5 mistakes retirees make choosing a Medicare plan
If you have Medicare coverage or you help someone who does, it's time for
your annual homework assignment: comparing your options during open enrollment
to see if you can do better.
It can be intimidating, but the payoff for your effort: potential savings of
hundreds to thousands of dollars.
Through Dec. 7, Americans enrolled in Medicare, the federal health-insurance
program for people 65 and older and the disabled, can make changes to how they
receive their benefits. Those changes will take effect Jan. 1, 2013.
Over the next few weeks, beneficiaries can switch their stand-alone Part D
prescription drug plan or enroll in one for the first time if they didn't sign
up when they were first eligible. They also can join a Medicare Advantage plan,
a private health plan that wraps medical and often drug benefits into a single
HMO- or PPO-like product. Or they can drop out of a Medicare Advantage plan in
favor of original Medicare, the government-sponsored program that doesn't have
restricted networks of doctors and hospitals.
"What is daunting to Medicare beneficiaries is the sheer number of private
plan options out there," says Fred Riccardi, director of programs and outreach
for the Medicare Rights Center, a nonprofit group in New York. "They all have
different premiums and copayments and different covered drugs and restrictions
on drugs."
Here are five of the costliest mistakes beneficiaries often make during open
enrollment, according to experts:
Mistake No. 1: Not bothering to give your current coverage a checkup
The first step is to take stock of what you have. Even if you like your drug
coverage, make sure you review your plan's annual notice of change, a letter
from the companies that Part D enrollees should have received by now, Riccardi
says. "It should say whether a drug that they're taking is no longer covered,"
he says. "It should specify how their premium is changing or if a pharmacy is
leaving the network." If you don't have any drug coverage, now is the time to
consider hopping on board. Should you develop a health condition that requires
prescription medication, your out-of-pocket costs without insurance could easily
overshadow the 1% per month late-enrollment penalty you may accrue for delaying
enrollment in Medicare Part D.
Mistake No. 2: Failing to shop around or only considering premium costs if you do
If you pass on seeing what's out there, you run the risk of overpaying for
your drugs next year by default. "You really have to look to see that the drugs
[you take] are covered at the best possible price," says Katy Votava, founder
and president of Goodcare.com, a consulting service focused on Medicare and
health-care costs in Rochester, N.Y. At minimum, beneficiaries should compare
drug plans every two years because costs often creep up, she says. "People
assume drug coverage is more standardized than it is." In fact, drug plans,
which you can compare at Medicare.gov, are all over the map in terms of how they
structure premiums, deductibles, copays and tiers of coverage. "You could have a
$10 a month copay vs. a $40 a month copay. You could have one medication covered
for $30 a month and the other not covered at all," Votava says, noting it's
possible to save $2,000 to $4,000 just by being in the right plan. In addition
to making sure the drugs you need are on the formulary, or list of covered
drugs, and that your pharmacy is in the network, see whether plans impose prior
authorization, step therapy, quantity limits or other restrictions, Riccardi
says. Reasons to shop around include if your medications have cost you a lot in
the last year, if premiums are increasing to an uncomfortable level, if you're
using a lot of out-of-network care in a Medicare Advantage plan or if you've
experienced poor customer service.
It's also easier to find quality plans this year, according to the Centers
for Medicare & Medicaid Services, which has beefed up its star ratings
system to alert consumers to the best-performing plans and remind those stuck in
continuously low-performing ones that they can switch plans. Beneficiaries have
127 four-star or five-star Medicare Advantage plans from which to choose, up
from 106 during open enrollment for 2012. And those in original Medicare have 26
high-performing prescription drug plans at their disposal, up from 13 last
year.
Mistake No. 3: Failing to account for out-of-pocket maximums
This is the number that tells you how much you could pay in a year before the
plan kicks in to cover what's considered catastrophic costs. Read the fine print
to understand what the plan does and doesn't count toward its out-of-pocket max.
Factoring in worst-case scenarios could save you thousands of dollars if you
develop a condition that requires extensive health services or a pricey
prescription drug. Then compare plans and do the math. "If you've had a Medicare
Advantage plan where all your care providers were in the network and it had a
low out-of-pocket max, like $1,700, then most people couldn't get a Medigap
[supplemental insurance] plan that would cost less than that," Votava says.
Otherwise, going with original Medicare and a Medigap plan to cover
out-of-pocket costs might make more sense.
Mistake No. 4: Choosing a Medicare Advantage plan without first checking if your doctors are in network
About one in four Medicare beneficiaries choose a Medicare Advantage plan,
which sometimes offer benefits beyond what's included in traditional Medicare.
If you're considering a Medicare Advantage plan, remember that this model means
seeing out-of-network providers can quickly become a costly proposition for you.
Before signing up for this option, call your preferred doctors, specialists and
hospitals to verify that they participate in the plan's network. This can get
tricky if you travel a lot, spend winters in a different location or get a
referral from your primary-care doctor to a specialist who's out of network. The
good news is that while plans can add or subtract health-care providers from
their networks every year, they can't be so picky about their members, Lipschutz
says. "Medicare Advantage plans have to take all comers, with the minor caveat
of people with end-stage renal stage."
Mistake No. 5: Assuming retiree health coverage from a former employer is automatically the best deal or misunderstanding how it interacts with Medicare's various parts
Retirees are often loyal to their old employers, says Votava, but their
retiree plan may not be the gold standard in terms of value for their money. In
some cases, retirees could get better coverage at a lower cost by going with
original Medicare and a Medigap plan or a Medicare Advantage plan. A basic rule
of thumb is if seniors are spending more than $250 to $300 a month for their
retiree coverage, they should shop around, Votava says. "Even people who are
paying $200 could be paying $125." Still, the decision of whether to drop
retiree coverage can be complex and it's often irreversible, so take your time
and seek professional advice if you need it. If you have retiree coverage from a
former employer, make sure you follow its rules concerning Medicare Advantage
and Part D, says David Lipschutz, policy attorney for the Center for Medicare
Advocacy in Washington. Some retiree plans require you to enroll in a Medicare
Advantage plan. Some will work with Part D plans while others prohibit you from
signing up for a stand-alone drug plan, he says. "Sometimes people will enroll
in a Medicare Part D plan and that enrollment might jeopardize their retiree
coverage all together," Lipschutz says.
If you need help weighing your options or enrolling in a Medicare plan, there
are several free resources you can consult.
- Medicare.gov has a Plan Finder tool that works by plugging in your ZIP Code. Counselors also can assist you by calling 1-800-Medicare (1-800-433-4227.)
- States also run help centers through Shiptalk.org.
- AARP has Medicare enrollment guides in English and Spanish on its website, www.aarp.org.
- You also can call the companies that provide the plans for help understanding their offerings. The Kaiser Family Foundation offers descriptions of how Medicare works on its website, kff.org.
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