In this week’s episode of Retire in Texas, Darryl Lyons, CEO and Co-Founder of PAX Financial Group, sits down with Justin Elliott, an Insurance Advisor at PAX, to explore the intricacies of Medicare and Social Security. Together, they dive into the evolving healthcare landscape and the critical decisions retirees face when it comes to Medicare Supplements and Medicare Advantage Plans.
Through clear explanations and real-world insights, Justin sheds light on the differences between these plans, how healthcare providers approach Medicare claims, and why the Social Security fund might be at greater risk than Medicare in the near future. The episode also emphasizes how PAX Financial stays ahead of these trends to better serve clients preparing for retirement.
Key show highlights include:
- Understanding Medicare Supplements vs. Medicare Advantage Plans.
- Why Social Security might face more immediate financial challenges than Medicare.
- The impact of demographic shifts, with 10,000 people turning 65 every day, on the future of retirement services.
- Practical tips for navigating Medicare decisions as a retiree or for aging parents.
- Justin’s key takeaway: “Be prepared to navigate a system that’s constantly changing to ensure the best healthcare coverage.”
Transcript:
Darryl: Hey, this is Darryl Lyons, CEO and co-founder of Pax Financial Group. And you’re listening to Retire in Texas. This information is general in nature only. It’s not intended to provide specific investment, tax or legal advice. Visit PAXFinancialGroup.com for more information and click on the Contact Us button. You’ll connect with an advisor for 15 minutes. They have a heart of a teacher, so if you’re just seeing if we’re a good fit, that’s the best way to do it. There are also some eBooks on there you might want to grab.
A lot of people like the faith-based investing e-book, just to kind of get a cursory view of what that looks like. Okay, so today I’m actually going to do an interview with one of the partners here at PAX. He’s been here for a very long time, really at the very beginning of PAX. He many of y’all know him, Justin Elliott, he really focuses on that insurance space.
And as a subsector of that insurance space, the health insurance. And so, I wanted to get a lay of the land there. So, Justin welcome.
Justin: Thank you. Good to be here.
D: Y’all probably heard his voice or met him before, but I’m going to jump right into it. I’m going to land the helicopter and get more detailed and granular. But let’s start at the very top. Can you just make sure people know what the difference is between Medicare and Medicaid?
J: That’s a good question. And I really wish for all these years the government didn’t spell these things exactly alike, minus two letters, because it’s a very common. Even if they know what they’re talking about. The lingo just gets wrong. Sometimes. Very simply, Medicare is a federal program for people aged 65 and over and for people with certain disabilities and conditions that are under 65, that’s Medicare. And Medicaid is not age based in any way, and it is strictly based on income. It provides additional medical care and support for people at or below the poverty level.
D: That’s it.
J: That’s a high-level description right there. Those are the big differences.
D: And then the other question that we get a lot staying on that Medicare arena, not Medicaid. A lot of people ask what are the Medicare supplements? And then how are those different from Medicare Advantage plans. Some of you guys aren’t 65 that are listening, but it’s actually good because if you have parents, you want to know this stuff and maybe even pass this along to your parents, because this question here alone is probably one of the number one questions, we get at PAX in general when somebody is turning 65. So, either tune in or pass this along because this is an important answer. What is the difference between Medicare supplements and the Medicare Advantage plans?
J: So once again they might sound alike, but they’re two totally different animals. But the point of both of them is to help fill in the gaps of Medicare Part A and B, Medicare supplements, also called Medigap.
D: Okay, wait, Medigap and Medicare supplements?
J: Identical. So, you’ll see sometimes the word them differently, but they’re both government used verbiage to describe both of them. So those are the traditional way of filling in those gaps of Medicare overall, as a general rule of thumb, with some deductibles and some coinsurance, if you just have Medicare A and B, that’s going to cover roughly 80% of your risk minus prescription drugs. So, the supplements fill that in.
D: And the other 20%?
J: That’s right.
D: More or less. Yeah.
J: That’ll cover the deductibles, the coinsurance, and you will have next to no out-of-pocket exposure. Very convenient works well. You can go to any doctor that takes Medicare. Very simple, very easy to use. If Medicare accepts the charges, the supplement pays every time.
You’ll never fight with an insurance company because the only reason they wouldn’t pay their 20% is because Medicare denied the claim. Overall, at this point, after 50 plus years of Medicare doctors, hospitals, they know what Medicare will and won’t do. I can count on probably less than one hand how many Medicare claim issues I’ve heard from our customers over the years. They just rarely happen under this strategy.
D: I would concur, we haven’t had any complaints about that. Yeah. So that’s Medicare supplements and that Medicare gap.
J: Correct. Medigap and Medicare supplements. Same thing.
D: So, the other one is the Medicare Advantage, right.
J: That’s a little bit newer animal. They were approved by Congress and came into being in the early 2000 as just another option for Medicare beneficiaries to fill in those gaps. And what that does, what makes it different? Most people don’t know this. When you join an advantage plan, you are literally getting off of Medicare, even though you’re still going to pay your part B premium to CMS, to Medicare, you’re still going to pay them. The standard rate for people who aren’t high income earners is currently $160 and change, and that goes up with inflation by a few bucks per month. Yes, that’s per month.
D: And that’s deducted from your Social Security check.
J: Yes. Assuming you’re taking your Social Security, or you can pay it directly. So that happens no matter what you will still pay your part B premium. The difference is, is that the advantage plan now takes you off of Medicare. And for every person, when you sign up for a Medicare advantage plan, the government’s paying them roughly a thousand bucks per month for every person they sign up.
D: Paying who?
J: The insurance company. So they’re paying UnitedHealthcare, Humana, BlueCross. They’re paying that major medical insurance company thousand bucks a month-ish per person. They sign up and now they are managing your care. Now you’re on the, for example, Blue Cross Blue Shield network. Yeah, that could be a PPO, which are more convenient and user friendly as we all most of us know over the years.
Or it could be an HMO which has a little more stringent networks. Either way, you got to stay in that advantage plan network. So, you’ve narrowed your accessibility to care somewhat, because you can’t just go to any doctor. Now that takes Medicare. If you have the PPO, you can get some out of network benefits if the doctor takes Medicare, but he’s not in your Blue Cross network.
There’re some ways around that, but it’s not quite as efficient as the Medigap supplement path. Also, as a part of those plans, you are now kind of in that world, because to go back out of that world, you have to pass medical underwriting.
D: To go back to Medicare.
J: To go back, you have to literally get off of the advantage plan in writing. Typically, it’s done at the end of the year during Medicare open enrollment, which is from October 15th to December the 7th every year. Now, if you move from Arizona to Utah, you’ve moved out of your service area. That’s a qualifying event for Medicare that allows you to actually now you can shop for a supplement and you could get a guaranteed issue policy regardless of your health.
That doesn’t happen to most people. So, if you’re in good health and nothing crazy has happened, you can go back and you can enroll in a Medicare supplement and apply for it. Now, it’s just like applying for any insurance when you first get on Medicare. There is no medical underwriting on the Medigap supplement side. So that’s an important thing that everybody should know.
Is that initial time when you’re on, you got free rein to go whichever route you want that is best for you. The quote unquote advantage to the advantage plans is that a lot of them, most of them cost zero.
D: That’s what I was going to say. I was going to ask you about the cost difference.
J: And that is what really draws citizens and Medicare beneficiaries to those plans.
D: You pay zero for the premium, but then you have to pay more out of pocket costs or a limited network or.
J: Yes, you definitely have more out of pocket exposure plus a narrower network of access. That’s the tradeoff and pretty much with anything else, in insurance and in life. You know, there’s going to be a tradeoff. If something costs a little less, there’s a string there.
If all your doctors are in that network, a lot of people have no problems with it until maybe five years later, their doctor leaves the network, which I’ve seen happen before. So that’s one risk you’re taking that could be a liability. Whereas on the supplement side, you’ve got any doctor that takes Medicare unless the doctor retires or just says, I’m not taking Medicare, which is extremely rare because any physician in that stance is probably excluding 50 million customers nationwide.
So that’s a that’s a tough market to exclude unless you’re one of these concierge doctors or fee-based doctors that just only take cash.
D: You said something that was interesting to me, and I’m going to pivot for just a second in the dialog because you did a good job of covering the advantage versus Medicare supplements. And so, I think the listeners got a good idea of the differences.
But you did bring up something that I thought was interesting, and that’s the population that are on Medicare. And the fact that they vote. I do have concerns that Medicare may not be there. Are you hearing anything right now?
J: No. If I was to just guess, my nonpolitical expert guess would probably be that I’d probably be a little more worried about major Social Security changes in the near future than Medicare.
D: Okay, because of the voting block?
J: Well, they’re probably the same voting block, if I had to guess. But numbers that we consistently see on reporting and treasuries and everything else that’s going on and the solvency of both of the funds, it seems like the Social Security fund is in a little more immediate jeopardy than the Medicare fund. Like I said, for many years now, they’ve managed to offload a lot of risk on advantage plans.
D: Oh that’s true. Yeah.
J: In exchange, for now, the consumer gets quote unquote, a little bit less comprehensive care. They’ve managed to offload a bunch of it at a fixed rate and that’s a little more controlled. The Medicare premiums go up fairly consistently with inflation, which of course lately is much higher than many of us are used to. But I remember 20 years ago the Medicare premium was in the 120s, and it’s currently in the mid 160s.
D: That’s not unreasonable.
J: That’s not a terrible raise at all. Now in the future, it could spike and no one knows. But I would say Medicare is a program is pretty safe. They could always and it probably wouldn’t hurt, probably would hurt to raise the age.
D: Yeah, I could see that happening. The other thing I think was an article I wanted to reference was the state having some issues with some of their network. You know what I’m talking about. Can you reference that challenge that exist within the states and the hospitals? You can explain it better than I can.
J: Yeah, there’s some data just came out in the last few weeks that was done of several hundred CFOs of major hospital networks nationwide and almost 20% of them have said they are going to stop working with Medicare Advantage plans.
D: Now we’re talking advantage.
J: Yes, we’re on the Medicare Advantage world. Yes. They’re not going to deal with Medicare Advantage insurance companies. They cited the delays and the times that it takes for reimbursements, along with the reimbursement rates. What they’re getting reimbursed for those. And so, if the plans i.e. Blue Cross, again, we’ll just use them, not singling them out by any means.
If they’re slow to pay the hospital network, if Methodist can’t get their money from them in a timely manner, if at all, then eventually they’re just going to say, hey, we’re not working with you. We’re no longer in your network.
D: That would be hard. I mean, I’m sure they’ll have a transitionary period, but that would be really hard if you had to go to the hospital and all of a sudden you find out this doesn’t work for sure.
J: Yeah. Luckily, here in our backyard in central Texas, there’s nothing like that happening immediately.
D: We’re good for now.
J: The closest one I’m aware of is a large system in Houston. People are probably familiar with Memorial Hermann. And they’ve exited at least one Medicare Advantage plan starting in 2025. There’s been several and some other big cities. And of that survey, of the almost 20%, another 25 to 30 said they’re thinking about it, which could come in 26, 27 somewhere down the road, possibly if things don’t change and they can’t make it profitable.
D: Yeah. I think it’s an interesting demographic trend that we’re facing with 10,000 people turning 65 every single day, a good chunk of the population needing these services, but less people paying into it. And you just have just a math problem that exists. And so not only is this state dealing with these challenges, but even today, we talked about beforehand that Humana’s stock price fell considerably.
And so, we’re going to see some more pressure on some of these private industries that are trying to play within the Medicare system, because it’s a demographic challenge. And to a certain degree, you want to limit reimbursement rates. But at the same time, physicians are like, look, I’m not going to do it for this. Some of the very, very wealthy people are, to your point, earlier, just abandoning the system and getting some concierge services now.
So, we’ll see if that trend starts moving in a certain direction.
J: Yeah, that’s definitely what you see happening. It still comes down to supply and demand in everything we do. If you have a physician, a nurse practitioner, a, you know, whoever, a dentist, I mean, whatever the case is, they’ve got X amount of years in medical school and costs and time put into their profession, and they have an amount in their head that they need to get.
And if they can’t get it, they’ll get it somewhere else, is the way you have to look at it from a 50,000ft view. That’s just how we are.
D: We’ll continue to look at this at PAX and just pay attention to where the industry is going, because there’s a lot of stakeholders involved from somebody who might own Humana stock to a client of ours that might be a physician to our Medicare supplement clients.
I mean, we see a lot of the gaps from various angles. Just being in an ecosystem of health care service providers within PAX. So, we’ll continue to pay attention to these trends. And I know Justin will keep us informed. He sends us data points along the way. Justin, we’re at the mark where we need to land the plane. Is there anything specific that you wanted to make sure that we covered today?
I know we moved quickly here.
J: Yeah, just some heads up here. Just yesterday, an interesting report came out. The numbers are not official, but I’ve personally, I’ve already heard from a couple of our customers. You can’t see the plans for 2025 yet. We really didn’t touch on Medicare Part D as in drug, which is what it stands for.
And that’s the portion, Part A and Part B cover hospital and outpatient care. D is for drugs, as most people probably aware of those plans look like. Some customers have already called me getting personalized letters from their part D carrier that, hey, get ready your premiums going up for X. Starting in January. Now, luckily, there’s 20-some-odd plans currently in Texas for consumers to pick from, and it’s not uncommon for a plan from year to year.
Hey, this is no longer the best for the drugs that I take, and we consistently help people on an annual basis pick and choose the right one to fit their needs. So, someone getting a situation like that can probably find a better alternative. But that tells you that if, for example, someone’s only paying $5 for that diabetes drug that we hear touted on TV, sometimes somebody is paying for that currently and they’re about to pass that buck, maybe that’s one way of potentially looking at it, but there’s still lots of part D options out there that are coming.
And the other thing I wanted to mention is of our customers, we have several hundred customers that we’ve helped walk through their Medicare enrollment over the years. I’ve never had one want to come off of their Medigap plan and go to an advantage plan.
D: That’s a good point. Yeah,
J: But I’ve had a good handful. Not a ton Medicare Advantage plans. They’re not evil by any means. I don’t want to get that out there. They care for a lot of people, and we have a lot of customers on those. And for the most part, they’re happy. But the ones that are unhappy always come from that side of the fence, I would have to say.
D: That’s good anecdotal information, and I think we put that in our pocket and remember that when we’re making these decisions, when we turn 65. Justin, this has been really good. Crash course, but good if for some reason, if you’re a client of PAX, Justin’s available to you. Actually, we used to do Medicare supplements for the community at large and health insurance. It just was too much volume for us to handle. But Justin is available for our clients. So, if you are a client of PAX, just call Justin up to get clarity on this conversation and make sure you’re in the right place.
And for those that aren’t a client, you can go to PAX Financial Group and hit the connect button and you’ll connect with a financial advisor. I hope this was helpful for you today. Thanks for hanging in there. And as always, think different when you think long term. Have a great day!
Tune in to learn how these changes could affect your retirement and what steps you can take to stay informed. For more resources, visit http://www.paxfinancialgroup.com. If you enjoyed today’s episode, don’t forget to share it with a friend!
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