“Profit mechanisms…explain why so many Americans with ‘good insurance’ still find themselves fighting for care, drowning in paperwork, and facing financial ruin when serious illness strikes.” —Neal Shah, “Insured to Death”
High Stakes Healthcare Choices
“…as many as 66.5% of personal bankruptcies are tied to medical issues like high bills or lost income due to illness,” states Shah. In 2016, reports KFF, “half of all people on Medicare had incomes below $26,200 per person and savings below $74,450” and a third of Medicare beneficiaries have significant functional impairments. Chris Deacon criticized Sutter Health’s 2016 monopoly powers: “cardiology procedures in Southern California cost nearly $18,000 compared to almost $29,000 in Northern California.”
Medicare Open Enrollment is Oct. 15 to Dec. 7, but you can switch Medicare Advantage Plans between Jan. 1 and March 31. At age 65, most people signed up for Medicare Part A and made a critical choice between traditional Medicare—with Medigap relief from costly 20% co-pays—or private Medicare Advantage plans.
Medicare and Medigap
Lyndon Johnson signed the Medicare and Medicaid Act of 1965. Medicare extracts 2.9% of employment earnings without limit. Obama exacted 0.9% more on salaries over $200,000 as Medicare recipients got annual testing and preventative care. Yet Trump’s Big Beautiful Bill limits Medicare Low Income Subsidies, delays Medical Savings Program coverage and denies coverage to illegal immigrants or certain legal refugees.
After 40 quarters’ work, taxpayers get Part A, which largely covers Hospital and SNF stays up to 90 days, hospice care and post-hospital care for another 100 days. Part B subsidizes doctor visits, preventive care and some home health. Private Medicare Advantage Plans (Part C) evolved in 1997 to finance parts A and B plus drugs, vision, hearing and dental. Few can remain solvent without Part B and either Part D or Medicare Advantage for drugs; and retirees earning $212,000 pay indexed IRMAA penalties.
Original Medicare lets you choose most doctors without slow gatekeeper referrals. Pay deductibles and then suffer 20% coinsurance with no yearly limits. In 2016, Medicare beneficiaries enrolled in Parts A and B spent $5,806 out of their own pockets for health care on average. So Medigap or employer plans supplement Medicare coinsurance with dental, hearing, vision, drugs or foreign medicine with additional premiums. In 2016, beneficiaries in traditional Medicare and enrolled in Parts A and B averaged $5,806 out of pocket for health care spending.
Medicare Advantage
Usually cheaper, star ratings and specialist referrals check quality while provider networks cap prices. Yet consumers must choose from limited or distant networked providers. Suffer up to $9,350 out-of-pocket limits on parts A and B coverage. Marc Ryan’s Healthcare Labyrinth favors Medicare Advantage overall because the CDC found that elderly troubled by medical bills included: “12.3% for those with Medicare and Medicaid and 8.3% for those with Medicare Advantage.”
Critical of Medicare Advantage, Shah compares healthcare pricing to restaurants “where there are no prices on the menu, and you won’t know the cost of your meal until a month later when a bill arrives in the mail.” Grotesquely bureaucratic insurance companies deny payments with cryptic phraseology: “not necessary,” or “lack of prior authorization.” Most denials relate to mental health, gene therapies, durable medical equipment and imaging.
Healthier or more frugal retirees in competitive cities should do better with Medicare Advantage but more isolated, richer or sicklier ones may prefer original Medicare with Medigap. “Apply for the Medigap plan first.” Writes Danielle Roberts to those who convert, “Wait to make sure you are approved. THEN leave your Medicare Advantage plan.”
Decision for a Broken System
Americans spend roughly twice as much on healthcare as Europeans, with shorter lifespans and higher infant mortality. Democrats often favor Medicare for All systems—which may result in overuse and lengthy waitlists. Republicans promote insurance-free, consumer-driven solutions like HSAs and fee-paid care—which may leave the poor untended. With neither benevolent monopoly nor consumer bargaining, the health care lobby drives up paperwork costs and corporate profits. The planner’s insurance solution generally is high deductibles and high coverage limits. Favoring government catastrophic care to prevent private bankruptcy and consumer choice on standard medicine, Shah found compromise in: “universal protection with market-based delivery.”
Robert Arne, EA, CFP, MS, of Carpe Diem Financial Life Planning, is a Santa Cruz Mountain Certified Financial Planner who gives holistic financial advice as his client’s fee-only fiduciary. These articles are not personal financial, mortgage, tax or investment advice; consult appropriate professionals. Learn more at www.carpediem.financial.
