Medicare enrollment season is almost upon us. Every year, Medicare beneficiaries have a six-week period beginning Nov. 15 to select their medical plans. New Medicare members face the same choices when they enroll. Many of you have decisions to make. Even if you are happy with your Medicare plan, it is a good idea to review the options and reaffirm your choice.
This year, many more Medicare beneficiaries than in the past are likely to consider changing plans. Several forces are working in favor of change. Because of low reimbursement rates, more and more doctors are refusing to take new Medicare patients or even continuing to see existing Medicare patients. The government also is cutting reimbursement rates and changing some rules for Medicare Advantage plans, which might result in higher costs or lower availability of the plans.
There are two main Medicare choices, but there are a range of factors to be considered when choosing between them, and there are subsets within the choices. The goal when evaluating plans is to estimate your out-of-pocket costs for the next year. Opting for the lowest premium might not be the best decision. Instead, try to estimate your cash outlay, which is not easy with all plans. In this visit we discuss the factors you need to review.
Your two main choices are traditional Medicare and Medicare Advantage. Each has different factors to consider.
About three quarters of beneficiaries still are in traditional Medicare. There are several parts to traditional Medicare.
Part A is free to anyone who paid Medicare taxes over 40 quarters (10 years) while working and enrolls in Medicare. It covers inpatient hospitalization and some skilled nursing facility and home care. People who did not pay enough taxes can obtain Part A coverage by paying monthly premiums. For those who paid 30-39 quarters of taxes, monthly premiums were $244 in 2009. For others, monthly premiums were $443 per month.
There are deductibles and copayments for care Part A covers. You would pay a total of $1,068 for a hospital stay of 1-60 days; $267 per day for days 61-90; $534 per day for days 91-150 (known as Lifetime Reserve Days); and all costs for each day beyond 150 days.
Part B pays for doctor visits and other outpatient medical services. There is a monthly premium for Part B. The basic premium was $96.40 for 2009 and is likely to remain there in 2010. The premium is means-tested, rising for singles with incomes above $85,000 and married couples with incomes above $170,000. Part B has an initial deductible of $135 annually and a 20% deductible for all care after that.
A range of medical services are not covered by Medicare, especially Part B. If you need the services, you can pay the cost yourself or buy a Medicare supplement insurance policy (also known as a Medigap policy) to fill in some or most of the gaps in Medicare.
Medicare supplement policies are offered by private insurers, but the government standardized the policies. There are different plans, ranging from A through L. Plan A is the basic plan, and each successive plan adds coverage and carries higher premiums. Plan F, for example, pays most noncovered expenses other than prescription drugs. More details are in the Archive on the members web site and my book The New Rules of Retirement.
Standardized plans make the decision easier. First, review the different plans to decide how much coverage you want. Then, compare the different offerings of those plans in your area. You can find the available plans on the Medicare web site or your state insurance commissioner’s web site. The Medicare web site has an interactive Medigap Compare feature that makes the task easier.
Don’t automatically go with the lowest premium offering. The insurer might be charging too little, which could have at least two bad effects. The premiums after the first year might rise dramatically, or the insurer might withdraw from the market. In either case you would need to look for other coverage in a year or more. At that point, other coverage might be much more expensive or you might be unable to obtain coverage.
You can ask for an insurer’s premium history for the policies and should. Also, be wary of insurers who are new to the Medigap business or that are smaller companies.
Before choosing a policy, ask how the insurer determines its premiums.
A community rating premium charges the same premium to all of a company’s policyholders of the same policy regardless of age. Younger policyholders pay more than they would under other formulas, but the premiums tend to be stable and rise less over time.
An attained age premium bases premiums on your age. Younger policyholders pay less than older ones. But the premiums are likely to rise more sharply as you get older. The policy might not be affordable in a few years.
Some states limit the premium method insurers may use.
Traditional Medicare also does not cover prescription drugs. Separate policies for drug coverage may be purchased under Part D of Medicare. Detailed discussions of these policies are on the web site Archive, and we will update Part D in next month’s visit.
The alternative to traditional Medicare is Medicare Advantage. This is not one plan but many plans to choose from offered by private insurers. Advantage plans generally are either health maintenance organization (HMO) or preferred provider organization (PPO) models, though there are fast-growing fee-for-service Advantage plans.
Medicare Advantage plans generally cover more care than traditional Medicare, including prescription drugs and dental care. The plans also tend to charge lower premiums than traditional Medicare. This is possible, because of the payment the insurer receives from Medicare for each enrollee.
Medicare Advantage plans often limit your choice of medical professionals and hospitals. Your first step should be to see if the doctors you like participate in the plan.
The trick with Medicare Advantage plans is tracking deductibles, copayments, and non-covered services to estimate your cash outlay. The Medicare Compare calculator at www.medicare.gov is indispensable. In addition, check the fine print of the policies, not just the summaries. Examine the coverage for hospital stays and skilled nursing facility care. Beware of limits on items such as chemotherapy, blood transfusions used in transplants or other major surgery, and elective treatments such as hip replacement. You probably want a policy that has a lifetime limit on your out-of-pocket expenses.
Medicare Advantage members likely will face many changes this year. The government is reducing its reimbursements to insurers, so the plans will have to reduce benefits or raise charges.
There are a wide range of choices available to Medicare beneficiaries. You have the opportunity to change each year, and should at least review the alternatives and consider a change. It is a good habit to get into, because there are likely to be more changes in the next few years.
RW October 2009.