One more last - Annual HSA Contribution

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peakbagger

Minister of Fire
Jul 11, 2008
8,837
Northern NH
As I get closer to 65 this year I had one more "last". As soon as I could get access to High Deductible Heath Care Plan, I have contributed to my HSA account every year. When I was working for an employer, they made a portion of the contribution but for the last couple of years I have had to cover it all. This year is the last time I can make a contribution as I will be going on Medicare later this year and do not expect to be covered by an employer plan again. Thus it is the end of what is regarded by many financial advisors as the best tax shelter available to the average person. A lot of companies don't publicize them well and a lot of folks get HSA (Health Savings Accounts) mixed up with FSA (Flexible Spending Accounts). The both allow pretax money to be set aside for medical expenses pre tax but the FSA has to be spent the year its set aside or its lost while HSA money if not spent can remain in the account and invested with no limit. The trade off is in order to create an HSA, the employee has to buy a High Deductible Heath Care plan which means more of their own money has to be spent before insurance kicks in. The HSA plans usually cost less and many employers pay for part of the contribution but for many folks they would rather have the insurance company pay for the day to day bills. For someone with medical conditions and lots of medical bills that routinely hit the maximum out of pocket, a HSA may not make sense but for someone like me without a lot of normal expenses, its a long term better deal. In theory I could pay for the out of pocket expenses out of the HSA but for most folks its far better to invest the HSA dollars for the long term and keep it as major medical emergency fund and spend it later on in life as if it is spent on medical costs it comes out tax free and any long term earnings are tax free. Most employers do a real bad job at educating employees on these plans.

When the company I used to work for first rolled out access to HSA's, they like many companies assumed that all the employees would have the contributions got to one default account administered by the bank that they did business with. By law the HSA funds are immediately under the control of the employee and the employee can chose their own administrator, and working for a relatively small company they were initially resistant. I looked into their default plan and it was not great. High annual management fees and they had some mutual funds but they were all not very great funds with front or back door loads. A lot of folks don't understand this and lose out as the default company plans are usually low interest accounts with high fees. I did some research and I think I ran into a Clark Howard show that recommended the "best" administrators for the type of use the account owner would be using. In my case I wanted to invest the HSA money for the long term in a high rated no load mutual funds and fund out of pocket expenses from other savings. That meant I wanted low expenses and access to good mutual funds. I ended up going with a company called HSA Administrators, that eventually changed their name to Health Equity and have used them as my administrator ever since as they had low yearly expenses and access to a limited basket of Vanguard Funds. It was initially rough to get my company to acknowledge that I could put my money elsewhere (more paperwork for them) but one of the accountants also was interested in it, so the company grudgingly set it up and continued to do so until I stopped working for them. After that I was buying my own insurance so I just cut a check to Health Equity every January and deduct it on my taxes in April. Despite conservative investments and a strange market, I have good returns and expect them to continue. I now have a nice nest egg set aside to cover future medical expenses when I retire.

I could be saving receipts now and take that money out of the account later but the plan is start saving up my medicare bills and copays and expect that will add up to the account balance someday. As long as I have the receipts to back it up any money coming out of the account will be tax free.

I still have several months before I get to pick a medicare plan, I am still doing research and getting plenty of junk mail. Lots of options and lots of sketchy TV ads trying to con people.
 
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Our medicare comes to $29/month which includes vision and hearing. It's been a good plan for us.
 
Can you use your HSA account balance to pay for your medicare deduction from Social Security once you get on Medicare?
 
It sucks seeing that money come off of the top and go into a hsa account but it sure is nice knowing that money is there when needed.
 
Can you use your HSA account balance to pay for your medicare deduction from Social Security once you get on Medicare?
Yes. Any out of pocket medical expenses including Medicare part B, that includes prescriptions, dental vision and over the counter stuff.

Note that people who have paid into social security have already paid for Medicare Part A in their paycheck while they worked . Those who are now collecting social security usually pay for Medicare part B directly out of their social security check, so they may not remember or realize that they are paying once a month. For folks my age our full retirement age is later than 65 (Mine is 67 and 10 months) and many folks will decide not to collect SS even though they have to sign up for Medicare at 65 so they have to pay it directly. I do not plan to file for SS until 70. In either case my understanding is the $174 bucks a month (or more for high earners) for Medicare part B can be taken out of the HSA. Folks with traditional Medicare usually buy "medigap" Part G and prescription coverage plans Part D for even more out of pocket money (frequently called "letter plans") while those electing to go with Medicare Advantage (actually Part C) plans may or may not need to pay more, presumably Begreen has one of those plans? In many cases the extra dental and vision does not cover everything, usually it is the routine checkups and cleanings and some fixed amount before the member has to pay the rest. Most of the dentists in my area will not accept the low rates offered by the plans and the Advantage plans just do not offer that option in my area while the same plan does in other areas.

I am still learning the details on sticking with the conventional Medicare letter plans versus the Advantage plans. The Advantage plans are privately run by many types of organizations so it hard to generalize while the Medicare letter plans are more standardized. The Advantage plans tend to be set up like HMOs where members have to stick to services in the plan and get penalized big time for outside the plan. That can be big issue for snowbirds who live in two places during the year. Advantage plans can also ration care and costs by keeping the number of specialists in the plan low. If someone gets a major medical issue like cancer most likely do not have the choice to go to specialty centers unless they are in the plan. There is a rating system for Advantage plans, the ones with high ratings will gladly tell you their rating, the lower rated ones will be less forthcoming and try to convince potential customers that the ratings do not mean much. Medicare is more portable. BTW, no doctor has to accept Medicare or an Advantage plan, they can elect not to and can charge cash, but most big systems tend to prefer Medicare and many doctors limit the number of Medicare patients they will accept. I was surprised that one third party comparison model recommends conventional letter plans, (A,B,D &G) for me. I will definitely be spending a lot more time in the upcoming months to confirm.

BTW if you see the ads from old sport stars and actors saying all the extra great things people can get, be aware its mostly BS, they are mixing in other programs in limited areas that few are eligible for. They mostly are trolling for uneducated folks to call them and try to sell them something that will make them the most commission. Most are not brokers, they just collect names and sell them to brokers. AARP does the same thing, they make most of their money from selling names of members to firms that sponsor them. My dad used to volunteer for them and he was not allowed to mention firms that were not sponsors of AARP and was encouraged to plug the products of sponsors that in some cases were not great plans. Some states have Medicare "navigators" that are non affiliated with insurers that claim to be unbiased. I think our state had them but not sure if they still do. Most people usually chose a way to go once and stay that way for the rest of their lives so the various groups selling plans spend a lot of time and money trying to get people to sign up the first time.
 
Peakbagger, thumbs up on your sharing what you have learned about Medicare and Medicare Advantage. It fits with my and my wife’s understanding. Making sense of it can be so difficult. If one is close to that age it is well worth the time to do. We have been on Medicare for some years now and I’ll add a few thoughts and experiences. We first went to a community advocate and not one of the many “advisers” or as you point out commission earning brokers. We chose traditional Medicare, that is with A&B and with it medigap plan, G. It was right for us and has proved more so as we age. For us Medicare Advantage plans’ bells and whistles, dental, eyecare etc., cannot make up for our coverages including the ability to choose where we get our health care and which doctors we see. With our traditional plan we have been able to self refer to get very top medical care in Maine, and in one case Boston, with just a phone call to that surgeon’s office. We came through a rough period dealing with series of serious events and conditions and gratefully are in good health now. Of the hundreds of thousand of dollars in charges racked up we paid nothing except for our share of outpatient prescription drug costs. Choosing a plan is not a small decision. I have no doubt we picked the right plan for us. Of course the cost of the medigap supplemental plans with 100% coverage is not inexpensive and I am fortunate that we can afford that.

From the very beginning my wife has taken the time to make herself knowledgeable on Medicare etc. That has turned out to be very valuable in many ways. Each year Medicare puts out a hundred plus page large print handbook. As Medicare enrollees we receive it automatically. Getting a copy before choosing a plan would be good. In it there are some key sections that are very helpful. For example one explains medigap plans with a chart that lists coverage amounts in the various plans. Another section is on Medicare Advantage plans. Also an experienced advisor with no money in the game can really help one understand and choose the best plan for that individual’s situation and needs. I’m not saying there aren’t many unselfish broker / advisors who put an individual’s best interest first. It’s just there is some conflict of interest built in to that system.

Back to Medicare Advantage, as I understand it insurance companies are given a certain amount annually for each Medicare recipient and make their profit or loss by managing that care. Traditional Medicare has no such limitation. In talking to relatives we found that it can be very difficult to get specifics on what is covered an how much of a service is covered by insurance companies so dome digging may be required.
 
We first went to a community advocate and not one of the many “advisers” or as you point out commission earning brokers.
Good suggestion. That is what we did and it was a big help in cutting through the fog of options.
 
I do plan to see what resources are out there. My understanding was NH had a great advocacy program but cut way back by the majority running the state. When I ask older friends how they went about choosing most are just choosing based on what others are using but usually lean towards the Advantage plans as they cost less up front. I have heard complaints that the Advantage plans nickel and dime for copays and many folks end up with more out of pocket than expected.
 
It's good to shop. Our advantage has no co-pay for regular wellness visits but there is a small one for specialists. My meds are no copay. My wife and I are generally pretty healthy so there haven't been any serious expenses. My knees failing was probably the most and I did have to pay a small copay for the specialist, but the tons of xrays were free and there was only a small charge for the MRI. The best benny was last year when I got full coverage for hearing exam and the hearing aids.
 
https://www.ktoo.org/2024/01/04/older-americans-say-they-feel-trapped-in-medicare-advantage-plans/

My wife came across this article on Kaiser Health News this AM. It covers how an Adavntage plan can meet needs when younger and healthier but how leaving Advantage plans for original Medicare and a supplemental medigap plan may be prohibitive or impossible when older and needs become greater. Here are a couple of excerpts:

“The problem is that once you get into Medicare Advantage, if you have a couple of chronic conditions and you want to leave Medicare Advantage, even if Medicare Advantage isn’t meeting your needs, you might not have any ability to switch back to traditional Medicare,” Meyers says.

But, Meyers says, there’s a catch: While beneficiaries who enrolled first in traditional Medicare are guaranteed to qualify for a Medigap policy without pricing based on their medical history, Medigap insurers can deny coverage to beneficiaries transferring from Medicare Advantage plans or can base their prices on medical underwriting.

Only four states — Connecticut, Maine, Massachusetts and New York — prohibit insurers from denying a Medigap policy if the enrollee has preexisting conditions such as diabetes or heart disease

Of course changing to another Advantage plan is allowed during annual open enrolment.
 
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https://www.ktoo.org/2024/01/04/older-americans-say-they-feel-trapped-in-medicare-advantage-plans/

My wife came across this article on Kaiser Health News this AM. It covers how an Adavntage plan can meet needs when younger and healthier but how leaving Advantage plans for original Medicare and a supplemental medigap plan may be prohibitive or impossible when older and needs become greater. Here are a couple of excerpts:

“The problem is that once you get into Medicare Advantage, if you have a couple of chronic conditions and you want to leave Medicare Advantage, even if Medicare Advantage isn’t meeting your needs, you might not have any ability to switch back to traditional Medicare,” Meyers says.

But, Meyers says, there’s a catch: While beneficiaries who enrolled first in traditional Medicare are guaranteed to qualify for a Medigap policy without pricing based on their medical history, Medigap insurers can deny coverage to beneficiaries transferring from Medicare Advantage plans or can base their prices on medical underwriting.

Only four states — Connecticut, Maine, Massachusetts and New York — prohibit insurers from denying a Medigap policy if the enrollee has preexisting conditions such as diabetes or heart disease

Of course changing to another Advantage plan is allowed during annual open enrolment.
Wow that is key piece of information I will add to my research.

Thanks!
 
Yup, its real for sure, after trying to make a change to a health plan with a former employer that required medical underwriting, I found that the entire process was set up to discourage anyone from trying to do so.

Questions like "have you ever had a headache, if so list dates that they have occurred". Pages of similar wide-open questions.

It also lines up with something my mother went through near the end of her life that felt strange. Both parents were in a retired veteran plan that was sourced out to a private firm that switched into Advantage plans when they became available. The VA plan was a prototype for Advantage plans where the federal government handed off health care to private HMO like groups. My parents were treated as Advantage plan members. When my mom had a major health issue, I was contacted by the plan (I was my parents proxy) that the plan could not provide the best service to her and they would be transitioning her to Medicare. It was not represented as a choice. Luckily military veterans have a backup for this which was the equivalent to a Medigap plan so it was somewhat transparent to us. Subsequent to the transfer I learned that they had outright lied about one aspect of their ability to care for her and my guess is it probably was not a mandatory transfer, but it was a way of dumping high cost members out of their system.

I think a lot of "young" presumably healthier retirees are convinced to join Advantage plans due to low cost and then as they get older and have more specialized medical issues, rationing of services inside the plan start to appear but they are stuck without a way out unless they skip the Medigap and pay out of pocket and hope they can afford it.
 
It sucks seeing that money come off of the top and go into a hsa account but it sure is nice knowing that money is there when needed.

It's way way off the top. The HSA contributions are not only deducted income for from federal and state income tax but also from payroll taxes like SS, medicare, state L&I, etc. It really is a sweet deal.

I've maxed my HSA out from day 1 but I do use it for medical expenses. The Bank of America HSA has been good for us with low cost investment options.