Getting Ready for Medicare Decision Time

Many people make the wrong choices for Medicare. They choose the plans that aren’t best for them and consistently pay more out of pocket than they should. That’s been clear from a number of studies over the years. Some advisers conclude that 90% or more of Medicare beneficiaries spend more of their own money than they need to on medical expenses.

Fortunately, every year there is an opportunity to correct those mistakes. The Medicare annual open enrollment period is coming. From October 15 through December 7 there is an opportunity to change your coverage. During this period, you can switch from traditional Medicare to a Medicare Advantage plan or the reverse. Those already in Medicare Advantage can switch to a different Advantage plan. You also can join a Part D Medicare prescription drug plan or switch from one Part D plan to another.

Any changes made during this period will take effect January 1, 2016.

Medicare has several components. Part A is hospital coverage, for which there is no premium for most people. Part B is traditional Medicare covering doctors’ expenses and other types of outpatient medical care. Parts A and B have deductibles, copayments, coverage limits, and noncovered care. There are Medicare supplement policies, or Medigap policies, that pay some of the items not covered by Parts A and B. These policies are offered by private insurers and regulated by Medicare.

Part D is prescription drug coverage. Part D policies are offered by private insurers but regulated by Medicare.

Part C is Medicare Advantage. These also are plans offered by private insurers regulated by Medicare and generally combine Parts B and D and perhaps the terms of some Medigap policies and other types of care. People who are in Medicare Advantage aren’t eligible to buy Part D policies or Medigap policies because of the likelihood of duplicate coverage.

There are three major areas in which Medicare beneficiaries leave money on the table or spend money they don’t need to.

One major oversight is to enroll in a Medicare Advantage plan without realizing that it limits your choice of doctors and other medical providers. To receive full benefits of the plan, your care must be delivered by a provider in the plan’s network. When care is delivered out of network, except in emergency conditions, the plan is likely to either not cover the care or cover less than it would for an in-network provider. You pay for all of what the plan doesn’t cover.

This isn’t a problem for people who are content to use the plan’s doctors and other providers. But those who want to stay with a long-term doctor or pick their own doctors and specialists are likely to incur additional expenses. Traditional Medicare often is the better choice for those people. It allows you to select your doctors and other providers and decide when to visit them and which care to receive. Medicare pays the covered bills up to its scheduled prices. While a Medicare Advantage plan might look attractive, it isn’t when you want care delivered outside of the plan’s network or without the plan’s preapproval.

Prescription drugs also are a major cash drain. More and more medical treatment is delivered through medication. I’ve seen studies that estimate the major category of medical spending for older Americans is prescription medication, not insurance, doctors, or hospitals.

Part D policies and Medicare Advantage plans each covers prescription drugs. But you have to pay attention to the details before signing up for a plan. All plans don’t cover the same drugs or the same amount for each drug.

Each plan has what’s called a formulary. That is the list of prescription medications covered under the plan. The lists are very specific. For example, statins are a commonly-used medication. A plan might cover a particular brand of statin but not other brands. Or it might require a member to try the preferred brand first and allow a switch to another brand only when the preferred brand hasn’t achieved desirable results over a period of time or when the member has adverse reactions.

When a generic drug is available, some plans will cover only the generic and not any name brands. Of course, a plan also might not cover certain types of drugs or drugs for certain conditions.

To examine a prescription drug plan, you first need to develop a list of medications you’re taking. Also consider any medications that your medical history, family history, or comments from your doctor indicate might be recommended in the next few years. Perhaps you have borderline high cholesterol or high blood pressure and might need medication to control those in the future.

Then, examine the formulary and restrictions in the plan for those drugs. Most details are on the Medicare web site and are available over the telephone through 800-MEDICARE.

Also, be sure you are looking at the latest information. The plans release the coming year’s formulary and plan details in the fall in time for the annual open enrollment, and they are posted to the Medicare web site. But don’t rely solely on the web site. A plan can make changes that don’t make it to the Medicare web site. When you’ve used the web site to narrow down your choices, contact the plans directly either through their web sites or the telephone to verify there haven’t been changes.

Even if you are happy with your plan, you should review the latest information. It is not unusual for a plan to make changes in the medications it will cover or change policies on brands and generics.

Premiums are another way people leave money on the table, especially with Medigap plans. Some insurers apparently count on people not doing a good job of shopping for their coverage. So, premiums for the policies vary widely.

The Medicare supplement, or Medigap, policies are tightly regulated. Insurers are allowed to offer only certain types of coverage, and the types are identified by Medicare. Our latest discussion of the details of these policies was in the October 2014 visit.

Though the policies are identical, premiums for them vary widely. One study found that premiums vary by 100% for the same policies. That means some people pay twice as much as others for the same coverage because they didn’t shop around. You don’t want to automatically buy the policy with the lowest premium. The insurer might be trying to increase market share with low premiums only to substantially increase them in a year or two. Or it might make money by paying slowly or through other means. But you should shop around, especially for the Medigap policies since they are the same.

Be careful about piggybacking on someone else’s research and buying the same policies they do. Your medical history and needs are likely to be different. This is especially important when they don’t live very close to you. Prices for medical coverage vary considerably based on where a person lives. Often, premiums are very different even between counties that border each other. There are about 2,300 Medicare Advantage plans and 1,400 Part D plans offered around the country. The same insurers are offering the same or very similar policies but charging different premiums based on local costs and other factors.

Remember, even if you are happy with your medical arrangements, take a look at what’s available. Plan details and costs change regularly. You might find something that better fits your needs and perhaps saves you money.

RW October 2015.