q&a

Q&A: Medicare Advantage questions

October 18, 2021 By Liz Weston

Dear Liz: You posted a letter against Medicare Advantage plans. The letter suggested that you had to go to their doctors, which is false. You can go out of network with a higher deductible. I will also tell you that most of those same doctors accept your in-network deductible. I do this all the time when I’m at my summer home.

Answer: As mentioned earlier, Medicare Advantage plans are offered by private insurers as an alternative to traditional Medicare. The plans can differ in what they cover and how.

For example, if your Medicare Advantage plan is a preferred provider organization, you may indeed have some coverage if you use a medical provider outside the plan’s network. If the Medicare Advantage plan is a health maintenance organization, the plan may not cover out-of-network care except in an emergency. HMOs also may require you to get a referral to see a specialist.

Contrast that with traditional Medicare, which allows you to see any medical provider that accepts Medicare (which is most of them). One of the downsides to traditional Medicare is the co-insurance, including deductibles and copayments. However, you can purchase a supplemental, or Medigap, policy from a private insurer to cover those. There are a number of Medigap plans, but what they cover is standardized.

Medicare Advantage plans often pay for things that Medicare does not, such as hearing, eye care and dental. Many people who sign up for Medicare Advantage are, like you, pleased with their coverage. Others are not, though. Read on:

Dear Liz: Regarding the pros and cons of traditional Medicare versus Medicare Advantage options, I want to share a personal horror story about my parents. Both are now deceased, and I went through hell dealing with their Medicare Advantage plans.

These plans often send classy color brochures in the mail to seniors approaching 65, inviting them to a free lunch to hear all about the excellent care that they supposedly will receive when signing up with these health plans — all with no extra monthly premiums! Both my parents fell for the promises offered by these “free” plans.

As you wrote in your response, there are serious and inconvenient limitations to the quality of care and the hospitals and doctors covered in these networks. It was frustrating.

My mother’s primary care doctor always seemed exhausted and never explained anything correctly. He seemed to be annoyed when we asked him to repeat information. My dad’s plan told him it was not contracted with the hospital closest to him and referred him to a hospital much farther away. His primary care physician was rude, disrespectful and uncaring.

As my father’s health advocate, I was always arguing with his insurer. My dad became depressed at the poor quality of care and the lack of support from this company. I think he just gave up. He passed away in 2018 of prostate cancer, which had spread into his lower back. Had he received proper testing when it was supposed to be done, the cancer may have been caught early and treated. It was too far gone to treat by the time it was diagnosed.

If you stay with traditional Medicare, there are supplemental health plans that cost a few hundred dollars a month. I have heard from friends and relatives that the care is better through paid supplemental plans.

Bottom line: You get what you pay for. Probably best to stick with plain old Medicare; you might just live longer.

Answer: Like all private health insurance, Medicare Advantage plans can vary dramatically in quality. You can’t assume that one person’s experience with Medicare Advantage will be the same as another’s.

You can assume, however, that any insurance with lower upfront costs will have higher costs or more restrictions, or both, if you need a lot of care. If you want more freedom to choose your medical providers and you can afford the premiums, traditional Medicare with a supplemental policy may be a better fit.

Q&A: Ask a tax pro before Roth conversion

October 12, 2021 By Liz Weston

Dear Liz: I’m almost 70, still working, and I’ve got a decent-size IRA as well as a 403(b) that I plan to move to an IRA when I retire. Because I have a pension and other investments, I don’t think I’ll ever need the money in the IRA and 403(b). Should I convert to a Roth now so my kids (31 and 28) won’t have to pay taxes when they inherit it? I’ve got the cash to cover the taxes for the Roth conversion.

Answer: That would be a generous move, but you should consult a tax pro to make sure you understand the implications.

As you know, converting a pre-tax retirement account such as an IRA, 401(k) or a 403(b) to a Roth IRA can generate a sizable income tax bill. Such conversions can push you into a higher tax bracket and, if you’re on Medicare, also may increase your premiums.

You may want to spread the conversion over several years, converting just enough each year to “fill out” your tax bracket and avoid Medicare surcharges. A tax pro can help with those calculations.

Q&A: What’s the difference between ETFs, mutual funds and index funds?

October 12, 2021 By Liz Weston

Dear Liz: What is the difference between ETFs, mutual funds and index funds?

Answer: Index funds are a type of mutual fund. Mutual funds and ETFs both allow you to buy a diversified mix of investments, but they’re structured differently.

Mutual fund shares are usually priced once a day, based on the value of their underlying assets minus liabilities. Investors buy and sell without knowing precisely what the share price will be, since that’s calculated after they place their orders with the mutual fund company. ETFs, or exchange-traded funds, by contrast, trade throughout the day on stock exchanges and can be worth more or less than the underlying investments, depending on demand.

Most mutual funds are actively managed. That means the underlying investments may frequently change as the fund manager tries to “beat the market” and get a better return than a market index or benchmark such as the Standard & Poor’s 500. All that trading increases a fund’s costs and usually doesn’t result in a higher return.

By contrast, index mutual funds just try to match the market benchmark. This is known as passive management. Less trading leads to lower costs and typically better returns.

Most ETFs are passively managed and have even lower costs than typical index mutual funds. ETFs are the investment of choice for robo-advisors, which offer automated investment management, but they also can be an inexpensive way for individuals to invest. Also, ETFs don’t have the investment minimums that can sometimes be a barrier to start investment with mutual funds.

Q&A: Business credit card dilemma

October 4, 2021 By Liz Weston

Dear Liz: I am a sole proprietor and have two business credit cards. I used my Social Security number to apply for the cards and put $2,000 to $3,000 a month on these cards, yet all this credit card activity is not reported to Experian, thereby hurting my credit score, and I now have “stale credit” per Experian. Is my credit card activity not reported because my cards are considered business cards?

Answer: The short answer is yes. Although you used your personal credit history to apply for the cards, business cards typically don’t report activity to the consumer credit bureaus (although negative activity may be reported, such as if the account is delinquent).

You can remedy the situation by getting and using a personal credit card or two. If your credit report has become so stale that it can’t generate a credit score at all, you may need to start with a secured card or look into a credit builder loan.

Q&A: What you should know about Medicare, Medigap and Advantage plans

October 4, 2021 By Liz Weston

Dear Liz: I’ve read your most recent columns about Medicare Advantage and believe that more should be said before people decide to go that route.

You mentioned that switching from Medicare Advantage to Medicare itself can be problematic. As a couple who have had both plans and now have Medicare with a Medigap plan, I want to say that the best (and, by the way, easiest) switch my husband and I made was to go back to Medicare.

People should understand that Medicare Advantage plans become their primary insurance, severely limiting their ability to go to whatever doctor or hospital is most convenient. When traveling, they are limited to the hospital and doctor they chose with their Advantage plan, the one near home! My husband also could not go to a doctor I had because we were signed up at different local hospitals.

So I phoned Medicare in 2009 and a young man was so helpful, and in no time we were back on Medicare. He said to go to the Medicare website, choose from the many Medigap options offered that suited our needs, and we did. It was that easy.

We opted for no copays, skilled nursing care, and much more. Granted, our monthly premiums are more than they would have been before, but since that date we have not laid out one cent for medical care including doctor visits, my husband’s open heart surgery (at a hospital of our choosing), emergency room and surgery for my broken ankle, and annual EKGs to monitor his heart.

Surprisingly, we also have coverage for foreign medical treatments and took advantage of that in 2018 for minor surgery needed. The Medigap insurance covered 80% of that when our travel insurer refused to pay.

Our Medigap policy also allows us to go to any doctor or hospital without a referral. And, of course, Medicare is accepted throughout the U.S., and Medicare Advantage plans are not. The tens of thousands of dollars we have saved in the last 11 years make it worth paying more each month, and we have peace of mind.

Answer: Thanks for writing and for sharing your experience.

For readers who haven’t kept up with the discussion: Medicare Advantage plans are offered by private insurers as an all-in-one alternative to traditional Medicare, the government-administered health insurance program for people 65 and older. Medicare Advantage plans typically cover some things that Medicare does not, such as vision, dental and hearing care, but the plans also have regional networks of providers you’re expected to use. You’ll pay more, and sometimes all, of the bill if you use out-of-network providers.

Traditional Medicare allows you to go to any doctor or hospital that accepts Medicare — which includes the vast majority of both — but can have substantial copays and other cost-sharing. A supplemental plan or Medigap plan offered by a private insurer can cover those costs, and most Medigap plans also offer emergency coverage abroad.

The premiums for Medicare plus Medigap can be higher than those for Medicare Advantage plans, but ultimately may prove more cost-effective for people who travel frequently or who want more choice about their care.

If you sign up for a Medigap plan when you first enroll in Medicare, the insurer is required to take you. If you miss that open enrollment period, an insurer can charge you more or even deny you coverage because of preexisting conditions.

There are a few exceptions, however. If you initially enrolled in a Medicare Advantage plan but want to switch to Medicare plus a Medigap plan within the first 12 months, you’re allowed to get a Medigap policy without underwriting.