Medicare 101: The Basics

Drew Thomas  0:04  
Fast fact, Medicare was signed into law on July 30, 1965. Currently, over 66 million Americans are enrolled in the program. I'm Drew Thomas and you're listening to Bank Chats.

Drew Thomas  0:20  
As we jump into this latest episode, some people may be thinking or asking themselves why a podcast about banking and financial education is taking an episode to focus on something like Medicare. And the answer is that healthcare accounts for a significant portion of a typical person's annual spending. According to what I was able to find at the Centers for Medicare and Medicaid Services, in 2022 the average American spent $13,493 on health care, which is a $4.5 trillion national expense. And so, with us today, to talk a little bit about Medicare and how this all works, is William McKendree. He's the director of the Pennsylvania Healthcare Benefit Solutions Program. He was previously the program manager for Pennsylvania's Health Insurance Assistance Program and was the director for the Western Pennsylvania Center for Aging Services. So, Bill, you have absolutely no credentials to speak of, is what I'm saying.

William McKendree  1:33  
None it's an embarrassment to my organization.

Drew Thomas  1:38  
How are you today? We haven't talked in a while.

William McKendree  1:41  
I'm doing fine. We, we just finished the finishing touches on a new studio so that we can do podcasts and Zooms like we're doing right now. So, welcome to my new studio.

Drew Thomas  2:01  
Yeah, hey, that's a, that's awesome. That's really great. I mean, I know you guys have been doing some stuff with YouTube channels and stuff, and we'll put links to those in the description for this episode, because it's going to be really important to give people an opportunity to see the full details of what you can share, because we're not going to be able to get to all of the little minutia that you can help people with whenever we talk through this conversation here, because I know we've, we've worked together before on this, and you have a couple of hours worth of ,of information that you can share, really, with people. But, by the way, I was going to ask you, do you know that you're actually the second William McKendree to show up whenever you Google your name?

Drew Thomas  2:40  
Which is which

William McKendree  2:41  
Is the first one a, a bishop of the Methodist Church from the 18th or 19th century?

Drew Thomas  2:49  
He is, yeah, that's the first one. But still being number two on Google is pretty impressive for you know.

William McKendree  2:55  
Without doing anything criminal, yeah, I'd say I'm doing pretty good.

Drew Thomas  2:59  
Yeah. All right, so, so, so let's jump into this a little bit here, and maybe we can start out with a very broad question, which is, what, what exactly is Medicare? Is it, is it a health insurance plan? Is it something that people have, you know, while they're working, after they're working? What exactly is Medicare?

William McKendree  3:19  
Medicare looks very much like an insurance product. It was intended to look like an insurance product. It's a federal government program. It was created in 1965 to provide healthcare coverage for individuals that met the basic qualifications. It's administered by the federal government, specifically by the Centers for Medicare and Medicaid Services, abbreviated to CMS. And people enter the basic platform of Medicare through the Social Security Administration by going to the Social Security Administration in person into one of their community offices, or ideally, they'd prefer that you do it online by going to their website, ssa.gov. It was essentially created back in the mid-1960s, because back then, if you would have been eligible for Medicare, if you would have been 65 years or older, was very, very likely you had no health insurance coverage. A significant majority of individuals 65 years or older did not have health insurance coverage. They did while they were working, but when they stopped working, it went away, and they found it difficult or impossible to get an insurance company to sell them, and even when an insurance company sold them one, they found that it was not very good, it didn't do a whole lot, and when it was time to use it, they were denied access to the services that they presumed they could have. And so, Medicare saw this as an essential problem for people that would meet that criteria, people that were 65 years or older. There was enough political determination to get it passed. And in 1965, Medicare was created, along with its cousin, Medicaid, to assure that individuals that met the criterion, not that much criteria to meet for Medicare, were guaranteed at least a basic platform of accessing benefit that would pay for a big part of their health care services. Okay? And when it was originally created, it was intended for people that were 65 years or older. Within a short period of time, it was realized how successful this program was it. It went from less than 50% of the people eligible for Medicare had any kind of health care coverage at all, to close to 100%. And that number has never dropped below 97%-98% of people eligible were enrolled in something in any given year. And so, Medicare was ultimately expanded within a few short years to eventually include people that were under 65 but they were recognized as disabled by the Social Security Administration. And then, expanding even further to include individuals that were under 65, were not necessarily disabled, but were diagnosed as end-stage renal, they were in the final stage of their kidneys shutting down. And these would be individuals that would be on, or soon going on renal dialysis or kidney transplant. So, right now, the portals for being eligible for Medicare is, you age into Medicare. If you're a US citizen or permanent legal resident of the United States, you're eligible for Medicare if you simply turn 65 years old. You could also be eligible if you're recognized as disabled, receiving disability benefits. And after a period of receiving disability benefits, again, you're automatically eligible to enter the Medicare system. And ultimately, the last eligibility portal was if you are under 65 but you're diagnosed as end-stage renal, you immediately have access to the Medicare system. So, those are the three current basis for establishing your eligibility, and by far the largest majority of people in Medicare do so by reaching age 65. Some postpone it because they're continuing to work at 65 and they're covered by an employer benefit. But for those individuals who want to get into Medicare as quickly as possible, usually it's the people turning 65 and usually within that period, around the month that they turn 65.

Drew Thomas  8:15  
Okay, so, so we know that we're looking at, generally speaking, an elderly, you know, 65 and older population, or someone with some sort of a medical reason to be able to be eligible for Medicare prior to that. But I know that Medicare, I think that a lot of people have a misconception a little bit about Medicare and what it covers. There's I think there are people who think that, well, as soon as I turn 65 the government just takes over and I get all my medical stuff taken care of, you know, whether it's, you know, just my medical or whether it's dental or vision and things like that. Can you talk a little bit about, you know, how does it work, like, what's Part A, what's Part B? There are a lot of components to Medicare that I think people have questions about or concerns with.

William McKendree  9:01  
Well, and this is probably the biggest issue about trying to wrap your head around the Medicare system. There's a lot of moving parts, and it's like a jigsaw puzzle figuring out what all these parts are, what they do, how they fit together. It wasn't always necessarily this complicated.

Drew Thomas  9:25  
It never is. Starts out simple, and then it always gets more complicated.

William McKendree  9:32  
Yeah, let the government have a whack at it, and they'll, they'll, you know, turn the straight line into, into a pretzel. So, when Medicare was originally conceived, there were two parts to it. There still are. This is the platform that we still have existent, and it's actually referred to as the original Medicare components. So, you have the Part A and the Part B. The Part A was intended to cover a huge part of the cost associated with being inpatient, the inpatient care services in a hospital or in skilled nursing facility or rehab facility hospice care. Ah, and Part B was intended to cover a significant part of the cost associated with the outpatient services, the visiting your physician or specialists, outpatient diagnostics, outpatient operations. And both A and B from the beginning covered a big hump, and still do, but as the actual dollar amount of what they didn't cover. So, if you say, well, they're not going to cover 20% well, okay, if 20% is only a few dollars, that's not a big deal, but if 20% of a million dollars, that's a big deal, and as costs of health care became more and more expensive as the kinds of services became more and more diverse and essential for individuals maintaining the health care. So, then Part A and Part B just weren't going to be enough, and this required looking at the other stop, go ahead. Go ahead.

Drew Thomas  11:23  
No, I was just gonna ask, so, so is it a matter of the idea that the costs just outpaced the government regulation that says what percentage they were gonna pay for, or is it the fact that it's just based on a percentage and costs have increased, so now 20% of what used to be $100 is now 20% of a million dollars?

William McKendree  11:42  
Basically, it's a bit of both. It's the idea that Medicare was never intended when it was created to be truly comprehensive, that it would pay absolutely positively everything for the cost of accessing the care. And, but, when it was originally conceived, it was presumed that they would pay enough and that the individual in Medicare would be able to out of their own pocket, come up with the balance that represented the cost share. But they often defined that amount as a percentage, for example, Part B will cover 80% of the cost associated with outpatient services. And if, as I said, 80% of $100 is manageable, then that's not a outrageous problem. But if it's 80% $100,000 so as costs of care obviously kept increasing, just inflation, if nothing else, but also just the complexity and the quality of services from 1965 to current have increased, and with that, increased expense. But also, Medicare, it isn't literally just always a percentage. There's dollar amounts that are required to be shared. It's the totality of that, though, and the constantly escalating cost of health care that individuals find difficult to rely just on Medicare A and B, and even from the beginning, there were private insurance products that would supplement Medicare A and B. They were not seen as essential, though back in the 60s and early 70s, as they are now. Private insurance products are indispensable. One does not go into Medicare and get just the platform of Part A and Part B. It's where you start. It's what you enroll first. But then you build on that platform by picking up the other products, the private insurance products. And when it was conceived, it was the idea that a person would turn eligible, typically, they would turn 65, they would enroll in Part A and Part B, and that would probably be enough. And maybe they would get a private insurance supplement, but it wasn't the majority of individuals. The majority of individuals would relied on just A and B. It's not the case anymore. And this is the big part of what makes Medicare so hard to wrap your head around. What are the other stuff that goes along with A and B? That's common, that's a, a common denominator for everyone, but it's the other stuff, and this is a very subjective part of Medicare. What's the best for me under my circumstance, my needs? And this is where having the right navigator to tell you what all of these things are and how well they work, and what they do and how they work with everything else is essential. And so, when an individual is going into Medicare, they kind of have a sense of, well, I have to pick up Medicare A and B. What else do I have to get, and what else is going to work for me, and who's going to tell me the right information that's going to help me make the best choice. Is it in my best interest, or is it in the guy that's selling these products best interest because of the commission they're going to get? Yeah, and there's where the problem becomes.

Drew Thomas  15:40  
Yeah, that's definitely something I want to touch on, as far as figuring out you know how to get some of the answers to these and who to, who to talk to and who to trust. Before we get to that, let's talk a little bit about how people pay for Medicare, because I think that there is, at sometimes, a bit of a misconception in that people think that they're paying into Medicare as though it's a savings account, like when they are, you know, that comes out of their paycheck when they're working, they work for 45 years, they paid into Medicare, and they think that, you know, when they retire, suddenly, there's some savings account sitting there waiting to pay for all their medical bills. And in reality, it doesn't really work that way. Correct?

William McKendree  16:20  
Correct. Again, go back to Medicare's origins, when Part A and Part B were initially conceived, it was, it was recognized at that point, and although the paradigms changed, the rules haven't. Part A, the part that covered inpatient costs, at least some of them, was considered far more important. In fact, literally, it was presumed that as long as individuals were in part A, that itself would be sufficient, because this is where the costs of healthcare were going into hospital, being an inpatient during those periods of time.

Drew Thomas  16:20  
Needing a major operation, or something along those lines.

William McKendree  17:11  
Yeah, and in those days, it was, it was also presumably your stay in hospital would be for an extended period. You're going to either be reconciled out through the front door, or you will be reconciled out through the back doors of the morgue. We're going to bring this to a terminal situation, right, right? And as result, Part A had this unique characteristic of while you are working, you're paying in to support the Medicare Part A system of Medicare, while you work from your wages, is taking a certain percentage that represents your contribution to the Medicare system. It's not an account that you put your money into. It's you are paying your dues to keeping Medicare Part A afloat. And even if you're self-employed, you have an obligation when you're filing your federal tax return to indicate what your net earnings from being self-employed were and pay a percentage of that in what's called self-employment tax. Part of which is paying your contributions to keep the Medicare Part A afloat. And in return for that, you're given credits. For each year that you work and pay into the system, you get four credits that give each year divided into four quarters, each quarter giving you a credit. So, credits, okay, when you've acquired 40 of those credits, so work 10 years doesn't have to be 10 years in a row, but over your lifetime, work 10 years, you acquire the minimum number of quarters you need to have your Part A, a zero premium. Now, if you haven't worked or paid into the system while you're working the requisite 40 quarters at least, then you can still have Part A, but it's no longer free, and there's a premium. And in fact, the premium could be significant. It could be more costly just to have Part A than all the other parts of Medicare put together, including the private insurance. So, there's a strong motivation for individuals, as they're working to absolutely positively make sure that they're paying in to support the system or, and this was anticipated back in the 1960s, one of the spouses may not be working. One of the spouses may be a person that is taking care of the household, taking care of the kids, and not holding down the job that pays a wage or self-employed revenue that they're paying into the system. Now they piggyback on the working spouse. So, if one of the married couples has the 40 quarters, then essentially they both have the 40 quarters. Part B was always seen as more optional. Even though it's essential, it's still the basis for its support has a more optional premise that when you finally enter Medicare, specifically the Part B portion of Medicare, what's triggered is a monthly premium that you have to pay. And even though you likely will pay nothing for your Part A that's covered by you supporting the Medicare Part A system, you will pay a Part B premium, and that amount is going to be determined by your wealth. Individuals that have a larger annual income are going to pay a higher Medicare Part B premium when they finally enter the Medicare system.

Drew Thomas  21:05  
Is, is that based off of your income while you're working or you're in, or your retirement income at the time that you enter Medicare?

William McKendree  21:13  
Well, that's based on the Medicare system asking the Internal Revenue Service to report what your annual income from your federal tax return was from two years ago each year. So, okay, for example, this year, 2024, the Medicare system asks the Internal Revenue Service to tell them what your annual income from your federal tax return was from the year 2022. They will always advance that. So, for next year, 2025, they're going to ask the Internal Revenue Service to say what your annual income was from 2023. So, every year, it's absolutely going to be recalculated and redetermined. But for some individuals that if we look back two years ago, they were working full-time, they were generating a significantly larger amount of income than now that they're retired, they have this dilemma of, in the look back that they look much wealthier annually than they do now. Now they get to request that Medicare reconsider the determination and but the burdens on them to reach out and say, well, wait, let me prove to you that what I'm looking at now in annual income is different from what you guys are looking at when you looked two years ago. I was working, my spouse was working, we were generating that significantly larger amount, and you're imposing a much higher Part B premium on the now as a result of that. Let me show you that my now is different. And if it's done correctly, if it's done with a commitment to make sure the details represented to the Medicare system, then the reconsideration is successful, and the Part B for the current year is reduced. But again, here's the problem, getting someone to assist you in putting together that request for reconsideration might be difficult, and often the guy selling the insurance products or purporting to guide the people through when it comes to those kinds of problems, can't be found or aren't available to do that kind of stuff. So, it's either the burden on the person themselves entering Medicare to request a reconsideration, we're finding someone that will say, sure, we'll be more than happy to help you navigate through it. And this can mean the difference of paying an amount that represents, from their annual perspective, a fair amount, instead of an amount that's literally hundreds or maybe even 1000s of dollars more in cost based on a misrepresentation of the income. So, it can be a significant difference.

Drew Thomas  24:03  
So, that kind of brings me to what we started talking about, which is, you know, how do you even know this stuff? You know where, and I don't mean you specifically, I mean you know, you know where you're coming from, because you've lived this world, right? But me, if I didn't know you, and I wasn't listening to this, this podcast, or, or, or visiting your YouTube channel, or attending one of your seminars, how do people even know that that's even a possibility? You know, do they just get a bill in the mail and just blindly pay it, because that's what we're told to pay? Is there, is there a way for you to buy private insurance to instead of using Part B, if you find that private insurance is cheaper?

William McKendree  24:45  
Let's, let's go back to the idea of the expectation that when you are ready to enter the Medicare system, you are about to immerse yourself in a really complex process. And it's critically important, making sure that you are getting a high-quality level of healthcare and being able to afford it. For most individuals is a high priority, especially as they're in their 60s and getting older.

Drew Thomas  25:18  
Sure, I know people that have, that have chosen to keep working just so they can keep getting healthcare from their from their employer.

William McKendree  25:24  
Because at least they understand that devil that they're dealing with. So, while Medicare should, like so many other complex programs, make available a national helpline or that assists individual. They don't. They don't really, of course. So, it's essentially in the same way with paying federal income taxes. It's like you're supposed to know how this works, and it's your burden to figure out how it works. There are some state agencies that exist to help people figure this out. I ran one of them for over 15 years, but they're staffed by volunteers. They're not paid, and if they were, they certainly wouldn't be paid enough to motivate getting the best and brightest. So, the burden is often on individuals to self-educate. Now they know something's happening because their mailbox is telling them as they're approaching 65, they're getting inundated with stuff. The problem is that's coming from a very biased self-serving entity. It's coming from insurance companies that are hot to sell products, and so they're going to attempt to capture those individuals as they're coming into Medicare and persuade them to let them navigate them through the process. Inherently, there's nothing wrong with that, if you understand that those individuals are not representing your interests. They are paid by insurance companies through commissions to sell their products, and if you're lucky, the best you're hoping for is no damage is done in this process to help get you through it. So, there are other entities. There are counseling firms, practices that are part of law firms or accounting firms, or, in our case, or a nonprofit that does this as a free service, and the goal of any of these programs should be to have available well trained and highly motivated individuals that are not comped by selling something, they're simply, they're either paid fee to do the counseling service, or they're doing this because they're motivated to make sure that people going into this system are well educated. This should be a educational process, and it really should be, if I could, you know, wave the magic wand an essential function of government. There should be an agency staffed with paid professionals whose job is to help navigate people through the process, much like there is where the Social Security Administration or other agencies. And there is, therein lies the problem. We're imposing on the American population, the necessity of making hard choices that economically and health wise potential, essential choices, and if they're left to their own devices, if they're lucky, they do okay. If they're not, it could be a disaster, that may be a mess that they can't clean up later. So, yeah, it's, I'm obviously impassioned by the idea that people in the community need a service that's going to be on their side, representing their interests, that's unbiased and objective and helps them make the right choice. Not because we're trying to sell something, but because, you know, it's, it's a virtue that people are, are educated to the point that they can make a good decision.

Drew Thomas  29:45  
So, you mentioned something about maybe not being able to correct this. So, I guess my next question really is, say I'm, you know, say I'm 65, I'm 66, I've been enrolled in Medicare, and I've made my choices, and I'm in but now I'm wondering, did I, did I pick the right thing? Did I, did I choose the right path? Is there a way for me to adjust, you know, what I'm paying now, short of the annual review of Part B. You know, is there a way for me to then, you know, go to someone say, okay, you know, go to, I don't know if you can go to healthcare.gov, and look for an insurance plan. I don't know if it's something where there are specialized ones that only are applicable to Medicare. What do I do if I if I want to make sure that I'm that I've done the right thing?

William McKendree  30:39  
To some degree there is the ability to self-correct. But the most important decisions are going to be made at the beginning, when you enter Medicare. So, the first, I guess, the first ultimate decision is, when am I going to do this? Am I going to do this when I'm initially eligible, when I turn 65, or am I going to postpone it because I'm working, because I have an employer benefit that is okay, it's not great, but it's good enough? It's affordable, it gives me access to the healthcare services I want, and I can manage through it. And plus, I also intended to work anyway past age 65 so it's again, better to work with the devil that you know.

Drew Thomas  31:23  
So, I still have to tell Medicare, I'm sorry to interrupt, I still have to tell Medicare that I want to be enrolled at 65 it's not like you just automatically get dumped into Medicare?

William McKendree  31:32  
No Drew, old wives’ tale, okay, uh, when you turn 65, if you are not already collecting Social Security benefits, which likely you're not, because now the normal retirement age is past 65 and probably most likely because you're continuing to work, you also postpone collecting your Social Security benefits. As long as you are still working, as long as you're covered by an employer health benefit, you have no obligation to enter Medicare Part A or Part B, and you have no obligation to even tell the Social Security Administration or Medicare that you're postponing. In fact, if you reached out and says, hey, I just want to let you know, I'm postponing, they would say, okay, fine, let us know. Don't bother us. Go away. So, there is an old wives’ tale that when you turn 65 you have to pick up Part A. No, you don't. You can postpone Part A and postpone Part B, and nothing bad will happen. Now, and I don't know why, I, well, if you had another hour I'd tell you why. But essentially, if you're collecting Social Security benefits, then the Medicare system will insist you take Part A when you turn 65 but that's the only thing they'll insist. And if you're not collecting Social Security, they won't even insist that. They'll say, fine, you know, come back when you're ready to enter Medicare. And so, a large number of clients come to us as they're approaching 65 and say, I just want to make sure. Do I have to do anything? And I'll ask, okay, are you collecting Social Security? No, no, no, I don't do that for a couple more years. All right. Are you working? Well, my spouse's working, right? That works just as well. If either you or your spouse are working, are you covered by the health benefit through that employment? Yes, then if you want to hold on to that benefit, if you would rather continue that benefit than joining Medicare, you do not have to reach out at all, and you do not have to enroll in the Part A or the Part B, and you will not be penalized. Now, when finally, you stop working, or your spouse stops working, and that benefit comes to an end, then you have a grace period to get into Medicare, and if you don't get into Medicare, yeah, now, you will be penalized for not securing the coverage. But it, in that regards to be very user friendly, it encourages you to stay with your employer benefit, if that's what you want. Then there's some guys that don't want to stay with their employer benefit. And Medicare will say, okay, you're certainly eligible to join, but it's a choice you have, and you're not again, to drive this point, hope you're not required to reach out and notify the federal government, nor are you mandated to picking up any part of Medicare, as long as you're covered by an employer plan and as long as you aren't collecting Social Security benefits. Then comes the point, what ultimately and again, the client who now comes to me and says, well, I'm gonna stop working, and my employer's gonna stop my health benefits. Okay? And I recommend that that decision really needs to be made about three months before it goes into effect. Because you're gonna need to do some stuff. So, first of all, you're going to need to finally enroll in the Medicare Part A and Part B, or if you already got the A sometimes happens, and pick up the Part B then. Make sure you've got your platform established. Well, then, well, then we have to pick private insurance products that are going to enhance. And this is where is answering your question. So, as I'm entering Medicare and doing it now that I'm 65 or I'm doing it because I postponed entering Medicare, what private insurance do I get? And the whole universe, Medicare, can be divided into option one or option two. Option one is, I'm going to use Medicare Part A and Part B as my primary coverage.

Drew Thomas  36:11  
Okay.

William McKendree  36:12  
That's my platform that's going to be when I go to a doctor or a hospital or a care provider and they say, what's your insurance? Medicare A and B. Then, they're going to say, well, you know, that only covers 80% this is going to be pretty expensive. So, what else do you got? Then you say, I have a insurance supplement or a private insurance company, okay? And they're called Medigaps. And that private insurance supplement will pay the balance, the entire balance, or close to the entire balance of what A and B don't pick up. So, between my Medicare A and B and my private insurance Medigap, I have an expectation that I can go to any doctor or hospital care provider that takes Medicare A and B, and that's pretty much all of them in America. But when I get there, the entire cost of my health care is paid for. Said, wow. It's like, well, how much does that cost? Well, on top of paying my Medicare Part B premium, I have to pay a premium for the Medigap. It's going to be likely over $100. And again, depending on how old I am, and depending on how good or bad I do my shopping, it could be more, might be even less, but I still have to pay that, and I have the expectation that that coverage is going to be quality coverage. It's going to do a good job. But maybe I'm not that sick, maybe I'm not that much in need of that kind of comprehensive coverage. So, I might be swayed to the other option. And the other option is, instead of supplementing Medicare A and B, with a private insurance product, I'm going to effectively replace Medicare A and B with a private insurance product. Now the second option, and this is typical, this is probably what most people think of when they think of Medicare coverage, is a private HMO, health maintenance organization or PPO, preferred provider. In either case, managed care sold by private insurance, people are used to them because that's typically what they have while they're working, sure, and they have certain drawbacks, like they have networks, and if you want to maximize their coverage, then you have to stick within the network. And there's going to be cost sharing, there's going to be co-payments and deductibles that don't necessarily exist in the first option, I told you, because they are never going to cover comprehensively everything, and there's no guarantee they're going to stay that way from year-to-year. Every year they can change. And this is where you alluded to, and every year, a provision is made between October and December, called the annual enrollment season. It's where people get to review these Advantage plans and say, is this going to work for next year as well as it's doing this year? And is there something better? And you can switch if you have an advantage plan, an HMO or PPO, you can switch from one to the other during this enrollment season. But you can't switch from an advantage plan back to a Medigap unless, well, because they are so comprehensive, these Medigaps, we're going to pay for everything. I mean, you are paying nothing for the rest of your life. And people are going to say, well, that's now what I want, because now I'm really sick. The Medigap company is going to say, yeah, well, see, we get to do something that advantage plans don't get to do. We get to underwrite here. We get to say, we want to check out your health status, and if we don't like the characteristics of your health status when you look like you're going to be too risky, too expensive to us, we can turn you down. Now, during the first six months of you entering Medicare, you cannot be underwritten for these Medigaps. If you come to a Medigap seller during your first six months of being in Medicare and saying, that's what I want. I want a Medigap, they can't say, well, we better check you out. They can ask you things like, okay, you know, how old are you? And what level of Medigap do you want, and what is your zip code? And they might ask questions to give you a discount, like, are you married, or, you know, is your spouse also going to buy a Medigap? But they can't ask the hard questions like, do you have cancer or heart disease? What's the shape of your kidneys? It's like those are the questions exclusively reserved in the underwriting process. And so, individuals, the very beginning comes very hard decision. Do I want to get superior coverage, a product that's going to guarantee that I can go pretty much anywhere I want in America, and when I get there, it's going to pay pretty much everything for the cost, and it will stay intact for me as long as I want to keep paying the premiums forever and ever and ever. But if I'm not really utilizing this, and do I want to pay those kind of premiums, because that other option, the option that has limits and laws, but their perk is they can be very, very inexpensive. The premiums can be as low as, how about zero, or certainly less than $100 in fact, the biggest majority of these second option type products, these Advantage plans, absolutely positively, are under $50 a month, and this is a huge motivation. I'm not sick, I don't use a lot of services, and I can get coverage as low as zero. Are you kidding? It's like so the only thing I have to pay for is the Medicare A and B. It will be like you don't get to use Medicare A B, yeah, but you still have to be enrolled in it to be able to get an Advantage plan this HMO or PPO that's going to replace relying on Medicare A and B, you still have to be enrolled in Medicare A and B. You still have to pay that premium, whatever it is, for Part B, but then saying I can get a zero premium HMO product or PPO product that will give me some additional coverage, not great, but I don't need great, but I don't have to pay an additional cost for it. That's an incentive and something else these option two products do; they'll offer a bunch of swag that steps outside the normal Medicare system. Okay, so understand that Medicare Part A and Part B don't cover basic dental care and don't cover basic vision care and don't cover other kinds of things that are not even really healthcare, but kind of extraneous, like health club memberships or be able to get to and from your doctor's appointments and all of this stuff. If Medicare Part A and Part B aren't covering it, then the Medigap says, no, we supplement Medicare A and B. We don't give extraneous stuff. But the Advantage plan say, oh, we can do that. We'll cover some of your dental, some of your vision, maybe not a lot. But hey, you're not paying much in premiums, so what's the kick? And we can also give you extraneous stuff, like access to health clubs, and we'll buy you pickleball, if that's what it takes to come on over to our side. You'll do this all for a zero premium. How you pull this off? Well, see, we get subsidized by the federal government.

Drew Thomas  44:21  
I was gonna say, if you're still paying at Part B, you're, they're probably getting a subsidy, a subsidy, then from, from the government, then, right?

William McKendree  44:25  
Yeah, and then so the government says, look, since we're not going to cover you that whatever amount we collected off of you for Part B, we're going to give that to the private insurance companies. But it doesn't stop there. We're talking about closer to $2,000 or more a month going to these private insurance companies to take over the responsibility of Medicare. And this is money that Medicare provides with the presumption, with the expectation that by giving these private insurance companies this money, this $1,000 to $2,000 a month in subsidy, they're going to take over the responsibility that would be normally Medicare's, because we have this weirdly bifurcated system. We have people that rely directly on Medicare, Part A and Part B, and typically supplement with a Medigap. Then we have about half the people in Medicare instead saying, yeah, I'm in Medicare A and B, and yeah, I pay my Medicare Part B premium, but instead, for whatever reason, elect to go with these other private insurance products, and because the insurance companies that sell them are so well compensated by Medicare, this trickles down to their brokers, and very often, brokers are pushing the HMO and PPO product, even if it's not necessarily the best kind of product for the customer, because the commission is so much more generous to them, the, the bonuses they get, the incentivization they get from the insurance companies to push these products. And we're constantly, our program is constantly trying to correct that problem of, if we catch the client early enough to say to well, let's see if we could reconcile this and get you back to a better product, considering that you came into Medicare battling cancer, and now you're finding your co-payments and deductibles under an HMO or PPO, costing you $8,000 plus dollars a year, oh my. How good is a zero premium if you have to shell out that kind of money? And had you been aware that you could have, instead of replace Medicare A and B, supplemented it, and you would have paid nothing for your cancer treatment or nothing for your cardio treatment, or whatever that condition is, because it's fully covered between Medicare A and B and your Medigap, who knew?

Drew Thomas  47:12  
And there's no stipulation between the federal government and these insurance companies to say, well, you know, yeah, we're going to give you this money with the expectation that you're going to take over for Medicare A and B, but you have to pass along so much of that money toward your, your, the people that are enrolled in your insurance, like the insurance can, the insurance company can basically take that money and divvy it up however they please. They can, they can keep $1,000 of it for themselves and only pay $1,000 to you as an example.

William McKendree  47:41  
First of all, that any Advantage plan has to cover at least as well as Medicare Part A and Part B. So, you know that any Advantage plan, you're getting at least essentially what Medicare Part A and Part B would cover, but that's still leaving a huge cost here to the person. So, it's expected that they're gonna cover more than that, or they're just doing A and B. And why would I want to? But and Medicare also insists that, you know, a significant portion of their subsidization goes to, covering the medical cost, but it still leaves a significant amount left over, and that money that's to cover the costs starts to get merged with the money spending on the swag. For example, how much of this money that we're giving you goes to paying for the co-payments and the cost sharing of your operations of being in hospital or your diagnostics as an outpatient? And how much of this is going to pay for the cost of providing you with health club membership or paying for your food vouchers that will give you, as a perk, we'll give you so many hundreds of dollars towards getting groceries. It's like, that's not really healthcare again, but it's a real popular thing.

Drew Thomas  47:41  
Yeah, but what good is it if I'm stuck in the hospital getting treated for cancer and I can't go to my health club membership, or I can't buy groceries.

William McKendree  49:29  
Or if, even if, that's important, what's more important is that your chemotherapy and your radiation or the operation that you really need is not as well funded, right, right. And there's also another incentivization, if I'm relying on a private insurance product to cover a big part of the cost, ideally, all of the costs of care related, uh, I don't want to be challenged by that insurance company saying, hmm, if we approve this, if we allow this, we're going to be shelling out a lot of money. So, yeah, we get a couple $1,000 from Uncle Sam, and you know, we'll spend part of it on that. And of course, we're going to spend a big part of it on comping our executives and bonusing and commissioning our sales force and marketing and etc., but we're still going to spend, obviously, on healthcare. But we still are a for-profit enterprise, and we want to keep a big hunk of that as profit so we can justify to our owners our shareholders at the end of the year, hey, look at how good we are as in business. So, there's an added motivation, Drew, for these companies to minimize the access of services and statistics year after year after year keep reinforcing the idea that people that are using Medicare Part A and Part B directly as their coverage have a greater likelihood of having access to services, the same kinds of services for the same kind of people with the same kind of conditions have a greater likelihood of getting access to a full throated quality of service with Medicare Part A and Part B than they do with the private HMOs and PPOs that are incentivized to say to the care provider the hospitals, the complex service systems to say no, denied, sorry. And these private insurance companies have built in to their process for determining yes or no, computer algorithms, which, information inputted into these systems, not by doctors, but by basically, data input people, and it's the computer's algorithm that says, well, in this case, no, you don't get, or you get limited, and the motivation is pretty basic. The less you use, the more of the money that we collected in subsidization from the government, in any premiums we collected, the more we get to keep. So, you're, you're basically buying into a system where the entity you're relying upon is self-motivated to limit what you're going to get. Now I'm not saying Uncle Sam is perfect, but at least Uncle Sam is presumably not driven by a profit motive to say the less you get, the more profit we can show at the end of the year.

Drew Thomas  53:04  
No, if anything we know about the government is that they are not run like a well-run business. I mean, that is for sure.

William McKendree  53:12  
And just the statistics from reliable entities confirm that you know the same scenario, a person of a certain age, a certain health situation, going to a facility, let's call it a hospital, and saying, I have a emergency condition, it is likely that person is going to get more and longer, extended services if they have Medicare Part A and Part B, than they would if they had a HMO or PPO and ask people that are in Medicare how that works? How, how's that working for you? It's alright if I don't use it if I'm just using it to see a doctor occasionally. How about that stay in the hospital? I really thought I should have been there longer, and they're telling me, after a couple days, I'm being sent home, yeah. And how about the guy next to you? Well, he had Medicare and he's still there. It's like nobody wants to be in a hospital. Nobody wants to have to go through the circumstances of healthcare, especially extended, complex services. But if it's a question of maintaining your health or your life, then you embrace that.

Drew Thomas  54:27  
Yeah, I think that I think that sometimes it's we, we as human beings, we tend to have a very short-sighted thought process in terms of what's, what's going to make me happy today. And if you're, if you're, if you're fortunate enough to make it to 65, 66, 67 years of age, and you're not dealing with any major health issues, and your graduate, you know you're retiring from your workplace, and you have dreams of traveling the country, or doing all these wonderful, you know, going on fishing trips and being relatively healthy, I think it's very easy for people like that to fall into the idea of, well, why wouldn't I just get a cheaper healthcare product, you know, $0 a month premium, instead of paying all this money to Medicare, not thinking about the fact that, you know, if, if, if you're fortunate enough to make it to 75, 76, 77 maybe by then you do have a medical issue that you're going to have a harder time paying for.

William McKendree  55:28  
I don't want to completely downplay the inherent value with that second option. Look, some people are going to say, look, I know I should get something much better. I just don't have the money. I'm on limited resources and the best I can do, honestly, is zero or close to zero, when it's all said and done. And I should get more, but I just can't. It's like I get it. Or the person that says, look, don't tell me, it's my life, and if I choose to take the risk that down the road, my coverage might not be as good as it should be, and I might not be able to change to a better level of coverage. That's my choice, and I agree. I agree with that first person, sometimes you just can't afford even the $100 extra dollars a month. Or you're right. You're absolutely right. This is your life. This is your choice. My problem is, I want the person to know that both of these options exist, and what the pros and cons, what the impact of the choice is. And my problem is with the industry that so motivates the pushing of a particular product line, pushing the HMOs and PPOs, because those products were so well subsidized by Uncle Sam, which means your tax dollars and the guys that are out hocking this stuff are so much more compensated in commissions and bonuses for pushing that, that the typical person going into Medicare or existing in Medicare doesn't get to know what choices they have, doesn't know that they have options and what the choices that they make are going to have repercussions. It's a question again about education. It's when you go into Medicare, do you know, first of all, what your options are? Do you know how your options work? Do you know how often you have an opportunity to change and how limited those changes may be, and as long as you're educated, as long as the choice you make is a choice that you can own legally and confidently, then make whatever choice you're going to make. But don't impose such a burden on the average person that's not an expert in insurance and not an expert in the government systems. They have to know all this stuff and know it in a way that's going to make a profound effect on the rest of their life and their families well-being. Don't impose it and then set them at the mercy of a predatory entity that is pushed to how much commission can we make? Oh, yeah, I'm going to try to do the best job for my client. How do I know? Yeah, how do I know that you really are looking out for that person's interest? And so...

Drew Thomas  58:37  
You make, you make a fantastic point. I mean, you really do make a fantastic, that it is maybe more about having the knowledge and the information available to you when you can still make an educated choice, especially since you can't go back and oftentimes retroactively, make that choice later, especially not for the same price that you might have made it when you were first enrolling. Knowing your option is...

William McKendree  59:03  
If you're giving an annual time, it's like, fine, but until you get to that enrollment for the next year, how do I survive this current year? Even if you could reconcile this annually, and there's still the I gotta live through it currently. Um and this gets back to something I had said originally. I think, my opinion, government has an obligation if they're going to allow such a system that is so complex and convoluted and so essential to the well-being of its citizens, and they have an obligation of creating a agency or program that is well funded that serves the purpose of objectively, unbiasedly educating the community to take advantage, and not leaving it up to private enterprise. But, with all of the adverse potential to take on that responsibility. So, our organization exists, and we're not the only organization like this. There are other entities that embrace that same philosophy that you know, if government is not going to do it, then it is the, the task of organizations that say we're going to do it as a service to the community. We're looking for, then, the opportunity to fill that void that doesn't exist a truly objective and unbiased approach that helps educate individuals. So, if the theme for this podcast is you know, Medicare is important. Medicare is complex. Medicare can be devastating if you make the wrong choices about it. Then the other part of that, the corresponding element is, then the burden is on each individual to take the responsibility of either self-educating themselves from the resources they can get their hands on and or looking for entities that they can trust that are going to help them make good decisions.

Drew Thomas  1:01:31  
So, that, that gives us a good opportunity to sort of, sort of put a bow on this a little bit. Because, again, I know we have, I mean, we could talk for another two hours easily about all of the, the pitfalls and the things that, that you can deal with when it comes to Medicare. We didn't even get a chance to talk about things like Medicare Part D and things like that, which, you know, maybe we can do that on a different episode. But in the meantime, you are the director of the Pennsylvania Healthcare Benefit Solutions Program. Do you help anybody across the country? Are you specific to the state of Pennsylvania? Or how does that work?

William McKendree  1:02:09  
Well, as the name implies Pennsylvania Healthcare. We focus on Pennsylvania, but Medicare is a national system. So, some of our clients come from all the states. We serve anyone who contacts us and says, I have a question about Medicare, but also I have a question about Medicaid, I have a question about how to navigate through the Affordable Health Care Network if it has to do with healthcare benefits and healthcare acquisition, we're going to help anyone, and we're not going to ever say to a person, oh, I'm sorry we don't do that. We are going to at least say, let me direct you to the right entity, the right agency, the right program that is better equipped to do that. But rarely do we even do that. The people that come to us should have an expectation that if this is about health care benefits, navigating through health care coverage, and if this is about utilizing the Medicare system, I don't care what state you're coming from. I don't care that you're not necessarily in our geographic bailiwick, if you need help, we're not going to turn you away.

Drew Thomas  1:03:40  
Well, so with that in mind, I know your website is phbsp.org, so you can, sort of, you know, figure out where that's coming from, the Pennsylvania Healthcare Benefit Solutions Program. So phbsp.org, link is in the in the description of the episode. You also have a YouTube channel, which is @pahealthcarebenefitsolutions. Your YouTube channel has a fantastic series of information on there which you use visuals to help explain some of this stuff that you know, the differences between the different options, between the Part A and Part B, some of the Medicare enrollment period information. I know you have some really fantastic visuals to help people understand that. So, I definitely encourage people to check that out as well. Is there anywhere else, or anyone else that you would, you would want to mention before we, before we sort of wrap things up?

William McKendree  1:04:31  
No, I think if you come to our website and navigate our website to see what events we're doing, what podcasts are available and how to contact us with questions like this, I think you will be well served.

Drew Thomas  1:04:49  
Awesome. Thank you so much, Bill. We really appreciate your time on the show today. We always, you know our goal really on this podcast is to educate. So, it really ties in very well with what you were saying, that it's really about education and understanding what your options are and how to make educated choices before, before it's either too late or before you're, you're limited in, into waiting for another enrollment period of some sort to be able to make changes. So, I would love to invite you back to talk about this some more if we can. You're welcome anytime, and I appreciate everything that you were, you were able to share with us today.

William McKendree  1:05:25  
Thank you Drew, this was a lot of fun.

Drew Thomas  1:05:37  
This podcast focuses on having valuable conversations on various topics related to banking and financial health. The podcast is grounded in having open conversations with professionals and experts with the goal of helping to take some of the mystery out of financial and related topics, as learning about financial products and services can help you make more informed financial decisions. Please keep in mind that the information contained within this podcast and any resources available for download from our website or other resources relating to Bank Chats is not intended and should not be understood or interpreted to be financial advice. The host, guests, and production staff of Bank Chats expressly recommend that you seek advice from a trusted financial professional before making financial decisions. The host of Bank Chats is not an attorney, accountant, or financial advisor, and the program is simply intended as one source of information. The podcast is not a substitute for a financial professional who is aware of the facts and circumstances of your individual situation.

Drew Thomas  1:06:43  
Once the early landmarks of first car, first job, or even first child have come and gone, the last major milestone is often considered to be making it to retirement. But even then, the choices we make regarding our health and financial stability in our later years remain vitally important. For most of us, that's not the end of the road, but rather the start of another stage of life. People like today's guest, Bill McKendree, are working to provide the education we need to make the best choices possible. And we thank him for that, and we also thank him for joining us on the podcast today. Kudos as well to our producer and part time co-host, Jeff Matevish, for his skills and talents. AmeriServ Presents: Bank Chats is produced and distributed by AmeriServ Financial Incorporated. Music by Rattlesnake, Millo, and Andrey Kalitkin. You can find and subscribe to the podcast on any of your favorite podcast apps. For now, I'm Drew Thomas, so long.