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Retirement: Financial planner explains health care choices to consider

Dr. Carolyn McClanahan, a CFP at Life Planning Partners, joins Yahoo Finance Live to break down health care and Medicare options that investors should consider when planning for retirement.

Video Transcript

BRAD SMITH: Well, one area you always want to have less debt and more cash is in, well, retirement for sure. A new report by the US Department of Health and Human Services reveals private Medicare plans denied 18% of claims allowed under Medicare coverage rules, which is an estimated 1 and 1/2 million payments for all of 2019. So what does that mean for the future of Americans' Medicare plans?

Big question here-- here to discuss all of this, we've got Dr. Carolyn McClanahan, who is the founder of Life Planning Partners Incorporated as part of our retirement segment brought to you by Fidelity Investments. Doctor, great to have you here with us today. So first and foremost, when people are planning for this, when they've finally got to retirement, how can they avoid some of the largest pitfalls when it comes to having the proper Medicare and health care?

CAROLYN MCCLANAHAN: Right. The choice you have to make when you turn 65 is, am I going to go on traditional Medicare or am I going to go on Medicare Advantage? And that report you cited, it actually is about Medicare Advantage denials. So when you go on traditional Medicare, it's the government basically approving the claims. And traditional Medicare has-- they're very good about approving claims.

Medicare Advantage is run by private insurers. And so they are more likely to turn down claims because it makes them more money when they turn down claims. So it's an important choice for people to make. And people need to understand the pitfalls of traditional Medicare versus Medicare Advantage.

BRAD SMITH: When should people begin their enrollment process?

CAROLYN MCCLANAHAN: The enrollment process starts when you're 65, you have to enroll in Medicare A. And if you're not employed, Medicare B. And you also have to buy a Medicare-- a Medigap plan that covers any shortfalls that traditional Medicare has. If you continue to work, though, which we always encourage people to work as long as they can, because it's healthier for both your brain and your finances, then you can delay Medicare B and Medigap plans if you work for a large employer.

So it's important, though, to make sure when you quit that you sign up quickly, because if you don't, then you can have penalties and ongoing fees that you have to pay the rest of your life. So it's important for people to know their Medicare choices.

BRAD SMITH: I'm sure people would rather just play Wordle and count that as work to keep your brain going and fresh.




BRAD SMITH: But one thing that, perhaps, could be changing how Medicare how health care for retirees is considered and calculated, could it be fit tech when we think about all of the new solutions that are out there, either in the comfort of your home, and some of those in-home, gyms and the amount of data that they could even be passing through to health care providers? Do you see that changing the future of retirement and Medicare plans in the future?

CAROLYN MCCLANAHAN: Gosh. People always look to technology as the answer. But when you're aging, it's so important to have good relationships with actual people and your physicians to help take care of you. And so one of the problems with Medicare Advantage is you are now locked into a network of doctors and you have no choice in those doctors.

And so they may rely more on technology, which technology is good for some things. But when it comes down to it, health care decisions are very personal. And with Medicare Advantage, as long as you're healthy, then it's all good. But once you get a serious illness, if you don't like how the doctors are treating it-- or let's say that your doctors leave the network, well, you're out of luck, because you're not going to have any choices, whereas with traditional Medicare, you can still get that personal care and not have to acquiesce to everything the insurance company wants to do or not do for you.

BRAD SMITH: One major consideration that's come about over the past two years is how COVID would be looked at from a health care perspective and whether it would be treated as an ongoing or existing condition. What have you been hearing in terms of where that falls within health care plans, what's covered, and what's not?

CAROLYN MCCLANAHAN: Well, if we're talking pre-retirees, so pre-Medicare, the problem with COVID is it is considered a pre-existing condition. Now, the good news for health insurance is that health insurance now in the United States, thanks to the Affordable Care Act, is guaranteed issue. So they can't charge more or turn you down for health insurance because you've had COVID. But Where it does start to affect you, though, is if you need disability insurance, life insurance, long-term care insurance-- if you're having serious symptoms from long COVID or any residual effects, they may deny you coverage or raise your premiums to provide coverage.

BRAD SMITH: What type of process should people be prepared for as they are planning to retire and enrolling in any type of Medicare, considering some of the agencies, some of the regulatory bodies, and even Social Security Administration-- some of their staffing is off of some of the peak levels that we had seen in the past. So with that in mind, what should they be preparing for?

CAROLYN MCCLANAHAN: Gosh. You know, it is getting more complicated. And I hate that, because the older you get, the less you want to deal with complication. And so I always caution people when they're signing up for Medicare, get somebody to help you-- ideally, an independent insurance agent, not an agent that works for only one company.

Agents are very, very geared into selling Medicare Advantage, so you don't want somebody that's going to push you into that. Alternatively, hire a financial advisor and pay them hourly to help you navigate the Medicare enrollment process. For people who are still working, sometimes their HR departments will help them with that process.

BRAD SMITH: Dr. Carolyn McClanahan, who is the founder of Life Planning Partners, joining us this afternoon. We appreciate the insights on what is a very tricky situation for some people to navigate through. Thank you so much.