How to Find the Best Health Care Plan

A recent headline in The Wall Street Journal said it all: “Health Benefits for Retirees Continue to Shrink, Study Says.” “Outlook Is Even Bleaker For Workers Leaving Jobs Over the Next 20 Years,” said the subheadline.

Take a look at a few developments in just the last few months:

• Another 200,000 Medicare members will lose their coverage as their HMOs withdraw from Medicare participation. These join the two million or so Medicare enrollees who lost HMO coverage over the last few years. The HMOs say that Medicare reimbursements no longer are adequate. Other HMOs continue to participate but are increasing costs to members and reducing benefits. 
• Bankrupt companies have reduced or eliminated their retirees’ health benefits. These include Polaroid and several large steel companies, with some airlines probably not far behind. 
• Other employers are requiring retirees and employees to bear a greater share of the cost of health coverage. Now, the average retiree personally pays about 68% of retirement medical costs, compared with 39% 10 years ago. 
• Premiums on all health care policies are increasing rapidly with estimates for next year coming in at 15% and higher. 
• Some of the pharmaceutical companies are withdrawing the drug discount plans recently offered to seniors. They say the plans could reduce the reimbursements Medicare and Medicaid pay for their drugs. 
• A report in April 2002 said that today’s seniors carry a record amount of debt, and that half of those seniors filing for bankruptcy say medical expenses pushed them over the edge.

A government report in 2001 estimated that a typical retired couple would spend almost $6,000 annually on Medicare premiums, Medigap coverage, and a long-term care policy. These expenses do not include out-of-pocket costs, prescription drugs, deductibles, and costs above policy limits. An older couple, one with poor health, or one that chose to purchase more generous policies paid more.

No doubt other expenses decline as one retires and ages, but health care expenses can increase to make up the difference.

It is open enrollment season at many employee and retiree health plans. A number of you are forced by circumstances to reconsider your options now. Even if you aren’t forced to, this probably is a good time to take a look at the available health care options.

In most areas, you continue to have two basic options. One option is traditional Medicare; the other is a managed care organization, such as an HMO. As I said, many HMOs are dropping out but there still are HMO options available in many areas, especially populous metropolitan areas.

Several features often attract seniors to HMOs. One is coverage of prescription drugs in the basic plan.  Another attraction is that HMOs often are less expensive to the participant. HMOs also usually offer optical coverage and other care not covered in traditional Medicare and other health plans. Among the downsides, you don’t get to choose your doctor, and access to specialists is limited.

Traditional Medicare allows you to choose your doctor and go to a specialist when you want. It offers scant coverage for prescription drugs and has other coverage gaps that might make you seek out a Medigap policy.

One way to get a thorough picture of your Medicare options is on the Internet. If you don’t have a computer, try to get help from a friend, relative, or the local public library. At www.medicare.gov, the Centers for Medicare and Medicaid Services have a feature that lets you compare the senior health care options in your geographic area. The site identifies the specific firms in the area that participate in Medicare and summarizes their offerings.

It is a fast and convenient way to get a snapshot of which providers offer plans in your area, the basic features of the plans, and the costs. You will find a feature that estimates the annual out-of-pocket costs for someone of your age and your general health status. A survey of member satisfaction with each plan also is available.

This web site also provides information on nursing homes and prescription drug discount plans in your area.

The web site, however, is only a starting point. It doesn’t indicate, for example, if your doctor belongs to an HMO. It also doesn’t say which drugs are covered under plans with prescription drug coverage.

Here is a checklist of additional information you need to gather before making a decision:

• To which plans does your doctor belong? The best source for this, of course, is your doctor’s office. Unlike printed directories of participating doctors, your physician’s office will be able to say if the doctor is thinking of adding or dropping participation in some plans. Then you might have to decide if keeping your doctor is more important than saving. 
• Which prescription drugs are covered? If you have a chronic condition or use some drugs regularly, find out if they would be covered. Too often, seniors sign up for plans only to learn later that the drugs they use aren’t covered or won’t be covered for the first year of participation. 
• What other services are covered? Some people want vision, dental, and mental health in one plan. For others, this isn’t important. 
• What preventive care is covered? Health problems are best discovered and treated when found early, and preventive exams and tests do just that. Some plans won’t pay for tests unless there are symptoms or a doctor’s order. Others allow preventive tests only on a schedule based on your age and health history. Find out any limits on annual exams and preventive testing. 
• Is there a wellness or disease management program? Patients who have or are at risk for chronic diseases get better control of the conditions and improve health by participating in special programs designed to educate them and closely follow their condition. Many plans offer reduced rates or special benefits for those who voluntarily enroll in these programs. 
• What is the worst-case cost to you? Most plans have a coverage limit, and all have deductibles and other out-of-pocket costs. Try to work through the limits and exclusions to determine what the cost of a major illness would cost. 
• What are the typical costs likely to be? You’ll pay premiums, co-payments, deductibles, prescription costs, and perhaps other expenses. Draw up a schedule of your likely medical care during a typical year and see how much that would cost you in the plans you are considering. Be sure to first check whether a plan will cover drugs you use regularly or other treatments you think are likely. 
• If you are considering traditional Medicare, also look at Medigap policies. The 10 types of Medigap policies and how to choose between them are discussed in the Health Watch section of the Archive on our web site. (See the box below for access details.) After selecting the types you want to consider, shop around. Costs vary greatly among insurers for the same type of policy. Medigap policies can be compared at www.quotesmith.com.

Compare the premiums of a Medigap policy to what the covered items likely are to cost during a year. Paying the costs yourself might be just as cost-effective as a Medigap policy. If you consider a policy with prescription drug coverage, know which drugs are covered.

After gathering all this information, compare the typical and worst-case costs of the plans available to you. Also, get a history of a plan’s premium increases and benefit reductions.

Health care coverage involves trade offs. Decide what you want covered and what isn’t worth the premiums. Shopping carefully could reduce your out-of-pocket costs by 20%. That is just enough to offset the premium increases in most areas.