above 800 number), or in person. But I went back on the website where you apply for Medicare. I found the application. I filled it out. It was pretty easy.

     And so as of right now, I await confirmation that I'm accepted into Medicare. And I await some materials in the mail which will presumably inform me what else I need to do to get more than the basic Medicare Parts A and B coverage.

     I'd worried that I'd somehow fallen out of the system, or that it might be hard to sign up for Medicare. Bottom line:  Don't worry, it's easy to sign up. But it is hard to find out exactly what you're signing up for, and to figure out what kind of backup medical insurance you should get.

     More on that in Part II, after I've had a chance to look over those materials.
       

Health Insurance -- Hard Pill to Swallow

     I never noticed what health care cost back when I was working during the 1970s, '80s, '90s and into the 2000s. My company took a few dollars out of my paycheck. The amount went up a little bit, from year to year, but not as much as my salary -- and besides, it was a minor blip in my financial picture.

     Then I got laid off. I went on COBRA and had to pay the whole bill. I was absolutely stunned at how much health insurance costs.

     I did some research and found I could do better than my old company, which offered what we now call a Cadillac plan (but from what I hear from old colleagues, it doesn't anymore). I got a little better deal through my professional association; but it was still breathtakingly expensive.

     My insurance bill went down after my kids transferred onto their own plans. But now, in the last couple of years, it's started shooting up again. By 16% last year. And a proposed 20% to 40% for this year.

     As I outlined in a previous post, Affordable Health Care for Early Retirees, I haven't been blaming my insurance company for high insurance costs. I figured if medical insurance was a profitable business, I'd be getting solicitations by mail and phone and Internet to sign up with Prudential or Aetna or Allstate. After all, various companies are always trying to sell me life insurance or auto insurance or home insurance. If they're not trying to sell me health insurance, it must not be very profitable.

     In fact, it's hard to get health insurance. You have to have connections in order to get medical insurance. Like they're doing you a favor.

     And besides, I've seen what doctors and hospitals try to bill people for their services -- from my daughter who recently went to a clinic for a sore throat and was billed $383 for a five-minute visit, to my friend who got a pacemaker, stayed in the hospital overnight and went home with a bill approaching $100,000!

     The insurance paid . . . not all of it, but most of it, by far. How can that be a bad deal?

     I do not claim to be an expert on medical financing. But in my admittedly unscientific poll last week, the majority of responders did blame the greedy insurance companies for high medical insurance premiums. And a couple of them must know, since they used to work for insurance companies.

     Some 42% of the votes said greedy insurance companies were primarily responsible for the high cost of medical insurance. Just 23% blamed the high cost of medicine. About 12% blamed overuse of the medical system by well-insured people. Only a couple of people blamed Obama.

     Dr. Kathy McCoy at Living Fully in Midlife and Beyond said, "My feeling -- as a retired healthcare professional -- is that the biggest problem in escalating healthcare costs is the unfettered greed of the big insurance companies. I hated dealing with them when I was in practice because they would refer a patient to me and then I would have to fight for (at times) up to a year to get paid. But I most hated hearing stories about people who had faithfully paid premiums being dropped the moment they really needed care or being denied coverage due to pre-existing conditions."

     June of Aging Gratefully said, "I worked in the insurance industry. It was property and casualty insurance, not health insurance, but in some ways there isn't much difference. Greedy insurance companies are The Bad Guys in this situation."

     Still, I think Dianne from Schmidleysscribblings has a point when she says, "We need to look at our own contribution to the mess . . . Health insurance costs will continue to rise as long as those who can use the system whenever they can. Everytime an effort is made to rein in costs by advising that perhaps some tests are not necessary, such as mammograms, the outcry is so loud, the insurers, regulators and doctors back off."

    Plus, I know plenty of people who run to the doctor with the slightest ache or pain. It only costs them the $20 copay. So why not? It probably does run up costs for everyone -- but is it really significant?

     It's a complicated issue, and even the experts haven't been able to solve it. But still, I'm looking at that letter from my insurance company, and I'm beginning to wonder . . . 20 to 40%? Really?

     Probably the reason hardly anyone blamed Obama for rising medical insurance costs is because not much of the Affordable Care Act has come into effect yet. So the impact is yet to come. Obamacare does an admirable job of extending access to health care for many Americans, including us early retirees. That's certainly a good thing. But anyone suggesting that Obamacare is going to lower medical costs is drinking the Kool-Aid.

     Annie Lowrey of the New York Times reported on an Oregon study showing that uninsured people who gain health insurance "feel healthier, happier, and more financially stable." But it also concluded that despite some savings from better practices, such as keeping people out of emergency rooms, the insured spent about 25% more on health care. The conclusion: "Expanded coverage brings large benefits to many people, but it is also more likely to increase a stretched federal government's long-tern budget responsibilities."

      Better health for more people. But at greater cost, at a time when it's hard to argue that we can easily afford it. Two sides to the same coin. No wonder Obamacare has been controversial.

     Now this past weekend the New York Times in "Doctor Shortage Likely to Worsen with Health Law" revealed that experts project, even without the healthcare law, by 2025 the shortfall of doctors in America will exceed 100,000. Factoring in additional medical coverage from Obamacare, the shortfall will be over 125,000.

     That can't be good. Gee, I wonder what my insurance increase will be for next year?
    

Affordable Health Care for Early Retirees

     The Affordable Care Act is now, apparently, the law of the land, and while I'm no expert on health-care legalities, it does seem that Obama's ACA extends a very welcome helping hand to those of us who, by force or by choice, are among the ranks of the early retired -- the "lost generation" of people who have left work but are too young to qualify for Medicare.

     When I was laid off at age 53, I was able to stay on COBRA for a while, which covered my wife (we were separated at the time but still married) and my two kids. Eventually I had to get my own insurance. The way I did it was to find a work-related association I could join that offered health plans to its members, and through the association I was able to sign up for somewhat-reasonably-priced medical insurance. As my kids went off to college they were able to get health insurance through their universities. After I got divorced, my ex-wife qualified to join a different association and get medical insurance through them.

      I don't know why -- because she was a woman? because she moved to a different state? because she belonged to a different association? -- but she had to pay even more than I did for medical insurance. In this past year, she was shelling out more than $1000 a month for coverage . . .  just for herself!

     But at least we were able to get insurance. If your employer won't let you stay on their plan (very few do) or you're not eligible to join an organization, and have to buy medical insurance on an individual basis, your prospects are dim indeed. Some states offer medical plans for people with limited income; but a lot of people can't get medical insurance at any cost.

     (Which is one reason why I don't blame insurance companies for the high cost of medical care. If they were making so much money off medical insurance, they'd be sending us flyers in the mail, calling us on the phone, advertising on TV, in order to get us signed up. But instead, it's difficult to find an insurance company to take you on as an individual, so it can't be that profitable. Anyway, I stopped complaining about my medical insurance when they paid, in full, a $950 charge by an ambulance corps to drive my son 3 miles to the hospital when he cut his head in college. Who's ripping us off here? I asked myself. Not the insurance company. It's the ambulance corps!)

     Anyway, now starting on January 1, 2014, under the Affordable Care Act, states will be required to set up insurance exchanges where you can buy your own individual medical insurance. Indeed, unless you qualify for an exemption (are you Amish?), or are already covered under another plan, you will be required to get insurance.

     So, finally, those of us in our 50s and 60s who are no longer on the company payroll, and who are too young for Medicare, can do the responsible thing -- we can afford to buy reasonably priced medical insurance

     If your income is limited, the government will help you buy insurance. Medicaid will cover people under 65 who have incomes up to 133% of the poverty level -- which, today, would be $14,856 a year for one person or $20,123 for a couple.

     People with incomes up to four times the poverty level would qualify for assistance in buying health care. An estimate by the U. S. Department of Health and Human Services says a couple earning the poverty level of $15,130 a year would pay an annual premium of $303 for health coverage. A couple with an income at four times the poverty level -- an annual income of $60,520 -- would pay $5,750 a year for health insurance, or $480 a month.

     When you consider that my ex-wife is paying over $1,000 a month for her health insurance, that sounds like a good deal. I pay less than that, but not a lot less, and $480 a month sounds like a good deal to me, too.

     All along, I've personally have been supportive of the government trying to do something about health care. The medical-hospital-insurance complex is just too big and complicated for individuals to negotiate by themselves, especially if they're sick or injured. I do worry that Obama's plan does not really address the high costs involved with medical care, and that ACA is going to end up costing us all a lot more than we've been told. But that's an issue for another day.

     In the meantime, if you really want to educate yourself, go read all 974 pages of the Affordable Care Act (unless you think the Republicans are going to repeal and replace, in which case it would be a waste of time, but I'm betting that doesn't happen.)

     Or, for a brief summary, go to "Consumer Questions on Health Care Act, and the Answers" from the Sunday New York Times, or for a slightly more jaundiced view check out this other report "How Obamacare Could Help You Retire Earlier (or Destroy Itself Trying)" from AOL Daily Finance.