Medicare decisions have lasting, profound effects

The Bakersfield Californian
October 9, 2012

Last year, the leading edge of the baby boomer generation wave crashed on the Medicare shore.

An estimated one baby boomer every eight seconds turned 65 in 2011 – adding more than 2.5 million new Medicare recipients in that year, alone.

Baby boomers are people born between 1946 and 1964. They are the sons and daughters of returning World War II veterans. They are members of a huge “birth boom” that has impacted nearly every aspect of American life for decades.

Over the next two decades, more than 70 million people are expected to become eligible for Medicare, the popular federal program established in 1965 to provide medical care for the nation’s elderly. In 2003, prescription drug benefits were added to Medicare, with the credit for shepherding this program expansion through Congress given to Bakersfield’s then-Congressman Bill Thomas.

Oct. 15 begins an “open enrollment” period, during which eligible Americans may sign up for some Medicare benefits. Decisions must be made by the Dec. 7 deadline.

Questions about Medicare benefits – ranging from “How do I enroll?” to “How much should I pay?” – are among the most commonly asked by my retirement planning clients. These questions have spiked in just the past year, prompting me to revise and expand the Medicare discussion in my retirement planning classes.

No doubt some of these questions stem from the Medicare reform debate that is raging between the presidential campaigns.

A new survey by the Kaiser Family Foundation revealed that Medicare was the election’s third most important issue, behind the economy and the budget deficit. The survey also found that more than half of those questioned said they want the government’s health care plan for seniors to remain as it is, with the government acting as the insurer, while 37 percent said they prefer the model laid out by Rep. Paul Ryan, Republican presidential candidate Mitt Romney’s running mate, which would give seniors a set amount of money to shop for private insurance. Reformers argue that without this change, the Medicare program will collapse under escalating demands and costs.

Strangely, the Kaiser survey found opposition to a “voucher” plan was even greater among those 55 and older – a group reformers said would not be affected by the change.

Boomers, who range in age from 48 to 65, have seen their retirement savings and earnings capabilities devastated by the Great Recession. They doubt they will have enough money to retire.

When boomer clients now ask about Medicare, I stress the importance of considering individual situations. I recommend:

  • Ask yourself: How much can I afford in premiums and out-of-pocket expenses? Do I want to select my own health care providers, or chose network providers? Do I have a chronic illness that requires several prescription drugs?
  • Understand Medicare’s four parts: A – hospital care/skilled nursing facilities; B – doctors’ care/ outpatient care; C – Medicare Advantage plans; and D – prescription coverage.
  • When selecting a financial advisor, make sure he or she will educate you. In other words, become a member of the investment team, not just a passive observer. Ask questions. Make sure you understand your investment strategy.
  • Utilize a variety of investment strategies.
  • Start saving NOW. It is never too late.

A big part of retirement planning includes providing for future medical care, the cost of which increases drastically as we grow older. The Medicare decisions boomers make as they turn 65 have profound and lasting effects.