We all remember story problems from grade school. This scenario about an Oregon couple has the elements of one of those story problems, albeit with more complicated arithmetic.
The Salem couple are retired, enrolled in Medicare and plan to live abroad for a year. For Medicare, these are their choices:
- Keep their Medicare, each paying the $165-a-month Medicare Part B premium, and also enroll in the least expensive Prescription Drug Plan costing $1.60 a month. Neither Medicare nor the drug insurance would cover them while living in another country.
- Fail to pay the Medicare premium or to enroll in prescription drug insurance, and incur late-enrollment penalties for both upon their return to the U.S. and their re-enrollment in Medicare.
The couple talked with a Senior Health Insurance Benefits Assistance (SHIBA) volunteer counselor, took the various cost figures and said they would do the arithmetic before making their decision.
For this Medicare story problem, we will optimistically assume that the Medicare Part B premium remains at $165 a month and that the $1.60-a-month premium for the lowest-cost drug plan continues.
If the couple live outside of the U.S. for one year, their cost to keep Medicare and drug insurance would be an estimated $4,000 for the two of them. That is a robust sum to pay for insurance that does nothing for them.
But suppose they neither keep their Medicare nor stay enrolled in the inexpensive drug insurance. They would incur a lifetime late-enrollment penalty for each decision. The late-enrollment penalty for not having paid the Medicare Part B premium is 10 percent of the current premium per year of delayed enrollment, or $16.50 a month for each of them. The monthly penalty for not having drug insurance is 1 percent of the benchmark premium, or about 33 cents times the 12 months they wouldn’t have it ($3.96 each).
Returning after a year, their combined monthly penalties would amount to an estimated $41, or $492 over the first 12 months. Remember, though, that these are lifetime penalties. Assume a life expectancy of 10 more years, and the penalties balloon to about $4,920 (granted, inflation would reduce the value of those penalty dollars).
Although we don’t know what the couple decided, it seems likely that they would elect to keep their Medicare and drug insurance. That — albeit dependent on unknown contingencies — may be the less costly decision. Keeping Medicare and drug insurance also eliminates the hassle of re-enrolling and the every-month annoyance of paying a penalty.
If you would like to make an appointment with a SHIBA counselor, or to ask a question to be answered here, please see the end of this column.
You have written that SHIBA counselors can obtain Medigap premiums, which is a nice service. But we can get premiums ourselves for Medicare Advantage insurance, so why not for Medigap?
You can, although this is relatively new. As with Medicare Advantage insurance, you may obtain premiums for Medicare supplement (Medigap) insurance policies on the Medicare website, Medicare.gov. Click on Find health & drug plans and, after entering your ZIP Code, select Medigap policy.
After entering your ZIP Code again, you will be asked three routine questions, then follow the prompts. You will see the various plan types (Plan G is the strongest available to most Medicare beneficiaries). Be sure that you are reviewing the plan type that is of interest to you.
To see side-by-side coverages for various Medigap plan types, see pages 38-39 of the 2023 Oregon Guide to Medicare Insurance Plans.
If this site is less intuitive that you like, then either a SHIBA counselor or a state-certified insurance broker who is knowledgeable about Medicare can assist you.
Jim Sellers of Salem is a certified Medicare counselor with the Senior Health Insurance Benefits Assistance (SHIBA) program. To ask a question to be answered in this column, e-mail [email protected]. To schedule a free SHIBA phone, Zoom or in-person appointment with a volunteer Medicare counselor, call 800-722-4134.
STORY TIP OR IDEA? Send an email to Salem Reporter’s news team: [email protected].
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