Make It Last – Ep 74 – Interview with Carol Baker of CABA Benefits
Medicare open enrollment is swiftly approaching. Now is the time to gather as much information as possible and begin your planning. Tune in this week to get some great information from Carol Baker, Principle of CABA Benefits, as she shares her wealth of knowledge on everything Medicare.
If you need additional information you can give Carol Baker a call at 973-428-0863 or visit her webpage cababenefits.com
Make It Last with Victor Medina is hosted by Victor J. Medina, an estate planning and Certified Elder Law Attorney (CELA®) and Certified Financial Planner™ professional (CFP). Through his law firm and independent registered investment advisory company, Victor provides 360º Wealth Protection Strategies for individuals in or nearing retirement.
Click below to listen to the full episode…
Click below to read the full transcript…
Victor J. Medina: Hey, everybody, welcome back to Make It Last. I’m so glad you can join us this Saturday morning. I’ve got a special guest. Earlier in the week I recorded an interview with Carol Baker because we are upon Medicare open enrollment. That is the middle of October to the beginning of December.
I’m going to jump right into the interview with Carol. We talked about all of the options on selecting Medicare, different plan options, what you can do about Medigap policies. You are in for a treat today. Let’s go right to the interview with Carol Baker.
I’m joined today by Carol Baker. Carol Baker is the principal of CABA Benefits. You can locate that at cababenefits.com.
I got to admit Carol is here because she’s my business health insurance broker. We went out to lunch and we started talking about Medicare and Medicare supplements because, in as much as I have my CFP and I do financial planning for people, specifically people in retirement, health benefits in itself is a completely different area.
I can’t handle that kind of insurance. I thought, “Oh my goodness.” Carol has such a wealth of information that I had to invite her onto the show. I’m so happy that you joined us. Welcome, Carol.
Carol Baker: Thank you for inviting me.
Victor: Let’s start with a top‑down view of Medicare. I think people just take for granted conceptually what it is. Describe for me generally what Medicare is, when it begins, and then we can start delving into things like the different parts and whatever else. Generally, how would you describe Medicare?
Carol: Medicare is a government program. There are different parts of it, Part A, Part B. There can be a Part C that you take advantage of, and Part D, which is the drug portion.
Many people take Medicare once they turn 65 or go ahead and enroll. They’re generally entitled to it if they worked for a certain amount of quarters ‑‑ 40 quarters ‑‑ in their lifetime or about 10 years, or their spouses have worked.
Victor: It’s a health insurance program you get eligible for. You attain eligibility largely based on your work history and essentially paying into it. When they’re taking out all those payroll taxes for Social Security and Medicare, you’re earning a certain number of quarters so that you can get this when you turn 65.
Carol: Yes, absolutely.
Victor: Is it automatic? When do you start looking at claiming Medicare? What are the timelines for getting enrolled, at least on the parts that are already included or you’ve earned?
Carol: If you are already collecting Social Security or railroad benefits, which I don’t personally know of anybody who’s collecting railroad benefits, but Social Security. If you have already started collecting Social Security, you become automatically enrolled in A and B.
If you have not started collecting Social Security, you want to file for Part A and file for Part B. Unless you work for a large company ‑‑ large meaning over 20 employees ‑‑ in which case you just want to obtain Part A.
Victor: What age are we talking about for people to do that?
Carol: 65. You can actually start to file three months prior to your birth date.
Victor: You start the process by going to a government website?
Carol: Yes. You can go on Medicare.gov and actually file that way. You can go to your local Social Security office. We normally recommend that you go first thing in the morning. Maybe [laughs] Tuesday…
Victor: The lines are smaller.
Carol: [laughs] Yeah, six or…
Victor: The people might be more helpful.
Carol: Sure, sure.
Victor: They’ve had their coffee, but they haven’t been tired out by everyone that’s been there all day.
Carol: Exactly. Maybe Tuesday through Thursday. I describe it like going to motor vehicle. Try to be the first one in the morning. I believe you sign in. You’re taken as like at…I don’t want to say at a deli, but…
Victor: Take a number.
Carol: [laughs] Take a number. They call you by your name. I generally recommend, too, that you bring as much information as you can with you. Maybe your original Social Security card, your driver’s license. Again, like the seven points or the nine points you need with motor vehicle. I’d rather somebody bring too much information than not have enough information.
Victor: A couple quick questions on that. It sounds like this is not something where you need a lot of professional counsel. In other words, enrolling for Parts A and B is more of just a reflex. You’re going to get them. You’d have to make a lot of decisions. It’s just about a matter of getting into the system. Is that fair?
Victor: Why is that? What is A and B? What do they cover where you really don’t need a lot of additional counseling or help to make selections on that?
Carol: First, you want to research what size your…If you’re actively at work, you want to first find out how many employees your employer has and decide there if you want to file for B. If you’re not working, you absolutely want to obtain Part A and B timely because you could be on an individual plan, on COBRA, what have you.
Usually, it’s much more cost‑effective to have a Medicare Parts A and B, and pick up a supplement, an Advantage Plan, or what have you.
Victor: What is it that Parts A and B cover for you versus the other parts? Are there certain specific services that are covered by A and B?
Carol: Yes. Part A is what most people refer to as the hospital portion. It’s inpatient hospital coverage. It also covers lots of other things, blood. Basically, you can think of it as hospital coverage. Then Part B, the easiest way to think of it is as major medical ‑‑ the doctors, outpatients, most things that Part A don’t cover.
Victor: If you’re being covered by your work, then that means that you’ve got a health benefits plan that can cover your doctor’s visits, so on, so forth. There might be a reason why you don’t enroll in B.
Why is it so important to make sure that, if you have a large employer, you are being covered? How does it play between the two? Are there are penalties for not enrolling in B when you do that?
Carol: If you do not enroll in Part B timely and you work for a small company, what happens is the insurance carrier that your small company has will not pay for anything that Medicare would have paid for. If you don’t enroll in Part B, you have a hole or a big gap in your coverage because the carrier will not pay for any claims that Medicare would have paid for had you enrolled timely.
Victor: Let me see if I understand that. Because the company is small and therefore being covered by a plan that doesn’t have a wide diverse pool to spread the risk over, basically, the law is saying, “Look, we’re not going to require those insurers to continue to cover you if you could have been covered on Medicare.”
Therefore, that’s where the smaller company insurers gets to step away and say, “We’re not going to cover that if you could have been covered by Medicare when you turned 65.”
Carol: Correct. Once you turn 65, if you work for a smaller company, it’s a TEFRA/DEFRA federal rule. They pay secondary whether you did what you were supposed to do or you didn’t. It’s their obligation at that point to pay anything secondary.
Victor: If you work for a larger company, ostensibly you’re covered. They would continue to cover your claims for your doctor visits and things like that even if you don’t enroll in Medicare because, under the large company rule, they’re still obligated to be a primary payor of your claims. Is that right?
Carol: Yes. Exactly.
Victor: We haven’t talked at all about prescription coverage, which is actually really helpful because we’re up against a commercial break.
When we come back, I want to move the conversation over into prescription coverage, which is Part D, in what decisions you have to make both when you start the plan and then anything that might happen on an annual basis going forward. Stick with us. We’ll be right back on Make It Last with Carol Baker from CABA Benefits.
Victor: Welcome back to Make It Last. We’re joined today by Carol Baker who’s a principal of CABA Benefits. Not only is Carol a Medicare specialist, but also the Medina Law Firm’s personal broker when it comes to their health insurance. I’ve had a really long relationship with Carol and I’ve invited her here.
We’ve been talking about Medicare generally. We spent the first segment talking about Parts A and B, enrolling in them and what coverage might be available if you’re still working. There is a process when you turn 65 to go and do that.
Carol, we haven’t yet spoken about prescription coverage. What part is that? When do you make the claim? Are there any penalties for not doing it timely?
Carol: Well, Part D, how I try to get people to remember it, D for drug plan. When you file for A and B you want to decide which direction you’re going, if you’re going to come off your group plan.
If you have no coverage, you want to start to investigate your supplement, Medigap options, or Advantage because, depending upon the route that you go, your plan may or may not include Part D or drug coverage.
If you choose a Medigap or a supplement, you definitely want to pick you drug coverage. Now, I have a lot of clients who say, “I’m not taking any medications. I don’t want to pick up drug coverage.”
There’s actually a penalty if you go more than 63 days without coverage or what they call creditable coverage, meaning coverage better than what a group plan would offer.
Victor: Which you might get if you’re still working?
Victor: You could get it privately if you want to pay completely for a private prescription plan and that might be credible coverage, but if you’re still working your prescription plan that’s related to your job might meet the test for credible coverage?
Carol: Correct. You’re actually taxed based on the period of time that you don’t have a drug plan that’s creditable if you don’t enroll timely.
Victor: The longer you go without that coverage the higher the penalty’s going to be?
Carol: Yes. It’s a percent of the national average for each month that you’re not enrolled basically for the rest of your life.
Victor: Oh, wait. This is not a one‑time penalty. When that comes in that’s a tax that you’re pay ongoing from the time that you actually do enroll in prescription coverage or get coverage afterwards.
Carol: Correct. It’s an additional penalty that you would have to pay.
Victor: Is it people don’t enroll because it cost something? Prescription, when you go through and you look at Part D plans, you’ll get charged for them based on the number or drugs that you’re taking and things like that. Do people shy away because they don’t want to spend any more money if they’re not taking prescriptions?
Carol: Yeah. Well, I have certain clients who just maybe don’t believe in standardized medicine or prescription. They believe in alternative routes. They’re either not taking it, they don’t believe in it. Maybe they don’t want to pay for the cost.
Once you take a little bit of time and you explain to them about the penalty and maybe you choose a plan that’s not so expensive, a less expensive plan…
Victor: Like a base level plan that just…
Carol: …base level plan, it’s good on two points. To avoid the penalty and then, God forbid you needed a medication, you would at least have some coverage.
Victor: Even if it’s not optimized based on what is in the plan formulary or where you get it filled, whether it’s a mail order or a local pharmacy.
Victor: What’s the process of selecting the right Part D plan for you?
Carol: I believe that picking the best Part D plan for you is probably one of the most important pieces of this whole puzzle because you want to take a look at the medications that you’re taking, how often you’re taking, where you’re getting them filled against the plans and the formularies that are out there. There are plans without deductibles. There are plans with deductibles.
You want to make sure that the pharmacy that you go to is a preferred pharmacy in a particular plan. Most importantly, you want to check the medications that you’re on so that they’re on that carrier’s formulary list so that they will count toward your out‑of‑pocket. They call it a TrOOP, but your total maximum out‑of‑pocket there.
Victor: Is this something that people have to contact individual health insurance companies to do? How do they figure this out?
Carol: Yeah, you can go a couple of routes. One of the easiest routes is probably going on Medicare.gov. There’s a tab that says “How to choose Part D plans.” You can put in your prescriptions and the dosages and it will come up with different sorting mechanisms. You can sort by premium alone, your total out‑of‑pocket for the remainder of the year.
You want to focus on the plans that all of your medications, or at least 99 percent of your medications, are on that carrier.
Victor: It’s important when you start this process to know what all your medications are, how often you’re taking them, and where you like to get stuff filled. If you put that information into the system it’ll do the calculations and computations to try to figure out what plan will cost what for you.
Carol: Yep, absolutely. You just want to really look and make sure it tells you…There’s a lot of little things to look at when it spits out these lists. Is the plan national? Is it local? Does it cover all my medications? You really want to go into what the computer spits out and click on every little tab to make sure you understand.
Victor: Open all the windows. See exactly what you’ll be paying for each of the various prescriptions, what their charge is, and so you see how much goes towards out‑of‑pocket. When they look at the total cost, they’re including what you have to do to get to the minimum level of out‑of‑pocket before stuff starts to cover.
Do you feel comfortable that that program and that system is effective for clients to use that they can go onto a government website? Sometimes people are so suspicious. Like, “Don’t go onto the government websites. They’re not trying to help you.” Is this an area where it’s a valuable tool?
Carol: I think it’s a good starting point because, otherwise, you would have to go into each carrier’s program and take a look at what they offer. There’s, I don’t know, depending on the state, it could be 20 to 40 different carriers. You certainly are not going to do that for every single carrier out there.
What I tell people or clients ‑‑ it’s actually clients today ‑‑ is that they want to look at their own personal situation. They don’t necessarily want to have the same medical plan as prescription because it’s billed separately.
Some people say, “Oh, I want a certain carrier,” because they think it’s all going to be one bill. You really want to mix and match your supplement or your Medigap carrier against your Part D because the drug plans change each year. The formularies change each year. Someone’s medications could change each year.
Victor: You get something prescribed that’s far more expensive and not cover. You sit through it through the end of that particular year and then in open enrollment you got an opportunity to make that change.
Carol: Yes. That is one thing that I find that people don’t particularly do, is they don’t look at the drug plan each year. The medical plan is, of course, very important, but it’s standardized benefits. It doesn’t change all that much. The premiums, like everything in the world, go up, but they’re not as dramatic.
It’s the drug plan that people do not spend that time to look at. They just look at the renewal which they get and they say, “It’s five dollars more, well.”
Victor: Except there is a drug that came off of the formulary and, until you go and get that filled the next time, you didn’t realize…
Carol: Then you’re out of that open enrollment period and you’re not able to make a change for the remainder of that year. That’s generally where people become the most unhappy.
Victor: You mentioned something about Medigap policies and supplement policies, which suggests that Medicare is not going to cover everything. When we come back from the break, I want you to explain for us what Medigap coverage is. In other words, why do you need it and what’s missing.
Victor: Then what the role of somebody for what you do professionally, a broker, can help with that, so that people can make smart decisions about how to enroll in a plan, why they need one, and making sure that it’s a good one for them.
When we come back on Make It Last, we’re going to continue our conversation on Medicare, specifically when you enroll, what you should be doing. We covered already basic level care, prescription. When we come back, we’re going to talk about Medigap coverage supplements. Stick with us. We’ll be right back on Make It Last.
Victor: Welcome back to Make It Last. We’re spending today with Carol Baker who is, amongst other things, a health insurance specialist. We have her here today talking about Medicare coverage. When we took a break, we were talking about Medigap coverage supplements, which, of course, suggest that there is a gap or there’s a need for supplements. Set the stage for us.
What is it that traditional Medicare doesn’t cover? Why would you consider a Medigap policy or supplement policy?
Carol: OK. Medigap and the word supplement are interchangeable. They’re the same thing. Medicare Part A has the hospital portion, has a very large deductible for hospital. It has a little bit more than a $1,300 deductible for your hospital for the first 60 days. Then you have a $335 co‑pay or cost for days 61 through 90. Then, after the 90 days, there’s a $670 cost per day.
Victor: Which is not covered at all. You’d have to go into your pocket and into your savings to pay that. You’d be billed by Medicare if you had a hospital stay that met all those terms and you’d have to come up with that money.
Carol: Yes. After the 150 days, they don’t cover at all. The reason why you want to get a Medigap policy or a supplement is you want to fill some of those holes that you would be open to or liable for.
I know it’s a silly example, but I explain sometimes Medicare Part A and Part B as a big block of Swiss cheese. [laughs] You want to fill as many holes of that cheese as you possibly can, can afford, or feel comfortable with.
Victor: Some holes are going to be larger than others. To extend the analogy, the cost for a hospital stay might be a bigger hole that needs to be filled than something that isn’t covered on a particular test or something. I’m not making something up, but another area that isn’t covered.
Victor: Do these Medigap policies fill those holes? Talk to me a little bit. What part do they fall under? Are they standardized across the board for all providers? How does that actually work?
Carol: OK. Medicare Part B also has a minor deductible. The last few years it’s been $183 deductible. You can be charged 20 percent over the cost of what Medicare pays. A supplement or a Medigap plan fills in, again, as many holes as you would like to get filled in.
You can think of Medicare as parts ‑‑ Part A, Part B ‑‑ but the supplement plans are alphabetical A through N, depending on the states that you’re in. Those are plans, those are alphabetical plans, gets a little confusing because people start to interchange the parts of Medicare with the alphabetical plans.
Victor: You might have two As. [laughs] You have Medicare A plus you might have a Medigap Plan A that’s an A.
Carol: The Medigap or the supplement plans, there are probably three plans that people generally choose the most. Plan F, Plan G, and Plan N. Those plans fill in the holes that Medicare has on the A and the B side.
Victor: What’s the value of a broker in that decision? Do you bring in expertise about what these plans offer that you can help somebody make those types of selections for them?
Carol: Yeah. Working with a broker for pretty much any type of plan, whether it’s individual, coverage through the federally‑facilitated marketplace, supplements, Part D plans, we don’t charge or there’s no cost to using a broker or a health insurance consultant. We like to use that term.
Victor: Sorry. We’ll use the official term. [laughs]
Carol: It is the official term because there’s no cost to you. We get to know you. We ask you questions about how you use coverage. We ask about your medications. We keep a file for you if you decide to go with us. You have somebody to work with you to help understand the plans at the initial enrollment time, but throughout the year.
Then, every time at open enrollment, when the D plans, the drug plans start to change, you can call up a person that you’ve gotten to know for a long time, possibly, and say, “OK, I’m on the same medications. Can you pull my file?” You don’t actually say those words, but that’s what I’m thinking in the background.
“I’m on the same medications,” “I’ve moved,” or, “I’m on different medications. What’s going on for next year? What should I look at?” We help enroll somebody, help you understand the plans. We’re there throughout the year to call for advice, which is great. There’s no charge for us.
Victor: When it comes to enrolling in your first initial plan, is there timing element to that, or benefits to doing that when you enroll for Medicare at 65 either in terms of insurability or something like that?
Carol: Yeah. When you’re 65, if you’re not covered under a large group plan and even if you are covered under a large group plan, it’s worth the investigation because maybe your employer has a high deductible plan. Maybe the premiums are high. Maybe you’re not on any medications. It’s always worth investigating what the options are out there.
You do want to take a look the three months before you turn 65. Start investigating either on the computer yourself or reaching out to a health insurance consultant and saying, “I’ve just filed. I don’t have my card yet but I want to research and figure out what we need to do.” You do want to be enrolled by the first of the month of your birthday month because that’s when your Medicare starts.
Victor: Got it. If people want more information on how to contact you, Carol, and use your services, where can they reach out?
Carol: Sure. It’s Carol Baker, www.cababenefits.com. C‑A‑B‑A benefits dot com. Apparently, there’s too many Carol Bakers in the world. I couldn’t make it Baker Insurance or any variation of that. You have to have a certain specific name with the department of insurance and not used in all that good stuff. My phone number is 973‑428‑0863.
Victor: They can just contact you, right? Say, “Listen, this is where I’m at,” reach out, and have a consultation to try to figure out what to do.
Carol: Absolutely. I generally start with just over the phone information. I’m happy to meet people at their home or at a local diner, Starbucks, wherever they feel most comfortable and go over everything that they need to know. Again, they can put a face or a voice to the person there.
Victor: We have the voice from the show. Now they’re going to be able to put the face to it if they actually meet you in person. You go with anybody in the state and I think that’s fantastic, so I’ll give the number again.
If you want to talk to Carol about Medicare and Medicare supplements you can reach her at 973‑428‑0863 or visit the website she’s created at cababenefits.com, that C‑A‑B‑A‑B‑E‑N‑E‑F‑I‑T‑S dot com.
I want to thank you, Carol for being our guest today on Make It Last. We really appreciate all of the information that you shared.
Victor: Thanks for being here. We’ll be back next Saturday on Make It Last. We’ll continue our conversations on retirement. This has been Make It Last, where we help you keep your legal ducks in a row and your financial nest eggs secure. Catch you next time. Bye‑bye.