In the Money Insight: Retiree Healthcare with Caprice Black

Caprice Black, an independent healthcare broker with JRS Healthcare Solutions, recently joined me on In The Money Insight to discuss healthcare options for people in retirement. She helps retirees find the right healthcare coverage, whether they are Medicare eligible or not yet 65. Caprice and I spoke about what people need to know and plan for as we approach the open enrollment period for both Medicare and coverage offered under the Affordable Care Act. A summary of our conversation is below.

Cory:?Thanks for joining me, Caprice. Can you share the Medicare open enrollment deadlines people need to know?

Caprice:?The pre-enrollment period started on October 1—this is when people can look at the plans and options available for 2023. If you’re already on Medicare, you can submit plan changes beginning on October 15. And the deadline to choose your plan is December 7.

Individuals already on Medicare should have received their annual notice of change by the end of September. This document lists the changes to their current plan and is a key resource as they decide if they want to switch to another plan.

Cory:?And what about open enrollment for people who obtain health coverage through the Affordable Care Act marketplace—are these deadlines the same as Medicare?

Caprice:?No, they’re not. Open enrollment for 2023 coverage starts November 1 and goes through January 15. But if you want your plan to start January 1, 2023, it’s prudent to have your application or plan changes submitted by December 15.

Cory:?Thanks, Caprice. What expectations should people have for their healthcare expenses in this inflationary environment?

Caprice:?Let’s first talk about the market for people who are not yet 65 and Medicare eligible. The maximum out of pocket costs for plans offered under the Affordable Care Act are rising from $8,700 to $9,100 for an individual. This is what an individual is responsible for before an insurance company begins covering 100% of their healthcare costs.

Now let’s talk about people eligible for Medicare. They should know that on Medicare Advantage plans, the maximum out of pocket is rising from $7,500 up to $8,300—though most Medicare Advantage plans offer out of pocket caps that are a little bit lower.

The Centers for Medicare and Medicaid Studies (CMS) expects prescription costs on Medicare Advantage Part D drug plans to fall by about 1%, which is welcome news for consumers. This is likely due in part to the Inflation Reduction Act that was signed into law earlier this year.

CMS also expects, after a big rate increase from 2021 to 2022, that Medicare Part B premiums will stay the same in 2023 as 2022. This is more welcome news. The Part B deductible under original Medicare is $233, and that is also not changing.

Some readers may know that if you have income above a certain threshold, you have to pay more for Medicare. The income rate adjustment on Medicare Part B for higher income individuals is jumping from $91,000 to $97,000. This means retirees who have at least $97,000 in taxable income have to pay more for Medicare coverage.

Cory:?From a consumer’s point of view, you just shared some good news. I’m glad some of the rates and costs you spoke about aren’t going up much or at all for many retirees.

I’m glad you brought up that $97,000 threshold. Many people often don’t know that you have to pay more for Medicare Part B coverage if you exceed an income threshold. And this is one reason we spend so much time discussing tax planning and withdrawal strategies at Falcon Wealth Advisors. With all of that said, I’m happy to see that threshold is rising from $91,000 to $97,000 for an individual.

Caprice:?Yes, and that means for a married couple the threshold will be $194,000. And if a person feels they shouldn’t have to pay more for Medicare Part B because of a life-changing event, they can request a second determination.

Cory:?Let’s now talk about the Inflation Reduction Act. What is its impact for people who are not yet age 65?

Caprice:?The Inflation Reduction Act not only caps out of pocket healthcare costs but also?extends subsidies ?for three more years for health coverage purchased on the exchange. These subsidies were originally part of the American Rescue Plan Act of 2021 and their extension is good news for many people purchasing health insurance on the exchange. Without these subsidies being extended for three more years, we could have seen premiums rise by an average of 53%.

I recently helped a couple here in Kansas City purchase insurance on the exchange. They have about $75,000 in taxable income, and without the subsidies, they would have been paying $1,300 a month for their health coverage. But because of the subsidies in the Inflation Reduction Act, they only have to pay $233 for their healthcare coverage. These subsidies have allowed more people to purchase quality, long-term health coverage, and we’ve seen historic levels of enrollment because of them.

Cory:?That’s certainly good news for people who purchase insurance from the exchange. These subsidies don’t lower the cost of healthcare, but simply shift much of the cost from the individual consumer to the government, correct?

Caprice:?Correct, the subsidies are basically an advanced tax credit. When you purchase insurance on the exchange, you have to estimate your income for the upcoming year. If you underestimate your income, the government may come to you later and ask you to return some of the subsidy. It’s also worth noting that you can update your income throughout the year, should you experience a life-changing event like marriage, job loss, or any other number of factors that impact your finances.

Cory:?So we’ve covered how the Inflation Reduction Act will impact people not yet on Medicare. How will it affect people who are 65 and on Medicare?

Caprice:?The Inflation Reduction Act will cap how much seniors covered by Medicare pay out of pocket for prescription drugs at $2,000, beginning in 2025. There’s not currently a cap at all. Both annual and monthly costs will be capped.

Beginning in 2026, the legislation allows the federal government to negotiate the prices of certain non-generic drugs with manufacturers, which they could not do previously. This should help lower the cost of drugs in the medium and long term, and it’s expected this could help the government save at least $100 billion over a 10 year period.

The Inflation Reduction Act also puts an inflation cap on Medicare Part D drugs. If a pharmaceutical manufacturer raises the cost of a drug at a rate that exceeds inflation, they will have to pay a tax. And they’re capping drug plan premiums at 6%.

Finally, the legislation will focus on controlling out of pocket costs around certain diseases, like diabetes and insulin treatment. Cost sharing will also be capped on vaccinations, like the shingles vaccine. This will benefit both people on Medicare and Medicaid.

Cory:?It sounds like there are a lot of consumer-friendly changes for retirees. If you would like to speak with Caprice about the healthcare options available to you, please reach out to me and I would be happy to connect you. And if you would like to discuss your financial plan and how healthcare costs impact it, please contact me today. You can reach me directly at?[email protected] .

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