Season for Medicare Open Enrollment

EDITOR'S NOTE: This article was originally published in the October 2011 issue of Kiplinger's Retirement Report. To subscribe, click here.

The summer rituals of barbeques and beach books are behind us. Now it's time for a fall tradition: Medicare open enrollment.

Wincing at the thought of wading through all that fine print? You may be tempted to stick with your old plan, but while it may be a pain, you should give all of your options a thorough check-up. You may find that your current plan is raising co-payments and reducing coverage. Plus, new plans coming on the market may offer better deals than what you have now.

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This year, you have from October 15 to December 7 to choose your Medicare Advantage or Part D prescription drug plan for 2012. That compares with November 15 to December 31 in past years. "A lot of people procrastinate, and maybe Christmas was the time they'd talk to friends and family about their options," says Jan Berger, chief medical officer for Silverlink Communications, a Burlington, Mass., firm that provides consumer information on Medicare Advantage plans. "This year, they have to back it up a holiday, to Thanksgiving."

By the end of September, you should have received your plan's "annual notice of change," which advises you of any alterations to plan benefits or premiums, or if the plan is being discontinued. "This is one piece of mail that you don't want to throw away," says Berger.

Advantage and Part D plans can start marketing their 2012 plans by October 1, when all information becomes available on Medicare's Plan Finder tool (www.medicare.gov/find-a-plan). This resource is great for comparing prices, co-payments, deductibles, coverage and drug tiers for all Advantage and Part D plans in your area.

If you're enrolled in an Advantage plan and don't take action by the deadline, you'll be automatically reenrolled in your current plan. Or coverage will shift to traditional Medicare if your plan folds in 2012. If you switch to traditional Medicare, you'll need a separate Part D plan to provide drug coverage and a Medigap policy to cover deductibles and co-payments.

If you didn't sign up for Part D or Medicare Advantage when you were first eligible, make sure not to miss this enrollment period. If you do, you won't have any drug coverage for 2012.

Earle Carpenter, 66, who lives in San Francisco, had been counting down the days until he qualified for Medicare. As a self-employed wine writer, he had been shouldering the full cost of health insurance. When he turned 65, he enrolled in Part A hospital coverage and Part B. "I thought I was all ready to go," Carpenter says.

But Carpenter didn't realize that he would have to buy a separate policy to cover drugs, so he did not sign up for Part D. He discovered his mistake in June when he was diagnosed with an atrial flutter -- an irregular heartbeat -- and was prescribed three medications that cost a total of $450 a month.

Without any drug coverage from Medicare, Carpenter has had to pay the full cost until he can sign up for Part D coverage, which will begin on January 1. "It cost me a lot of money by not being well-informed," he says.

For those on the fence about Part D, Carpenter's story is instructive. "Even if you're in great shape, something like this can pop up," he says. If you don't take any drugs now, consider a low-premium plan, even if it has higher co-payments.

Watch Out for Hidden Charges

Even if you're happy with your current drug plan, it may not be your best deal. A study of 25,000 Medicare beneficiaries by PlanPrescriber, a company that provides plan-comparison tools, found that fewer than 7% of customers were in the Part D plan with the lowest total out-of-pocket costs for their medications. The study also found that fewer than 10% were in the Advantage plan with the lowest out-of-pocket costs.

The average premium for Part D plans in 2012 is expected to drop a bit to $30, from $30.76, according to the federal Centers for Medicare and Medicaid Serv-ices. But those figures can mask hidden cost increases.

Besides watching for rising co-payments, take a close look at the "drug tiers." A plan may continue to charge the same amount for each tier of co-payments (such as $20 for generics, $30 for preferred drugs and $40 for nonpreferred drugs). But your costs can rise if a plan moves your drug to a more-expensive tier, perhaps from preferred to nonpreferred. And if you reenroll in your current plan without reviewing it first, you could face an even bigger surprise if the plan has dropped one or two of your drugs from its formulary.

Some new options could be cheaper, depending on the drugs and pharmacies you use. A few new low-cost Part D plans are expected to enter the business and compete with the Humana Walmart-Preferred Rx plan, which costs less than $15 a month in premiums in 2011. That plan also charges just $2 for preferred generic drugs and $5 for other generics at Walmart and Sam's Club, and no co-payment for generic drugs at RightSourceRx mail-order pharmacy.

Closely scrutinize the terms. For example, the costs for the Humana Walmart plan can be much higher if you have to take nonpreferred drugs or if you use nonpreferred pharmacies. You'll pay 20% of the cost of nonpreferred generic and preferred brand-name drugs at preferred pharmacies, compared with 37% at nonpreferred pharmacies. And if you buy nonpreferred brand-name drugs from preferred pharmacies, you'll pay 35% of the cost, compared with 50% elsewhere.

The "doughnut hole" will change little next year. In 2012, the coverage gap will kick in when your drug expenses total $2,930 for the year (including both your share and the insurer's share of the costs). At that point, you will generally have to pay all of your drug bills yourself until your out-of-pocket costs reach $4,700, when the federal government picks up most of the rest of the bill.

There continues to be a 50% discount on brand-name drugs in the doughnut hole in 2012. A federal subsidy to help cover the cost of generics will rise next year to 14%, from 7%. Before you select your plan, ask your doctor if you can switch to generic drugs. The plan with the best deal for brand-name drugs may differ from the one that's best for generics.

The good news is that it can be easy to compare your Part D options by using Medicare's Plan Finder tool. You can also use PlanPrescriber.com (call 800-404-6968 for personal help), which is owned by eHealth Inc., to compare Part D and Advantage plans.

Start your search on Medicare's Plan Finder by entering your Medicare number, last name and other personal information. (You can do a search without your personal information by typing in your zip code and clicking "Find Plans.") Enter the names of your medications and dosages. A box will pop up if there's a generic alternative to a brand-name drug in the list.

Select "prescription drug plans" and a list of Part D plans will appear. The first column estimates drug costs for your specific medications, including premiums, co-payments and other out-of-pocket expenses. You'll see if a plan with a low premium ends up costing more because of high co-payments. You will also see whether your drugs are in the plan's formulary and whether a drug requires prior authorization before it is covered. Click "Compare Plans" for your top choices, and you'll see when you're likely to reach the doughnut hole.

Compare Medicare Advantage Plans

You can sign up for an all-in-one Medicare Advantage plan rather than enrolling in traditional Medicare, a Part D drug plan and a supplemental Medigap policy for co-payments and deductibles. The premiums probably will be lower with an Advantage plan than with Medigap plus Part D, but the Advantage plan may have higher co-payments.

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Under the new health care law, the federal government is gradually reducing subsidies to Advantage plans. As a result, a few plans are cutting back on extras, such as gym memberships and vision care. The new law also requires Advantage plans to cover services that are offered by traditional Medicare, such as coverage for certain preventive care. To encourage patients to cut costs, some plans are boosting co-payments for certain kinds of care. "One noticeable increase is in co-payments for inpatient hospitalization," says Alan Mittermaier, president of HealthMetrix Research, a Columbus, Ohio, firm, which rates Advantage plans. "A $200 co-pay might go up to $225 next year as an incentive to try to keep people out of hospitals." A few small plans are closing while others are expanding into new parts of the U.S.

Because Advantage plans provide both drug and medical coverage, it's more complicated to compare plans. As with Part D, you can start your search by using Medicare's Plan Finder tool, and clicking on "Medicare Health Plans." After entering your drugs, look at the left-hand column, "Refine Your Search." Under "Change Health Status," you can note whether your health is poor, good or excellent.

Then click on "Medical Health Plans With Drug Coverage." Focus on the "Estimated Annual Health and Drug Costs" column, which shows your expected out-of-pocket costs for premiums and co-payments for both drugs and medical coverage. The medical-related expenses will be based on your health status.

Choose your top plans, and click "Compare Plans." Like the Part D-only tool, you can see the Advantage plan's out-of-pocket costs for your specific drugs and dosages. When you click the "health plan benefits" button, you can find details about co-payments for in-network and out-of-network doctor visits and hospital services. Because the coverage can be higher for out-of-network services, make sure your favorite doctors and hospitals are included and find out about any preauthorization rules. If you're thinking about keeping your current plan, make sure your doctor will stay on.

Customer service can make a significant difference for Advantage plans, so it's important to look at Medicare.gov's quality ratings for each plan. This feature rates several categories, such as responsiveness and care, member complaints, appeals, customer service, and managing chronic conditions.

Also look at the "Cost Share Report" at www.medicarenewswatch.com, which is published by HealthMetrix Research and will be available October 15. The service chooses the best Advantage plans in your area for three health categories (good, fair and poor).

It takes some extra work to figure out whether you'd be better off with an Advantage plan than with traditional Medicare combined with a Medigap policy and Part D. First, figure out your out-of-pocket costs with an Advantage plan. Then figure out your costs with a Part D plan. You can use Medicare.gov or PlanPrescriber to choose a Medigap plan, which usually covers most out-of-pocket medical costs. Add the Medigap premiums to your total Part D costs.

None of this will be exact because you won't know how often you will use medical services. If you have few expenses and will use in-network doctors, you'll probably come out ahead with an Advantage plan. You're likely to do better with traditional Medicare plus Part D and Medigap if you expect big medical expenses and want a full choice of doctors and hospitals.

Find Personal Help

The Medicare.gov Plan Finder can be an amazing tool, but also complicated to navigate on your own. For personal help, get in touch with the State Health Insurance Assistance Program (SHIP). SHIP counselors in every state can help you pick a Part D or Advantage plan, and walk you through your Medigap options.

SHIP counselors can help over the phone. They also conduct seminars during the open-enrollment period. Counselors meet in hospitals, senior centers and other sites throughout each state. For example, there are nearly 200 counseling sites in Florida.

You can make a personal appointment at a counseling site. "The average time we spend with a beneficiary is 45 minutes," says Andrea Gray of Florida's program (called SHINE, for Serving Health Insurance Needs of Elders). During open-enrollment season, counselors can review your annual notice of change. You can bring in your medications so that the counselor can put the names and dosages into the computer to compare Part D plans. You can sit next to the counselor while he or she uses the Medicare Plan Finder tool.

The counselors can get very busy, though. The Illinois SHIP counselors had nearly 128,000 client contacts from July 2010 to June 2011. It's a good idea to make an appointment before the end of November, to give you time before the December 7 deadline. You can find contact information for your local SHIP at www.shiptalk.org or by calling 800-633-4227. You'll also find local SHIP information on the back of your Medicare & You Handbook, which you should have received by the end of September.