Ep. 05: – Medicare Transitions

Brighter Wealth Retirement

Intro about the episode:

Hi everyone and welcome to the Brighter Retirement Radio™ Podcast. In this episode you’ll hear from guest, Jake Dayton, who will share all about Medicare open enrollment and why it is so important. You’ll hear why the Medicare transitions are vital to understand and best practices for ensuring you pick the right plan when open enrollment time comes so you’re not faced with costly penalties.


>>Devin Peterson (00:00):

Devin introduces himself and the podcast, Brighter Retirement Radio. He explains that this episode of the podcast will be all about Medicare Transitions. He interviewed his friend and Medicare expert, Jake Dayton. Jake is also the president of LiveWell Retirement Solutions. Devin explains there are two transitions that create most anxiety, and those are when someone is about to turn 65 and transitioning into Medicare for the first time and as well as October to December every year during open enrollment when they have a short window of time to choose a new Medicare plan that might fit better for their prescription lists or their doctor’s needs.

>>Devin Peterson (01:25):

Devin explains these transitions seem to be year after year, what gives his clients the most amount of angst and worry. So today’s conversation with Jake Dayton is diving into the usual experience that a retiree might have as they’re approaching that age 65. If you’re around the age of 65 as well as beyond your 65 birthday, this episode will help you understand what common mistakes are made year over year as you have the opportunity to transition from one Medicare plan to another. Devin’s primary takeaway that he wants the listeners to have is this idea that seeking qualified assistance from a Medicare professional is not only essential, but it actually costs you nothing.

>>Devin Peterson (02:31):

Devin explains an example Jake gives for why it is important to have a Medicare specialist help you. The example is you can either jump on Google and figure out how to fix an alternator or you can take your car down to the local mechanic and he can fix it for you. Both of them work. However, there’s trade offs with both. And if your mechanic actually is fixing your alternator for free, why not take it down there? So the clear takeaway from today’s episode is seek qualified assistance when it comes to making that transition.

>>Devin Peterson (03:12):

Devin introduces his interview with Jake and welcomes Jake to the studio.

>>Devin Peterson (03:48):

Devin asks Jake to share more about him and why he is qualified to answer all things relating to Medicare.

>>Jake Dayton (04:23):

Jake shares that he is not from Utah but he is living in Utah now. He came to Utah to attend BYU (Brigham Young University). Originally he thought he wanted to be a doctor. The closer and closer he got to graduating he just didn’t feel right about it. He knew there’s certain things he loved about doctors and what they did. The fact that they were able to work with people and see, basically immediate gratification from what they’ve done. They can immediately see somebody walking into their office and when they leave, there’s a difference. People walk out of that office feeling better.

>>Jake Dayton (05:10):

Jake explains that it was really special to him to be able to see that with people. He knew he wanted something where he could meet with somebody. They walk in, they walk out in a better situation. Although he didn’t go down the route of a doctor, he started exploring a lot of different things and went into the direction of sales and marketing, where he was able to interact with a lot of people, which he loves to do and he was able to see that same experience through all the different things he did. He finally ended up working with the senior population primarily focusing on Medicare.

>>Jake Dayton (05:52):

Jake explains there’s a lot more feeling of a need for help with seniors. It’s so overwhelming this retirement transition, all the things they’ve got to think about. They hear that Medicare is something that’s not just optional. It’s required at one point or another. And that’s true. When you start talking about requirements and penalties, that starts to freak people out a little bit. And so people are coming, not knowing, given all the different sources, all the different voices coming at them, wondering what they need to do. When Jake, with a simple sit down or conversation with them, can help them understand it’s not as bad as you think. The feeling of relief on their face is, it’s again, the feeling of when they walk in to meet with him versus once they’ve left a completely different feeling, it’s like a burden has been lifted from their shoulders. This is why Jake loves focusing on the Medicare population.

>>Jake Dayton (07:03):

Jakes states originally he started as what’s called a Captive Agent. He started with a specific company, Humana. He heard they train their agents well, and that’s what he wanted. He wanted good training right from the start and he got it. He had a good experience with Humana for a year, but it didn’t take long to realize that being limited in his ability to only offer one company’s products or solutions, didn’t put him in the position he needed to be to be unbiased with people.

>>Jake Dayton (07:39):

Jake explains there’s not always one company that fits all. And so after about a year of a very successful time at Humana, he left the health insurance, the retirement benefits, the salary, everything to go off on his own and become an independent broker. To Jake, it was completely worth it because the moment he became an independent broker, he could represent every option, every company. This allowed him to have the confidence of knowing that when he sits down with someone he will have some solution for them, that they could figure out what was truly best for their situation.

>>Devin Peterson (08:28):

Devin explains how important the switch for Jake was because as the listeners hear they can really understand how they would gain so much more value from talking with Jake because they know that they’re being represented in their best interest, not necessarily a biased point.

>>Devin Peterson (09:14):

Devin explains that as they put together this episode the one thing that is so consistent in this arena is the experience that folks have when they are turning 65 and then have to deal with Medicare and then consistently beyond 65. They also have to make transitions potentially into a different coverage with different needs as their health changes and different prescriptions. So what Devin wants to talk about in this episode and get Jake’s insight on is these transitions into and through Medicare. What does that look like? What does the average retiree expect to go through or what should they expect to go through?

>>Jake Dayton (10:24):

Jake explains the transition process is the big stress causer.  When you’re going from a certain way of having done things to a completely new way of doing things, you have no experience. You haven’t read books. That’s not your area of profession. How in the world are you supposed to know? And when it comes to Medicare, with the things people hit, it can be stressful again because there’s so many different sources of things telling you that you need to do this or you need to do that. But then on the other side, there’s fluff, there’s advertisements, there’s things people are trying to sell you and they are very different. One thing that is certain, unfortunately in this world of Medicare, the one big consistency of Medicare is change. Things do change over time, but there are certain things you can count on when you were first new to Medicare.

>>Jake Dayton (11:14):

Jake goes on to explain it’s a stressful time where you’re getting phone calls every day. Some people, multiple calls per day. He’s had clients where, just for curiosity sake, he’s told them, hang on to every piece of mail you get leading up to turning 65 when you’re first eligible for Medicare. Hang on to all the mail you get, all the stuff you get, and he’s had people bring in a stack of mail over half a foot high of all this stuff they’ve received.

>>Jake Dayton (11:57):

Jake advises you have one thing saying this and others saying that so there’s opinion versus fact. It used to be that he could talk with somebody about two to three months in advance before they turn 65 and they could discuss everything they needed to discuss. They weren’t getting bombarded by so much stuff. We live in a time now where people are starting to get hit with stuff, mail, phone calls, things like that, a year in advance, nine months in advance, where they’re already getting all this information and starting to wonder if they need to do something now and if so what do they need to do? Now they’re having to address people’s needs, answer their questions, and meet with them sooner. It’s not so much a two month process anymore in advance. It’s far, far in advance.

>>Devin Peterson (13:05):

Devin asks Jake, how much of the mail do they receive do they really need to pay attention too?

>>Jake Dayton (13:27):

Jake explains there are certain sources which you know are government, CMS, the Center for Medicare and Medicaid Services, and Social Security. Every year people even on Medicare get a book called, Medicare and You. There’s your Medicare you’ve got to worry about when you turn 65 and transitioning and timing it properly and you can  start to apply for Medicare at the right time. But then in addition to that, you’ve got this extra coverage. People call it supplemental coverage or secondary coverage that you often want to get with your Medicare to make the coverage better and establishing a connection between the two is where having someone like Jake helps.

>>Devin Peterson (15:29):

Devin advises that Jake’s role as a Medicare agent is really to distill down to the simple actionable items that really need to be paid attention to.

>>Jake Dayton (17:02):

Jake explains that one of the more common mistakes that people do make as they make that transition is a timing issue. When you’re first new to Medicare, you have what’s called your IEP, your Initial Election Period, that goes from three months before the month of your 65th birthday, the month of your 65th birthday, and up to three months after is the time when you can transition onto Medicare and you can do so without having to answer any health questions depending on the type of policy you get with your Medicare. The challenge people run into, one of the common mistakes is just putting it off.

>>Jake Dayton (17:50):

Jake explains you’ve got this period three months before you turn 65, which is when you want to be taking action, when you want to be sitting down and planning for the transition of enrolling into Medicare. That Medicare, what we call original Medicare from the government is composed of two parts, part A and part B. Part A  is your hospital coverage. Part B is your doctor coverage or medical coverage. You want to be enrolling in that three months in advance.

>>Jake Dayton (18:40):

Jake advises that the part that you can do doesn’t take much time but the portion of this process that’s left in the hands of the government can take a while. Sometimes the part where people run into trouble is they wait too late before that period leading up to 65 where it’s a little too close and sometimes because of delays, by no control of their own, things don’t happen or get processed or they don’t get a response until after they’ve turned 65 going months afterwards, until sometimes they fall out of that initial election period.

>>Jake Dayton (19:58):

Planning and planning with their employer, talking with human resources about certain things that need to be done. So a couple months before they turn 65, they start making some decisions either by themselves or with the, with an agent, with their employer, start organizing that submit the application in that time window. From when you submit the application, how long a processing time do they have?

>>Jake Dayton (21:49):

Jake goes on to explain that there’s certain parts that need to be enrolled in. People hear about these Medicare penalties and if things aren’t done the right way you have these penalties as well. Timing is one thing. If you don’t time it right, then you don’t have certain parts of Medicare when you’re supposed to and you get penalized. But in and above and beyond just the Medicare A and B where you could have penalties, there’s another part of Medicare that runs people into problems called part D of Medicare. And part D is your drug coverage. And the reason that runs a lot of people into problems is because part D is not offered by the government. It’s not part of part A or B which is called original Medicare. You get part D from private insurance companies. And part D is required whether somebody is taking prescriptions or not. Medicare doesn’t care whether you think you need drug coverage or not. They simply care that you have it. So for a lot of people, they run into the problem of when they first get on a Medicare, thinking they don’t need any medicine so they don’t get the coverage.

>>Devin Peterson (22:48):

Devin asks Jake, What are some of the common mistakes that are made during that transition initially to Medicare for the first time for all those first time filers? He asks Jake to share a little bit more about that part D penalty because he’s come across it many times before and it’s not just a one time penalty, it’s a lifetime penalty.

>>Jake Dayton (23:22):

Jake explains one of the big common mistakes in the Medicare transitions is part D because part D is completely through private insurance companies. He states if you’re not taking a lot of prescriptions, you’d want to get a drug plan that’s very inexpensive, that just meets the requirement of having a drug plan if you don’t. Drug plans came into existence in 2006 so fortunately somebody is not going to be penalized anything anytime prior to 2006 if they’d been on Medicare for a really long time. But if you look at the maximum amount in this past open enrollment, which he will talk about in a bit,  he ran into a client who was healthy, still healthy, and not taking any prescriptions but they’re getting into their eighties now, still no prescriptions. They have no part D coverage. They didn’t feel they had a need. And so he had to have a conversation advising that you have a choice one way or another. You have the ability to stop this part D penalty from growing bigger and bigger every year. It’s not just every year. It’s every month that you continue to not have part D when you are eligible to have it. You’ll continue to have this penalty increase until it’s a monthly thing. So it’s basically 12 increases per year that you’re going to see this continue to grow.

>>Jake Dayton (25:07):

Jake gives an example of the penalty. If somebody this year in 2020, has not had drug coverage since 2006 right when it was first required, you’re going to have a penalty that is about 1% of the national average cost of a part D drug plan. That changes every year, but assuming because it’s been pretty close around the same every year. The national average costs of a part D drug plan is around $34. It’s hovered around the low thirties. About $34 a month for a part D drug plan, you’re paying 1% of that or 34 cents for every month you don’t have part D when you’re supposed to. 34 cents doesn’t sound that bad and it’s all relative. For some people when they see their big ultimate penalty of 34 cents times the number of months that they haven’t had part D, some people don’t feel like it sounds that bad, but others say, well, why in the world am I going to pay $30 to $50 a month for the rest of my life that I don’t have to pay if it can be avoided if it’s just set up right from the start.

>>Jake Dayton (26:59):

Jake explains you’ve got two options. So they can continue to go without drug plans. So they don’t have this penalty until they activate their part D. If they continue to go without part D the rest of their life, they will never actually activate the penalty. They’ll never officially have to start paying it. Jake’s job as an insurance agent though, as a broker is to say, what in the world are you thinking not having coverage for the just in case, because this has also happened with clients he’s had where all of a sudden life happens, you get older, your body starts doing things it wasn’t doing before, which you don’t have a lot of control over sometimes and all of a sudden you need to take a prescription that is so far out of reach, cost wise you can’t afford it unless you have a drug plan.

>>Jake Dayton (27:44):

Jake further explains suppose you come into needing a drug in the beginning of the year, January, April, June, whatever, and that drug, unfortunately, to be able to get a drug plan, you can’t enroll in that until later in the year during open enrollment. So if you’ve got to take that drug, you’re paying whatever it costs for it out of your own pocket without insurance until you can even enroll in the plan later during open enrollment that year. But that doesn’t even start until January of the following year. So you could be months and months, possibly a full year before you actually get coverage on that drug. Even if you decide you want to get the drug plan.

>>Jake Dayton (29:18):

Jake explains option two is we put you on a drug plan for the first time since you’ve been on Medicare, we actually start your part D. What that does then is activate your penalty. You’re going to get a letter in the mail from CMS saying, it looks like you’re getting on drug coverage and you haven’t had drug coverage ever since 2006 when you were eligible. And so they’ll give you an opportunity in that letter to say if you’ve had any other type of coverage. If from the time you were eligible for Medicare and when you finally start part D, you had some other type of coverage, what we call a creditable coverage, meaning a coverage as good as or better than Medicare, then that will help reduce your penalty a bit. For example if somebody has Tricare for Life or VA or has had work coverage. Those exempt you from the penalty. Jakes advised his advice to somebody is always going to be without reservation, don’t continue to take a chance and not have drug coverage.

>>Devin Peterson (31:25):

Devin asks Jake the next common mistake people make going into the Medicare transition.

>>Jake Dayton (31:41):

Jake explains it doesn’t necessarily have the devastating effects that the part D mistake does, but overall cost savings wise over the years over someone’s financial retirement can make a difference. A lot of people when they’re working or a lot of them will continue to work past 65, they’ll talk to their employer and say, hey can I stay just on my work coverage past 65, and their work will say, sure you can, as long as you work, you can hang onto your work coverage. Which is true for most people. You’ll have some employers that will say, no, once you turn 65 we’re kicking you off we want you going on to Medicare. But a lot of them will say, no, you can stay on as long as you want. Unfortunately that is what a lot of people do. And that may come as a surprise to people. But until you know how the Medicare coverage works, when you get the combination of Medicare, Medicare with the secondary coverage with it, when you understand how good that coverage is, a lot of people years after they’ve continued working, find out that the money they could have saved by getting on the Medicare plan could have saved them hundreds or thousands of dollars. Jake often tells people the biggest mistake unfortunately made in Medicare is assuming that what you have is good enough.

>>Devin Peterson (33:29):

Devin explains he could see how in a lot of areas that could be detrimental, just making the assumption that where you’re at is the best place to be. Particularly because the Medicare and healthcare environment is ever changing.

>>Jake Dayton (34:05):

Jake explains that what most people resonate with when it comes to the mistakes of Medicare is how costly they can become. He advises that he sits down with people and they’ll determine that their work coverage is better than what they can get through Medicare. He explains it’s always better to assess if what you have versus what could you have.

>>Devin Peterson (35:00):

Devin asks Jake to share more about the transition, continual transition if you would, as they go through Medicare year after year. And with that, what’s this open enrollment and why should we be talking about that and sharing information about that transition that happens year after year.

>>Jake Dayton (35:39):

Jake explains it’s the one time of the year when you have the ability to change your Medicare coverage from one plan to another. Right now that’s from October 15th to December 7th. That’s what we call the AEP, the Annual Election Period. There are exceptions to that. There might be other times during the year where someone can change their coverage. If they have what’s called an SEP, a Special Election Period, which is for people that meet certain conditions and give them an exception to the rule of having to do it during the regular open enrollment period. Great examples of that would be if you have a financial status change, become eligible for Medicaid or all of a sudden lose Medicaid status or other certain financial statuses. Even besides Medicaid, there are others called low income subsidies that they can receive where they’re not quite fully eligible for Medicaid, but still get help paying for prescriptions, things like that. Or if you move from one place to another. Each of these plans you can get with your Medicare only work in a certain service area. If you leave that service area, you are actually eligible to get on a plan, change plans to another area.

>>Jake Dayton (37:39):

Jake explains that there are other opportunities besides just open enrollment where somebody could change during the year, but for the majority of people, if you’re going to make a change, it’s going to be during AEP, the annual election period. During that time, you can make as many switches as you want. Somebody can make a switch during a plan. They have buyer’s remorse or they come across something they feel like maybe better, whatever the final enrollment is that they’ve chosen before December 7th. That is when it’s locked. That’s basically what locks in as of January 1st but it doesn’t matter whether you enroll in a plan on October 15th or December 7th.

>>Jake Dayton (38:27):

Jake advises there’s a lot of hype around it because again, that’s the only time you can make a change. The big mistake he comes across with people during open enrollment is often the same. It’s the same mistake people make when they’re first new to Medicare, which is keeping the existing plan they have. The problem is you don’t know what is changing going into the next year. It’s a 50/50 shot that it’s going to be good in the long run because there are two things that determine whether a plan is good for somebody. Two big things. There doctors, they have certain doctors they’re attached to and prescriptions they’re taking. Those change from year to year. The networks change. Hospitals go in and out of network. Doctors go in and out of network. Doctors drop certain plans and quit accepting other plans and whatever it may be.

>>Devin Peterson (41:01):

Devin confirms the changes happen all around in the plan and the prescription drugs in the government’s definition of how they shuffled things up which adds a lot of changes as well. Devin asks Jake what is the healthy way to approach open enrollment every year? Should they approach it with fear and worry? Should they approach it by just not caring? What’s the median there and how would he recommend they approach that?

>>Jake Dayton (41:40):

Jake explains that the insurance companies are required to send out what’s called the annual notice of change book. That basically details the changes from one year to the next. They’ll usually get that around early October. The best thing somebody can do is actually look at that book. It’s called ANOC for short, A-N-O-C, Annual Notice of Change book. It details side-by-side 2019 to 2020 including which copays are changing from this to this for each benefit line item benefit. If somebody’s happy with their plan, the great news is they don’t need to do anything. If you don’t do anything, it will automatically roll over to the next year. They’ll get a new insurance card, usually around late December. They’ll start using that new insurance card on January 1st.

>>Jake Dayton (42:49):

Jake goes on to explain if they look in that ANOC book and they don’t like what’s happening, that’s where you talk to your agents.nSometimes it’ll be that every plan is going through some negative changes.

>>Devin Peterson (43:28):

Devin asks Jake if there are any mistakes that might happen during that period?

>>Jake Dayton (43:46):

Jake explains the big thing during open enrollment is rash decisions. He advised people might come across somebody in a store sitting at a kiosk pulling them in to talk about the changes in Medicare. Jake gives an example of a client he had that recommended a new plan that they switched to without even looking up their prescriptions to make sure it was a good fit. Jake explains his client called him confused and asking if Jake could help but he could no longer be their agent since they changed the plan with someone else.

>>Jake Dayton (45:00):

Jake advises that’s something that ‘s worth clarifying as well. If you enroll with somebody else, whether you like that person or not, whether you know anything about them or not, that person becomes your agent. And so he makes sure to tell his clients, if they want him to remain their agent and be able to have his help all throughout the year they have to make sure to make all changes with him.

>>Devin Peterson (46:20):

Devin asks Jake, what’s an appropriate way that clients should interact with their agent? Should they, if they have an agent, should they reach out every time? Is it worth a sit down every single year or is it worth a phone call? What’s the best way that they can approach that transition and get that piece of mind that they’ve checked on where they’re at without kind of taking too much time?

>>Jake Dayton (47:00):

Jake explains it depends on how somebody approaches it. He reaches out to his clients to let them know what’s going on with their plan. If there’s any major drastic changes so they’re aware that they may want to chat. This is one of those big years where one of the companies was going through major changes and if clients didn’t do anything about it, they were going to transition automatically to a plan that was double the cost of what they’re paying. If there’s major things happening, he’s proactively reaching out to his clients, letting them know the specific things that are happening.

>>Jake Dayton (50:53):

Jake shares he believes in the idea of specialization. Let people do what they’re good at. He believes in this world of Medicare that has become very complicated, it’s very helpful and stress-relieving if you let somebody help you with that. He goes onto explain his clients never pay him and he is only paid by the insurance companies that he represents.

>>Devin Peterson (53:01):

Devin asks Jake one last question that is asked on every episode which is, what makes you feel alive and how do you stay relevant in your life?

>>Jake Dayton (53:18):

Jake explains there’s two different categories, personally and professionally. Professionally what he thrives on is dealing with people. He advised his job is client facing. He advised it’s a business relationship but over time, year after year, as he continues to help them, they develop a relationship and a friendship. For jake, somebody that loves people, it’s amazing to see what a relationship can kind of bloom into from somebody you’re just starting off as a business relationship and it becomes personal. They become lifelong friends. He thrives on being able to deal with people. There’s so many different people in the world and he gets to deal with all of them. The other big thing he would say is just for something that has become as complicated as Medicare, he loves to be able to tell people, it doesn’t have to be complicated.

>>Jake Dayton (54:40):

Jake says he loves simplifying things that are otherwise pretty complicated or difficult to understand and taking it to a level they can understand. He explains he loves seeing people’s reaction once they finally understand and something that seems so complicated doesn’t have to be.

>>Devin Peterson (55:24):

Devin asks Jake what makes him feel alive or stay relevant in his family life or community?

>>Jake Dayton (55:33):

Jake explains it’s spending time with those he loves. Family for him is his passion, his everything. He states he has a wonderful wife, very patient wife and five kids and just being able to raise them and figure this out as we go as parents. His kids range from about 3 to 13. He explains if he was working he would be spending time with his. He goes on to say that he also loves playing the piano and that is his release and gives him energy. Being able to just kind of be around family and be around the piano is what he gets out of bed for.

>>Devin Peterson (57:11):

Devin thanks Jake for being on the podcast and sharing all his knowledge regarding Medicare transitions