People will be able to review and change their Medicare plans when open enrollment starts October 15.
The tendency for many will be to ignore this opportunity and stick with their current plans: On average, about 88 percent of enrollees in Part D plans, which cover prescriptions, did not change their prescription drug plans during open enrollment between 2006 and 2010, according to a report by the Kaiser Family Foundation.
But that could be a costly mistake. Forty-seven percent of people who changed their plans saved more than 5 percent in out-of-pocket drug costs, which include deductibles and co-payments for prescriptions and doctors’ visits, the report found.
Every bit of savings counts at a time when consumers are being asked to cover a bigger share of their health-care costs, says John Barkett, director of health policy affairs for Towers Watson, a human resources consulting firm. Average out-of-pocket costs for people in traditional Medicare plans reached $4,734 in 2010, up 44 percent from $3,293 in 2000, according to a separate report by the Kaiser Family Foundation. “Every year you want to go back and check ‘Am I still in the plan that best fits my needs?'” Barkett says.
You have until Dec. 7 to make a change. Whether you are signing up for the first time or checking your current plan, here is a list of things to go over:
Know your alphabet soup. People in traditional Medicare plans will find that different parts of Medicare cover different services. Part A covers hospital visits, Part B covers medical care, such as doctors’ visits, and Part D covers prescription drugs. Generally, people should enroll in Medicare when they become eligible at age 65, but some people may be able to delay if they are still working and receiving insurance through their jobs.
Because those plans often come with deductibles, co-payments and other out-of-pocket costs, many people supplement coverage by buying Medigap insurance, which helps to pay for those additional expenses. Still, Medigap policies don’t typically cover long-term care, eyeglasses, dental care and other health expenses, according to the Centers for Medicare & Medicaid Services.
Consider Medicare Advantage. About 30 percent of Medicare beneficiaries are covered under Medicare Advantage plans, which are sold by private insurance plans and are more comprehensive. Medicare Advantage users don’t have to buy Medigap insurance because they have fewer out-of-pocket costs, but the trade-off is that they often have a smaller network of doctors and hospitals, says Dan Mendelson, chief executive of Avalere Health, a health care advisory company based in Washington.
But switching to a Medicare Advantage plan doesn’t always lead to savings. Some Medicare Advantage plans also introduce or increase deductibles, Mendelson says. And people who end up needing care from out-of-network providers may face steep bills, he says.
Look beyond the premium. Medicare premiums aren’t expected to change drastically this year, meaning that plans will distinguish themselves by what they cover and how much they charge for drugs and other services, says Tricia Neuman, senior vice president for the Kaiser Family Foundation. People should check that their medications and doctors are covered, Barkett says, along with their hospital of choice. Calculators on Medicare.gov and through consultants like Towers Watson can help people estimate what they might spend out-of-pocket for the entire year after factoring in deductibles, co-payments and other expenses.
Evaluate drug coverage. All plans are narrowing the so-called “donut hole,” or the coverage gap in prescription drug plans, as part of the Affordable Care Act. But some insurance companies offer more coverage than others, making it more important for people to shop around, Neuman says. (For 2015, people will fall into the donut hole after they spend $2,960 on covered drugs.)
Some plans are also introducing new restrictions on drug coverage, such as requiring prior authorization from a doctor or making patients try cheaper drugs before they will pay for a more expensive one, Neuman says. “You want to be aware so you don’t find yourself in a situation where you switch plans and suddenly find you aren’t able to fill a prescription at the start of the year,” she says.