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In a previous post I outlined what I see as the dilemma Americas face when it comes to paying for health care.
Since then I have been tracking social media comments on the topic. If the people posting are close to reflecting a significant portion of the population, we are in trouble.
I suspect the lack of a fundamental understanding of insurance, how companies operate and individual responsibility is not limited to health issues, but also explains a lot about how people manage their finances and use the resources available to them – the “401Ks are a scam” kind of thing. Since 1996 new employees at my old company have a cash balance pension – a defined benefit plan using a different accrual formula and less generous than the old plan. Ask those workers today and most will claim they don’t have a pension.
One person posted that his appendix burst, he was rushed to the hospital for emergency surgery, but the insurance company said it wasn’t medically necessary. That is nonsense, but readily believed.
Others claimed they didn’t know they had a deductible to pay or what was covered or not by their plan and thus they were being ripped off – read the plan material you were given. That rarely happens. “You expect me to read the appeal procedure?” I was told. I hope, but I know it’s a dream.
Did you know investing in three different S&P index funds is not diversification?
If I come across as frustrated, even angry, I am. I spent more than half my life – unless I live to 101 – trying to educate workers about health coverage, their 401k, pensions and retirement with very limited success. I had one minor success though. Years ago I was in line at a DisneyWorld ride wearing a company cap. I man rushed up to me, “You’re Dick Quinn aren’t you? He then called to his wife back in the line. “This man saved our retirement.” he shouted. I was a bit embarrassed and pleased – but the line still wasn’t moving.
A post I read and which received hundreds of likes, claimed health insurance is the only only major industry that is not regulated. Say what?
In fact, all 50 states regulate insurance including health insurance. While they aren’t all the same, their general role is as a consumer protection advocate and insurance regulator. Most commissions must approve the premiums charged. Employer self-insured plans which cover 65% of workers are under federal regulation, including strict claim and appeal procedures, but who reads their summary plan description that costs employers a small fortune to prepare, produce and maintain?
By the way, under such plans the insurance company that processes claims typically receives a fixed fee, but has no risk financial risk for claims paid. Employees rarely understand that.
Every year I receive a copy of Medicare & You, a 130 page booklet explaining how Medicare works and the choices I have. Section 8 tells me my rights and protections and how to file an appeal. Section 2 describes what services are and are not covered. Page 29 says Part B covers “medically necessary” services. Some services are limited and covered only under certain circumstances. For example, acupuncture is covered for 12 visits in 90 days, but only for chronic low back pain without an identified cause. Starting on page 122 there is a detailed comparison of all the Medicare Advantage plans in my state. And yet, a fellow retiree recently lamented there was no easy way to see his plan choices.
What’s on your reading list?
A person complained on Threads about the total he paid for all types of his insurance premiums, $40,000 a year he claimed. He concluded the entire industry was a scam because he hadn’t collected a penny. I call him lucky. I’d be very happy never collecting from any of my insurance.
Not understanding the purpose of insurance is common. Failing to make the distinction between paying for a service and providing it is widespread. If every insured person received in benefits an amount equal to or greater than premiums paid, there would not be any insurance companies and yet I read that health insurance is a scam because that doesn’t happen.
Making the connection between premiums and claims paid is virtually non-existent. Instead, paying CEOs high salaries and providing personal jets is claimed where the money goes.
Insurance is a pooling of risk designed to protect from unforeseen, generally costly, risk. You insure your home from the risk of fire and storm damage, but health insurance has morphed where the expectation is it should pay for even easily predictable, modest costs like vaccines and even inexpensive prescriptions. I have sixty bucks for a tattoo, but not a flu shot.
I often used a auto vs health insurance analogy when talking to employees and during labor negotiations. I recall once at union negotiations explaining the parallels between auto and health insurance. The auto coverage paid for repairs, but did not provide the service. Health insurance paid for a surgery, but did not provide care. Auto does not pay for oil changes. Health insurance did not pay for routine, preventive services (at that time). It didn’t go well. From the back of the room on the union side someone shouted, “are you comparing my wife to a car?”
Enough, I’m ranted out for 2024.
I’m going to check my IRMAA premium for next year and my new Medigap and Part D premiums. Nobody told me once on Medicare my premiums would be five times what they were while working.
Dick. If reading about insurance was so simple, why are most retirees now choosing Medicare Advantage? Maybe because of the way it is presented, and politicians support it because they are financially supported by the industry.
I wouldn’t use simple, certainly not overwhelming or beyond the ability of nearly e everyone. It’s a planning process beyond just reading that starts before making a coverage selection. I will go into more detail in a post in th next day or so.
Blessings to ALL, we are going to need it for the insurance industry. No common person except attorneys read the 100 pages that come with Medical Insurance, just go on the SS government websites, the info is endless. Enough said. The bottom line is you get what you Pay for. What people do not know is that there is much greater risk taking Medicare Advantage, MA at 65 or 70, but want to, because they think they will save money and get more. True if you stay healthy the rest of your life, but really happens in real life. Well think again, at 72 I got a rare bone cancer, and luckily for me, my reading and research said take Medigap, cost more, get less, but there when you need it. I read all the comments in this article, before making any, and if you get the drift, and remember that oil guy, pay me now or pay me later idea. Well, we are not talking about a $1000 here or there, my Bone Marrow Transplant cost a $1,000,000, but I made the better and right choice when younger, and only had to pay for telephone calls!!
Yes, it is difficult to make all the right decisions, but that is why Humble Dollar is so good, you get opinions based on the Real Deal, and hopefully will help you in your situation. Those who say Mayo Clinic, HD Anderson and others do NOT, repeat do NO take Medical Advantage, that is correct.
I do have to say, we need an organization to help us with Insurance, whether it is Medical or Car insurance to point out a roadmap that makes sense. Despite what many say, Insurance is way more complicated than believed. To me it seems you never know what Insurance is until you need it, then you learn exactly how it works. For me, I would recommend, talk to your friends, talk to your neighbors, read Humble Dollar, take in all the info, and then go to a professional that can be fully trusted, that does NOT sell insurance, to learn more before making your final decision. Some of us can get that from the government websites, or the Social Security booklet, or the policies, but it does take work to make good decisions. Most of us need some help.
In the end, you get what you pay for but you have to shop around to learn what that is.
I always recommend reading the latest edition of “Medicare for Dummies” and seeing a volunteer SHIIP counselor.
Common people who do not take the time to read and learn what they have can only blame themselves when things go wrong. We are not talking about legalize, but summary description designed to be read at the 8th grade level.
The Medicare.gov site does a good job with easy to read explanations. The Medicare handbook is also easy to read, but you need to read it.
yes, any offer of different options takes a bit of work to decide and most people really don’t like the risk of making such decisions despite saying they want choice.
“Common people”?? Just who would they be?
They would be the ones who are not uncommon.
I don’t know I just quoted the post I replied to.
Sorry, that was so long I missed it.
“unless I live to 101”
I hope you do.
When I read your above “101” phrase I thought your forum topic might be following the direction of a typical college course numbering for an introductory level. I do think you describe the concept of how to think about the purpose of insurance in your post.
I see similarities in your thinking about insurance to the article titled “Help Clients Save Money on Property and Casualty Insurance” penned 12/16/2024 by Allan Roth.
https://www.advisorperspectives.com/articles/2024/12/16/help-clients-save-money-property-casualty-insurance
Apparently the government of Taiwan is much more capable than ours, because we had a great national health plan there. But don’t worry, Dick, people still complained :-).
Regarding traditional Medicare, I’m so glad I have it. While not a national health plan, I think it’s the next best thing! And I feel a new sense of pride in paying IRMAA this next year, thanks to all the other comments.
A major reason I don’t seriously consider retiring is medical insurance. I have 7 years before I could be on Medicare.
Sometimes I think, I could just pay for health insurance. But I also take what would be a very expensive medication without insurance, so in the current political climate, what are the chances of being able to buy insurance in 2026 or 2027?
I’ve been reading a lot of complaints about the misnamed health insurance industry. Some of them are hyperbole, but there is a real trend of companies refusing to pay out as they are contractually required to. They are not helping people pay for health care, they are enriching investors. They have also contributed immensely to the problem of limitted access to healthcare by wasting huge amounts of time by healthcare professionals. People who should be providing healthcare services are instead battling with (misnamed) insurance providers. I’ve personally wasted days trying to get coverage for things the contract says should be covered. Insurance companies provide friction. A little would be ok to stop overbilling or overenthusiastic patients, but this friction is burdensome and expensive.
I’m curious how much of Medicare, Medicaid, and ACA related rules were written by insurance industry lobbyists.
[Full disclosure: I’ve worked in medical schools 30+ years.]
Enriching investors – and that is part of the problem of for profit health care. Instead of only paying salaries and patient expenses, they have to pay the investors with some of the money they get from premiums (or with medicare, the government). That leaves less for patient care and drives up costs. It is even worse when venture capital buys health care. They make their money when they sell at a profit (they don’t buy to hold). So they cut costs, trim out fat, sell at a higher rate and then the company that buys what they sold has more debt that has to be serviced (so the new owner company has higher costs too to pay down the debt and some health care money has to go for that).
What blows my mind is how so many insurance agents view Medicare Advantage plans vs Original Medicare + Medigap + D (OM) have the same misunderstanding. They view what people should get based on their current medical costs. The auto/health insurance comparison I see is you haven’t had an accident yet so you buy, with your brand new expensive car, only the state minimum liability insurance. Oops you have an accident that you are at fault or are hit by someone without enough insurance to cover your costs and it costs you an arm and a leg. So then you decide to get better insurance. Oops again. now it costs you a fortune because of the accident. Between the two you are out a lot of money that could have been saved had you bought good insurance to begin with. But people don’t think ot it like that.
With car insurance insurance you pay for good insurance hoping you will never use it and hope yourare a profit center for the insurance company… BUT if you ever need to use it you are glad you have good insurance because it is there and that is what you need when you need to use it.
But many people don’t seem to view health insurance or original medicare vs medicare advantage plans in that same light. They see zero premiums, they aren’t sick, they ignore the frequently $5000 to 14,000 maximum out of pocket, the limited network issues (try going to MD Anderson Cancer Center or the Mayo with an advantage plan – good luck with that) and frequent denials those don’t affect them. Yet. And then they do they often can’t pass medical underwriting to get a medigap plan (G only has the medicare deductible, which is less than $300. the cost of D – both pay B) where the combined premiums and other costs (including the limited dental, vision and hearing that MA’s include – although some medigaps have that included too) on OM are far, far less when you actually use your insurance to the extent you use it if you have an expensive illness or expensive chronic condition.
What I read on one agent forum where they justify the MA choice over OM is that the people are healthy when they sign up and don’t need OM because the high maximum out of pocket on MA (often $5000-14,000) isn’t being paid by them and they save a lot of money with zero to low premiums. Okay so what happens when they then get sick with an expensive condition and actually need to use their insurance? Oops. Their cost is then way more than OM, G and D combined. AND they have major network limits and more denials. So then when they want to change to OM as that will now be cheaper now that they are actually using their insurance they find they can’t as they fail medical underwriting. As a result they are stuck paying a lot more for life.
Of course the kicker is that independent agents get paid typically double to sign someone up for MA plans and the renewal is also typically double vs medigap and D (some D’s aren’t even paying a commission). They earn their entire income from commissions so we have the folly of rewarding for A (paying them a lot more for one of the choices, in this case MA plans) while expecting B (giving unbiased help to help people choose the plan best for them). And we wonder why MA plans are growing in popularity. At 65 to 70, when most people sign up, typically they are far healthier than at 75, 80 or 90 or beyond.
If people viewed the MA vs OM choice like car insurance likely many would make a different choice.
Side note – I am ignoring those who qualify for medicare and medicaid (called dual eligible) as health care is free or close to it for those people regardless of their choices. I am also ignoring who qualify for medicare premium assistance (and some for drug assistance) as well as the care/costs they have with their choices isn’t the same as those who are enough over the poverty line they don’t qualify for help.
What’s that Dick was saying about how for the life of him he can’t understand why people don’t just read their 200 page brochure and figure it all out – because, you know, it’s all right there and really not that difficult?
Yeah, right. Clear as mud says I. I guess if you spend your career working with these plans and reading the plan descriptions every year because you’re paid to, after a decade or two it all starts to make sense and seem pretty straightforward.
As for the rest of us I can aver that it is most definitely not straightforward at all. And more to the point, for the all the money we collectively spend on healthcare in the US, it should all be free to everyone. Yet it’s not.
Oh, and DB pensions in the private sector are highly unusual.
The money we spend on health care is a modest portion of the cost if it were “free.”
Only about 15% of private sector workers currently have a pension, but you still need to know about retirement.
A little time and effort, just read the sections relevant at the moment. Have a claim denied? Read that section describing your rights and the procedure.
I scan the Medicare Handbook each year.
People can’t complain when things go wrong or unexpected if they don’t pay attention.
If you receive benefits through an employer read everything the employer gives you – for your own benefit.
I am gifting a WaPo article on medical insurance denials and delays: https://wapo.st/3OXSB36
Dick, I remember reading in your last post that you pay $2K a month for all the different health insurance you have. That’s pretty crazy, because I am self insured, and pay less than that for three people. I have a high deductible plan with relatively high co-pays.
I’m 51, and many of my older friends keep telling me that there’s gold at age 65 where I can save all this money. 🙂
You need to compare apples t apples and a true comparison would include adding in all the deductibles and maximum out of pocket for everything, I have original medicare, G and D. On G my 2025 deductible is $185 – Just B’s deductible/out of pocket (and because I have G that is also my maximum out of pocket). For me premiums (B, G, D) plus B’s deductible is $5182 a year or (averaging the out of pocket over 12 months and rounding up) $432/mo. You can now, in 2025 ignore the out of pocket for D in the calculations as D is run exactly the same between for advantage plans as D (It’s $2000). Advantage plans also require one to pay B premiums as they are required to have B so if you remove that then I pay $2688 (or 224/mo) – way less than the max on any advantage plan available in this state.
D is more complicated in how things work as drugs have tiers and the price in some tiers for some drugs is $0, and tiers between D’s vary along with their prices (in most 2025 plans now there is a % of the drug cost for your copay in each higher tier and not a flat fee anymore), as does with medicare advantage (same rules now apply to both which didn’t used to be the case).
What is now the same now in D is the out of pocket is identical. It is prudent to check your drug prices each year and switch D or switch your advantage plan (you can switch those without passing medical underwriting, unlike with original medicare switching medigap plans) based on projected drug costs (and the big unknown is what will you be prescribed later in the year that you don’t know about yet). Of course if you switch your advantage plan usually that means switching who is in network which may or may not be practical.
In my case my work premiums were lower, but if I used the entire work out of pocket I’d be roughly where I am now with original medicare and G costs. A good chunk of my income, but I am grateful to have it as like the author, I have cancer. Mine has no cure but a longer life span (indolent non-hodgkin’s lymphoma) so I fail medical underwriting so good thing I chose original medicare to begin with as my total costs each year are thousands less than with an advantage plan and I can go to MD Anderson Cancer Center, the number one cancer center in the USA. Most advantage plans are not accepted by them. Unlike advantage plans, with original medicare I can go anywhere in the country that accepts medicare.
That’s $2,000 for both of us combined.
He pays a lot for Medicare — the premiums increase with higher earnings and also probably has a high priced medigap policy. That’s the case for my husband and me. I don’t find it unfair that people with more pay more.
Our total premiums are Part B and D IRMAA plus Medigap G. But since we were forced into Medigap by former employer at older ages we pay high premiums about $270 a month each.
Comments on social media tend towards the tails of the normal curve. People crave engagement out there and they know it’s better to exaggerate. I think if the insurance fairy showed up and fixed everything set, up a perfect system, the social media comments would be only slightly less hysterical.
There’s 18 days left in 2024 . . . I don’t think you can make it.
I don’t want him to make it. I learn something from every rant.
I believe you’ve claimed in several posts, that you never took your kids to Disney. But you went???? Sounds like it was a conference type trip. Still.,,,
Exactly, a conference and free to me. 😎
I also once wound up staying in a Disney hotel for business. It was a little surreal to get on the elevator wearing business casual to ride to the basement, along with a lot of excited kids getting off at ground level.
Could never do that!!
Do what? Go where your boss sends you because she wants you to give a speech?
By that point our “kids” were well into their teens.
But you apparently also went on the rides, etc.
He concluded the entire industry was a scam because he hadn’t collected a penny.
There’s two kinds of motorcycle riders; those who haven’t fallen off, and those who haven’t fallen off yet.
Insurance is a bit like that. Those who haven’t used it, and those who haven’t used it yet.
Having said that, I have to agree with him that $40k per year is a hell of a lot of money for insurance. I’m thinking we spend maybe $8k for all types of insurance.
Dan,
I had a boss in IT who said the same sorta thing: “There are two kinds of PC users; those who have had a hard drive fail and those whose hard drives hadn’t failed … yet.”
Backup your important data!.
We spend more than that just on Medicare and Medigap.
Right, you get to pay the irmaa penalty.
I know that Dick does not complain about paying the IRMAA surcharge (it is not a penalty). I have written in the past, but not very recently that people that pay IRMAA should feel blessed.
The 2025 income levels to qualify for the lowest surcharge of $46.50/ month per person is for singles $106,000, or $212,000 for married filing jointly.
7% of Medicare beneficiaries paid IRMAA in 2024. I would feel extremely blessed to be a member of this exclusive club.
My wife and my combined income during our working years that ended in 2019 rarely exceeded the single income level.
Despite all the above comments I don’t resent those who try to manage their income to avoid the charges. My only problem is with those fortunate enough to be in the IRMAA club don’t feel that way, fortunate, but that they feel they are being “”punished” rather than being grateful for having the level of income in retirement to qualify for IRMAA surcharges.
Income includes required distributions from IRAs etc., which is at least annoying. My income would be below the limit otherwise. Also, if you go over the next level by $1.00 you pay the higher rate.
“Income includes required distributions from IRAs etc., which is at least annoying.”
Yes, but remember you were able to deduct the contributions from your taxes when they were made, and avoided paying capital gains on that amount and the compounded returns, most likely for decades.
So again I think you should feel fortunate to have been able to do both.
Also I assume you knew that you would have to take out RMDs at a certain age in the future and pay the tax man. As the old (Fram oil filter) ad said, “you can pay me now, or pay me later”
Right now we’re trying to convert my wife’s (significantly smaller than my) traditional IRA to a Roth while we can keep our effective tax rate 12%.
We can know all the present or past circumstances that exist only in our own lives, not in others’. Instead of “I think you should feel…” it might be better to say “I would feel…”
Point well taken 😊
What I don’t think is fair is the earnings portion of the distribution from a Roth not counting as part of MAGI for IRMAA.
Earnings are earnings, money to be spent and lived on so why should Roth or Regular IRAs be treated differently?
At the same time interest on Munibonds also purchased with after tax money like a Roth is included in MAGI.
For the purpose of paying premiums income should be income regardless of source.
I pay income tax on the distribution, which I expected. The IRMAA payment is an additional and unexpected tax, not instituted until 2003, after I had retired.
Sorry, as we said before, not in any way shape or form is it a tax.
I stand corrected Dave, it is not a penalty, and I tip my hat to the people who pay it and do not see it as being unfair.
It’s an income based premium and I do think it’s fair. No different than employers who base employee premiums on salary.