Clients want advice about their Medicare options

Older clients increasingly need advice about their Medicare options, and a majority of financial advisers believe it's their fiduciary obligation to provide that advice — if only they knew how.

As more than 60 million Americans prepare for this year’s Medicare open enrollment period, which runs from Oct. 15 to Dec. 7, most don’t understand the plan components, admit to being overwhelmed by Medicare advertisements, and fail to consult with external sources before signing up.

Medicare comes in two flavors, one of which is original Medicare, which includes Part A hospital insurance and Part B outpatient coverage. Those who choose original Medicare usually supplement it with a Medigap insurance policy to cover deductibles, copayments and certain out-of-pocket costs, and a Medicare Part D prescription drug plan.

Alternatively, an increasing number of Medicare beneficiaries are opting for all-inclusive Medicare Advantage plans, which usually bundle original Medicare and prescription drug coverage, and often include extra coverage for hearing, vision and dental services, usually for a lower monthly cost than original à la carte Medicare. Medicare Advantage members must pay the Medicare Part B monthly premium, but often face little or no additional monthly costs in exchange for using a specific provider network.

During this fall’s open enrollment season, Medicare beneficiaries can change their Medicare Advantage plan or Medicare Part D prescription drug plan for next year, with coverage beginning on Jan. 1. They can join a new Medicare Advantage plan, join a new Part D prescription drug plan, switch from original Medicare to a Medicare Advantage plan, or switch from a Medicare Advantage Plan to original Medicare (although it may be hard to qualify for a Medigap plan due to medical underwriting requirements).

Most Medicare beneficiaries fail to switch plans during open enrollment even if other plans might better meet their changing health care needs, according to a new report, Hidden Crises: The Medicare Enrollment Maze, issued by Sage Growth Partners, a national health care consulting firm.

“Our research shows that widespread consumer confusion hurts older Americans and the entire U.S. health care system,” Dan D’Orazio, CEO at Sage Growth Partners, said in a statement accompanying the report. “It’s beyond time for changes to be made to better educate and support those enrolling in Medicare every year.”

Although one-third of the more than 1,100 respondents to the Sage Growth survey said they have a financial adviser, only 2% used that adviser to help them select a Medicare plan.

Separately, another new survey from Medicare planning software and consultation service 65 Incorporated found that the majority of financial professionals believe that advisers have an obligation to clients when it comes to health care planning for retirement. In a poll of more than 155 advisers, nine out of 10 respondents said financial advisers have a fiduciary duty to help their clients, but most don’t feel equipped to do so.

Both surveys confirm the need for advice is real as health care costs are a top concern of current retirees and those approaching retirement.

More than half of baby boomers and two-thirds of Gen Xers said they're terrified of what health care costs may do to their retirement plans, according to the Nationwide Retirement Institute 2021 Health Care Costs in Retirement Consumer Survey. And half of retirees say planning for future health and long-term care needs is their top priority, according to the EBRI 2022 Retirement Confidence Survey.

“With health care in retirement the number one concern of most clients, Medicare optimization and health care should be a starting point for any retirement planning discussion,” said Melinda Caughill, co-founder of 65 Incorporated.

The 65 Incorporated survey also found that nearly 50% of advisers said their clients ask them about Medicare “often” or “all of the time" and 40% said their clients ask about health care costs in retirement “often” or “all of the time.”

“Advisers are looking for tools to help their clients on their Medicare journey,” Caughill said. “Although advisers can’t possibly understand every aspect of this complex government program, software allows them to fulfill their fiduciary duty by guiding their clients through this complex decision in an unbiased way.”

And those software solutions are increasing. Healthpilot.com was launched two years ago to help consumers make sense of their Medicare choices and aid financial advisers in guiding their clients in the decision-making process.

“Think of the Healthpilot platform as a sort of ‘Amazon for Medicare,’” CEO David Francis wrote to me in a recent email. “It is an incredibly easy-to-use digital customer experience that uses each individual’s personal data — health status, doctors, medications, pharmacy, wealth status — along with a proven and proprietary set of artificial intelligence algorithms, to recommend the best Medicare product and plan for each customer,” Francis wrote. “From confused and intimidated to confidently covered in less than 15 minutes.”

Healthpilot has also partnered with Envestnet to enable more than 100,000 financial advisers and wealth managers in its network to use the Healthpilot technology and services to reach millions of retirees.

“We fill a service and leakage hole for these advisers with their retiree clients — the Medicare piece — and close the data loop for them with the knowledge that their client is well covered with an accurate estimate of their health care costs for financial planning purposes,” Francis wrote.

(Questions about new Social Security rules? Find the answers in Mary Beth Franklin’s 2022 ebook at MaximizingSocialSecurityBenefits.com.)