Jason Parker interviews Phil Castell, of Castell Insurance in Sequim, Washington about understanding Medicare.
Phil is originally from England. He married his high school sweetheart Sharon. They have two adult children and one grandson.
Phil has been a licensed Insurance Agent in the State of Washington since 1987. He loves to find solutions to fit his client’s needs. He has helped thousands of clients with Medicare solutions and Long Term Care plans. He has also protected millions of his client’s hard earned dollars in safe, secure, fixed annuities. Phil is also a financial planner helping those who are retired or wish to retire in the future.
Phil is currently the president of Sequim Dungeness Valley Chamber of Commerce where he enjoys participating in community activities. He has also been appointed to the State of Washington Insurance Commissioner’s agent and broker advisory committee.
In his spare time Phil is also active in the Sequim Masonic Lodge, Sequim Prairie Grange and the Strait Stamp Society.
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Below is the full transcript:
Announcer: Welcome back, America, to Sound Retirement Radio, where we bring you concepts, ideas, and strategies designed to help you achieve clarity, confidence and freedom as you prepare for and transition through retirement. And now, here is your host, Jason Parker.
Jason Parker: Hey, everybody. Welcome back to Sound Retirement Radio. You’re listening to Episode 67: Understanding Medicare. I have to tell you, I saw a report that came out recently that said, “A retired couple at age 65 … ” This was put out by Fidelity, said that, “The average couple will spend over $245,000 on healthcare in retirement.” This is a big deal. Medicare can be very confusing, so we’re going to shed a light on this subject today, and we’re going to teach people how it works and what they need to be thinking about.
I want to get started with a verse to renew our mind before we get started this morning. This comes from Luke, Chapter 10, versus 21: At that same time, Jesus was filled with the joy of the Holy Spirit and he said, “Oh Father, Lord of heaven and earth, thank you for hiding these things from those who think themselves wise and clever, and for revealing them to the childlike. Yes, Father, it pleased you to do it this way.”
All right, then I’ve got a joke for you. I know how much you guys enjoy these jokes every morning, so here’s one. Why do cows wear bells? Because their horns don’t work. Cracks me up.
All right, folks. Let me bring my guest on. Again, you’re listening to Episode 067. If you’re driving down the road in Seattle this morning, remember we archive all these conversations for you at soundretirementplanning.com. We also have them transcribed, so if you’d like to read them later on. In this episode, especially, we’re going to have some really great show notes that you’re going to want to refer to.
Today, I have Phil Castell on the program. Phil Castell is a good friend of mine. He’s somebody I’ve known for a long time. I consider him my go-to Medicare expert. Anytime I have somebody that comes into my office and needs some additional help, he’s the guy that I refer them to. One of a few, actually, but Phil is the guy that I’ve know the longest. He’s really a Medicare expert and I thought it would be good to bring him on the program. We’re in the middle of open enrollment now, or it’s just started with Medicare. Phil Castell, welcome to Sound Retirement Radio.
Phil Castell: Thank you, Jason. You’ve given me quite a build-up there. I hope I can fill those big shoes.
Jason Parker: Well, I should say, welcome back to Sound Retirement Radio. You were very well liked the last time we had you on the program, so I appreciate having you back.
Phil Castell: Thank you.
Jason Parker: What’d you think about that joke this morning?
Phil Castell: I think it was probably in the top 50% of the jokes you’ve told. It wasn’t the best, it wasn’t the worst.
Jason Parker: Well, that’s very kind of you, Phil. So Phil, here we are. We’re in open enrollment, but before we talk about open enrollment, let’s give our listeners just a quick overview of Medicare Part A, Part B, Part C, and Part D. It seems like it’s getting more and more confusing all the time. Will you help our listeners understand that?
Phil Castell: Sure. Absolutely. I’ll try to keep this as the simple basics.
Medicare Part A is what covers the hospitalization. Or, if you’re in the skilled nursing home, it covers a little bit of skilled nursing care, also. Medicare Part A, for most people, will have a zero cost provided that worked in the U.S. and paid into Social Security, will get Medicare Part A for free.
Jason Parker: Okay.
Phil Castell: Medicare Part B is the doctor’s and the outpatient, and everyone contributes something towards the cost of Part B. Most people pay $104.90 a month, and if you’re 65 but not yet taking Social Security, you’re still eligible for Medicare, and they will send you a bill for your Medicare Part B premiums. If you’re 65 or older and taking Social Security, they will automatically deduct it from your Social Security payments.
The one thing I’ll mention here with Medicare Part B is there is something called IRMA. IRMA sounds like your nice, little old grandmother, 87 years old, but this IRMA isn’t very nice. IRMA here stands for Income Related Medicare Adjustment, I-R-M-A. And if you’re fortunate to be a single person earning over $85,000, or a married couple earning over $170,000, you’re going to have to pay more than that $104 for your Medicare Part B. I just want to warn you, if you get a letter from Medicare talking about IRMA, it’s not a good letter.
Jason Parker: Hey Phil, before we move on to C and D here, because this is, I think …
Phil Castell: Sure.
Jason Parker: … important. That means testing, that’s something they’re talking about right now with Social Security, is the possibility maybe means testing Social Security. They’re already means testing Medicare Part B, saying that if you have income over a certain point, you’re going to have to pay more in premiums. Is that index, do you know, for inflation, does that go up every year, or is it going to be one of those things where over time more and more people are going to have to start paying more for their Part B premiums because it’s not automatically indexed? Any idea there?
Phil Castell: Yes, it’s not automatically indexed, because those amounts have been the same for last four years since they instituted it, I believe in 2011.
Jason Parker: Okay.
Phil Castell: Each year as people’s income does increase, more and more people will find themselves being sucked into paying a higher price to IRMA.
Jason Parker: Okay. The second thing which is really relevant today because all of the talk, all of the headlines are about people who are going to opting in for Medicare next year, so they’re not 65 yet. The new people that are going to be opting in, they’re going to be paying 50% more than people already on Medicare due to some nuances in the hold-harmless provision with Social Security not getting a raise, and some of those things?
Phil Castell: Correct. I’ll tell you very briefly how that works. Medicare and Social Security have an agreement where if a person does not get a Social Security increase and as Jason said, yesterday Social Security said there will be zero increase until 2016. That means people are already on Social Security and/or paying for their Social Security directly from … excuse me, if they’re paying for Medicare Part B directly from their Social Security, they will not have an increase in their Medicare Part B premium of $104.90. If you’re 65 and you’ve not yet started taking Social Security, you can still apply for Social Security now to lock in that $104.90 for 2016. People who are already in the IRMA situation where they’re paying a higher premium because of their income, or people who are aging into Medicare next year in 2016, it is anticipated that your Medicare Part B premiums will be higher.
We have this happen in 2011 and 2012 when the Medicare deductible in premiums increased and Social Security did not. After a year or two, everything evened out, and those people who’ve been paying a higher premium, their premium actually dropped again for 2013. The cost for the Medicare Part B program have to be assigned to people in Medicare Part B, and if the government can’t raise the premium for people already on Medicare, is the people who are new to Medicare who end up paying disproportionate, higher Medicare Part B premium. However, Jason, right now Medicare has not announced what their premium will be 2016, and I know that there are bills in congress and the senate that are trying to address this anomaly that is pretty unfair to a number of people.
Jason Parker: Bottom line is, even if it goes through the way that it’s currently structured, where some people are going to have to pay $150 for Part B next year if they’re opting in next year. By 2017, if Social Security gets a raise, then everybody’s going to get a increase in their Medicare Part B premiums, but the people that were paying more may pay less in the future, and if people that are only paying $104, will most likely pay more.
Phil Castell: That is correct.
Jason Parker: It’ll even out. You might get zinged for one year if you’re just opting in, but … Okay, that’s good. I appreciate your feedback there. Go on to Part C and Part D now on Medicare.
Phil Castell: Okay. There’s very simply two ways that people can choose to receive their Medicare benefits. They can choose to be on traditional Medicare, where Medicare is their primary insurance, and those people will then purchase a Medi-gap or a Medicare supplement. When I say Medi-gap or Medicare supplement, I’m talking about the same type of program. These are the secondary insurances that picks up all the copays and deductibles that the original Medicare does not cover. The other way people can get their coverage is if they enroll in a program called Medicare Advantage. Medicare Advantage is a program put out by private insurance companies where Medicare pay those private insurance companies a cost each month to provide your Medicare A and B coverages, and frequently they include they include your Part B, but prescription drugs as well. A Medicare Advantage program … When you go to the doctor you show your Medicare Advantage card, and the doctor just bills the Medicare Advantage company. They provide your primary and secondary, all rolled into one.
Jason Parker: Okay.
Phil Castell: Medicare Part D is for prescription drugs. There are currently, in the state of Washington, 30 programs in 2015, which will be reducing to 24 program for people in the state of Washington for 2016. There’s a reduction in the number of companies offering the prescription drug programs. This is because over the last couple of years, there’s been a number of mergers in the health insurance industry, and as these mergers are consolidated, it means less competition in prescription drug side.
Jason Parker: Okay. I want to back up here a little bit. Back to … People have basically two options. They can go the traditional route with Medicare, which is they are automatically enrolled in Part A, then they enroll in Part B, and then they buy Medi-gap plan or Medicare supplemental policy. That’s one option, and then they would also need to buy a Part D prescription drug plan under that.
Phil Castell: That is correct.
Jason Parker: The second option would be to get a Medicare Advantage plan, Part C, and under Part C, it may already include a Part D plan. If it doesn’t, do you have to go out and buy a Part D plan separate, then?
Phil Castell: You got to be very careful there, Jason, because if … There’s very few programs that do not include Part D.
Jason Parker: Okay.
Phil Castell: The vast majority of Medicare Advantage programs include Part D.
Jason Parker: Okay.
Phil Castell: If you choose a program that is only the medical portion, you will be highly unlikely able to enroll in a stand-alone drug program. I could get very technical here, but there’s something called Private People Service. Right now, to my knowledge, all the programs available are either a preferred provider organization, called a PPO, or an HMO. If your Medicare Advantage is a PPO or an HMO, you have to take the drug program through that provider.
Jason Parker: Okay. Phil, what’s been your experience? I’ve got so many questions I want to ask you, but just real quickly, what’s been your experience when people are faced with making this decision, between going the traditional Part A, Part B, Part D, and a Medi-gap plan, versus going with the newer Medicare Advantage plans? What are most people opting for today?
Phil Castell: Realistically, it all depends where you live. If you live in a major metropolitan area, there are very, very comprehensive Medicare Advantage programs available either for zero premium or very, very low premium. However, if you live in a county that is more remote, there may be no Medicare Advantage program available. In fact, in the county where I live, the two carriers are pulling out of the Medicare Advantage program, and over 1300 people are losing their health coverage this year.
Jason Parker: Well, they’re losing the plan that they’re on. They’re still going to be able to switch to a new plan, right?
Phil Castell: Correct. What’s happening is the Medicare Advantage program is leaving the county, so those people will just be on original Medicare, unless they choose to sign up for either prescription drug, or the Medicare supplement policy to pick up the pieces that their Advantage program used to cover.
Jason Parker: Wow. So, you say with some of the those Medicare Advantage plans, it’s possible to have zero dollar out-of-pocket cost?
Phil Castell: No. Usually, they’ll be zero premium.
Jason Parker: Zero premium.
Phil Castell: The premium may be zero, but then they’ve got deductibles and copays when they go to see the doctor or if you need a surgery, or ambulance, or hospitalization, they’ll be copays.
Jason Parker: Ah, I see. So, they get you one way or the other. If you’re pretty healthy, though, those can look pretty attractive, I guess, if you’re not going to the doctor a lot.
Phil Castell: That’s definitely so. In the major metropolitan areas, if … The Medicare Advantage programs are a wonderful, wonderful offers …
Jason Parker: Sorry about that, Phil. We were just disconnected. I’ve got you back on the line here. You were just staying that some of those in major metropolitan areas, some of those Medicare Advantage plans … sounds like they can be a real bargain for people.
Phil Castell: Absolutely.
Jason Parker: Can you give us some kind of idea, just roughly, if somebody wants to be in traditional Medicare Part A, Part B, and Part D, what are they looking at in terms of premiums, on average? Would you have a rough ball park number there on what people are paying?
Phil Castell: Well, obviously, everything will depend on where you live. I’ll just give some price quotes, ball park numbers for the state of Washington. Medicare, as we’ve discussed for most people, will be about $104 a month. That’s deducted directly from the Social Security. The supplement plans range in costs, generally from around $100 to about $200. The Plan F, as in Frank, is the most comprehensive program, in that it picks up 100% of every Medicare copay and deductible, and they range from about $180 all the way to about $240, depending which company you go with. The programs in the state of Washington, the premiums are the same for anyone, 65 or 95, there’s no difference. There is a high-risk program for people who are on disability due to age, and they’re not yet 65, and that is more expensive. If we walk about the Part D drug programs, most people can find good prescription drug coverage for between $18 and $40 a month, but those are 2016 premiums.
Jason Parker: Okay. So, you look at $104 for Medicare Part B, $180 for plan F, traditional Medi-gap plan, and then $30 for Part B. Somebody’s paying $314 per month and they have really, really good health insurance. Is that sound about right?
Phil Castell: They basically got 100% coverage for anything Medicare approves.
Jason Parker: What’s incredible about that … because we see people that are still … they’re retiring in their late 50’s, early 60’s, they’re not eligible for Medicare yet. A lot of those people share with me that they’re paying over $1000 per month for high deductible plans that don’t really cover a whole lot. When you compare what Medicare costs and what it covers, compared to what you get in the private sector before you’re eligible for Medicare, that’s a pretty darn good deal.
Phil Castell: It’s a fantastic deal. And the reason it’s so good, Jason, is very simply, you’ve paid into the system all your working life. You’ve paid in, and Medicare Part A is the hospitalization is free. The Medicare Part B premium of $105 or $104 dollars in change, is technically 25% of the cost of what that program actually covers. The federal government is paying for Medicare Part A, and subsidizing Medicare Part B to such a great extent, that is what makes Medicare such a wonderful program for those people eligible to be on Medicare.
Jason Parker: That’ incredible, Phil. For our listeners driving down the road, again, you’re listening to Episode 067. This is called Understanding Medicare. I’ve got Phil Castell on the program. He’s my local expert. He’s somebody I refer a lot of people to on the subject of Medicare.
Phil, now I want to actually step back a couple of steps and talk about when people should enroll in Medicare. If they’re just about to turn 65, what does that look like?
Phil Castell: When a person’s about to turn 65, if they are still working and they have coverage through their employer, they are exempt from having to sign up for Medicare. They don’t have to start paying the $105 for Medicare Part B until they retire.
Jason Parker: Now, real quick on that, I want want to clarify that. If they’re receiving a retiree healthcare benefit, that’s not the same as … because I do see people that were retired at, say 62, from the federal government and have really good health insurance provided as a retiree benefit, but that’s not the same as working, right?
Phil Castell: That is correct. It has to be an employee, you have to still be working as an employee to get that program.
Jason Parker: Okay.
Phil Castell: What happens is, if you are retired, and you’re taking Social Security already, Medicare will automatically enroll in both Medicare Part A and Part B. About three months before your birthday, they send you out your “Welcome to Medicare” that includes Medicare card. If you’re not yet taking Social Security or if you’re working and you want Medicare Part B, you have to either call Social Security or you can go on to Medicare and apply for your Medicare Part B. Takes about 10 minutes on the computer, and it’ very quick and easy. Once you’re on Medicare Part B, then you’ve got your options as far as Medicare Advantage or Medicare supplement drug program.
Jason Parker: We’re going to continue this conversation a little bit longer beyond our radio show, but while we’re still on the radio, will you give people your contact information in case they’d like to contact you to get anymore information on this?
Phil Castell: Sure. Absolutely. My name is Phil Castell. My email is firstname.lastname@example.org. My toll-free number is 1-800-279-2937.
Jason Parker: All right. Thanks, Phil. We’ll be sure to put that in the show notes for our listeners, too. If you want to just visit soundretirementplanning, Episode 067, we’ll have Phil’s contact information in there regarding Medicare.
We talked about how people enroll. Here’s a little nuance I want to ask you about. Let’s say somebody is about to turn 65, or they just turned 65, they’re eligible to start, but we’ve put together a social security claiming strategy for them, and within that strategy, they really shouldn’t start their social security until age 70 to complement their retirement plan the best way possible. In that situation, they won’t automatically be enrolled in Medicare Part B, so they actually have to make a telephone call or get on the computer to make that happen. Is that right?
Phil Castell: That is correct.
Jason Parker: Now, what about in that situation where the wife is say, only 63. She’s not eligible for Medicare yet. What happens for her? I see this happen a lot with folks that are retired from the federal government. They would like to be able to just continue their coverage though the federal government, but I think, doesn’t the federal government become the secondary payee or payer to Medicare once you’re eligible for Medicare?
Phil Castell: If you’re still working as an employee, your employer insurance is the primary, and Medicare would be a secondary. But when you retire –
Jason Parker: Phil, I just realized, I hate to do this to you. We’ll continue this conversation for the people that listen to the podcast or that want the show notes afterwards, or they want to listen online. But, for the radio time, we’re out of time here so we’ve got to finish up. Thank you for being a guest on Sound Retirement Radio.
Phil Castell: You’re welcome. Thank you very much, Jason.
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Jason Parker is the president of Parker Financial, an independent fee-based wealth management firm located at 9057 Washington Avenue Northwest, Silverdale, Washington. For additional information, call 1-800-514-5046, or visit us online at SoundRetirementPlanning.com.