Medicare recipients should re-shop their coverage every year to ensure they're enrolled in a plan that meets their individual needs at the best cost, says retirement expert Mark Miller.
Christine Benz: Hi, I'm Christine Benz for Morningstar.com.
The Medicare open enrollment process has moved up and will now run from Oct. 15 through Dec. 7.
Here to share some tips for navigating the process is Mark Miller. He is a retirement specialist and also a Morningstar.com contributor.
Mark, thank you so much for being here.
Mark Miller: My pleasure, Christine.
Benz: So, Mark, you often talk about the importance of re-shopping this coverage every year, even if you think you're happy with what you've got.
Miller: Right.
Benz: Why is that so important?
Miller: Basically, the plans can shift every year. The drug companies that offer the prescription drug coverage may change for the so-called formularies the conditions under which different prescription medications are offered or your needs may have changed. Your prescriptions may have changed. Your health situation may have changed. So, it's a good idea to recheck it every year.
Benz: Okay. So, you mention the prescription drug benefit--people are looking at that as they go through this process. What other decisions are they making as they navigate the Medicare enrollment process?
Miller: At the highest level, there are two basic choices people can make. You can either do traditional fee-for-service Medicare and then bolt-on a prescription drug plan, the so called Part D plan--that's choice one. Or choice two is to go into what's called Medicare Advantage, and that's basically everything wrapped together: hospitalization, doctor, prescription drug coverage, and so on. Those are the two paths that you can go down.
Benz: Okay. So, Advantage is designed to be kind of a stand-alone.
Miller: Yes.
Benz: You wouldn't need anything else.
Miller: It's managed care; it's a PPO or HMO sort of an option--all-in-one.
Benz: So, traditional Medicare, people often add on that prescription drug benefit...
Miller: Yes.
Benz: ... then also some sort of supplemental coverage.
Miller: Yes. Often they'll have Medigap coverage as well, but that's really not part of this particular enrollment window question. But yes, that's another way, another thing that often gets added.
Benz: Okay. So, key resources for navigating this process: What would you point people to?
Miller: Well, it's important to go to an objective source of information. You'll see a lot of advertising and marketing materials from the various big pharmacies and the retailers, saying "come on in for your free evaluation." Those are well intended, but ... you need to realize that the big pharmacy companies and the retailers are offering plans. So, it's like going into one car dealer to get a sense of the whole market. Your don't want to do that.
The very best source is the Medicare Plan Finder, which is on the federal government's site. The federal government collects reams and reams of important data. It's made available in this shopping tool.
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Benz: So, this is Medicare.gov.
Miller: Yes. The link is in the column that I wrote this month about Medicare shopping ... it's called the Medicare Plan Finder. Anybody who's comfortable using the web can go in there and shop these plans. It's personalized. So, you plug in your Medicare number and your specific prescription information--you want to have those bits of info handy when you do this. And it will then show you what's available in the local market where you live, and you can start sifting, sorting, and looking at the different plan offerings. So, if you are comfortable doing that, or you have somebody who could help you do that, who is maybe more web savvy, that's a great way to do it.
Benz: So, you want to have your list of drugs at the ready, too.
Miller: List of drugs and your Medicare number. Then beyond that there are a number of nonprofit agencies that provide excellent free counseling. Those are linked to in the column as well, and there are even a few fee-for-service companies that, for few hundred dollars, will shop a plan for you. And those are independent and will do a good job, and that's a convenience factor you just need to decide if you would like to pay that fee, and it can be, because sometimes they'll come up with savings that outweigh the fee.
Benz: So, Mark, in terms of trends in the cost of this prescription drug benefit, what are you seeing?
Miller: Well, on the perception drug side, the average plan prices are falling about 4% this year, but when you look at the top 10 plans, which cover about three quarters of the market, actually about six of them are raising their average premium. So, the market is still kind of all over the map. It's still sorting itself out in the wake of health-care reform, and the individual changes have very much to do with the demographics of the audience that a plan is serving.
So, even more important than whether a given plan is moving up or down, which can give you a very broad yardstick, it's much more important to shop for your particular needs, because that's where you'll really find out whether a plan is good for you. ... We have a chart in the column this month that shows what those top 10 plans are doing, and that's interesting and a useful starting point, but it's very important to go further and check what plans are going to be a good match for me.
Benz: Okay. Now, also changes to this notable doughnut hole that people often talk about--what's going on there?
Miller: The doughnut hole just refers to a gap in coverage that starts this year roughly around $2,900, ends around $4,700. It's being very incrementally closed every year and will be disappearing in 2020. The most important things going on right now are that the drug companies offer 50% discounts now under health-care reform for brand-name drugs, and the discount on generics goes up this year from 7% to 14%. So, the takeaway points are, if you think you're going to be in the gap, take a look at what your medications are and how the discounts affect you, and then there's a decision point as to whether you do or don't want to buy a plan that offers gap coverage because many plans will do that, roughly half, for an additional premium fee. So, you have to weigh the plus-minus of, does gap coverage make sense for me, given the way that the doughnut hole situation is changing.
Benz: Right. So assume you have gone through this process, maybe made some decisions, can you undo it and make changes, and what's the window for that?
Miller: There is a disenrollment period from Jan. 1 through Feb. 14, and the only decision you can make there is: Let's say you decided to enroll Medical Advantage, but now changed your mind. You can disenroll from Advantage during that window and go back into traditional Medicare, and you can add a stand-alone prescription drug plan. But you can't, for example, shift from one Advantage plan to another during that window.
Benz: OK, always great insight. So, it sounds like, Mark, if you're not comfortable going through this on your own, maybe get a buddy, a child, grandchild to help you do this research?
Miller: Sure, maybe an adult child, who is more comfortable with the computer would be one way to go, or these nonprofit counseling services are wonderful.
Benz: Great. Thank you so much for being here, Mark.
Miller: Thank you.
Benz: Thanks for watching. I'm Christine Benz for Morningstar.com.
