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Tips for Navigating Medicare Open Enrollment

From choosing the right Medicare plan to reshopping for prescription-drug coverage, here's what you need to know.

Tips for Navigating Medicare Open Enrollment

Christine Benz: Hi, I'm Christine Benz for Morningstar.com. Medicare open enrollment runs from Oct. 15 through Dec. 7. Joining me to share some tips on open enrollment is Mark Miller; he is a Morningstar contributor.

Mark, thank you for being here.

Mark Miller: Thank you, Christine.

Benz: So, let's get into Medicare open enrollment, but let's start by doing a little stage-setting. You say it's important to step back and take stock of what you have mapped yourself into in terms of Medicare. Are you in original Medicare or are you in what's called Medicare Advantage?

Miller: Right. One of the things I find is that when you start tossing around all these parts of Medicare--this alphabet soup of parts of the program--people start getting a little cross-eyed. So, just a very basic thing to know for people who are new to Medicare or who are already in Medicare--because you have an opportunity every year to make changes--is there are really just two sides of the coin. One is original Medicare, and the other is Medicare Advantage. Really, those are the two halves.

Original Medicare I describe as sort of "a la carte" Medicare. You pay your premium for Part B, which lets you go see doctors; you add a prescription-drug program, which is Part D of the program. You probably have added a Medicare supplemental policy, or Medigap. So, you've built it tier by tier. It's got the most flexibility. You can see the most doctors and so forth.

If you go into Medicare Advantage, think about that as the all-combined-in-one, usually HMO or PPO option. So, it's managed care. Everything is through the one funnel. Usually, the prescription-drug component is in the Advantage program. You don't have Medigap policies in that because Medicare Advantage, on its own, does all the things that Medigap does. That's just the basic landscape. You are either over here in original or you are over here in the managed-care side.

Benz: What happens, Mark, if you do nothing? If this Medicare open enrollment comes and goes, and you haven't made any choices?

Miller: Assuming your plan is continuing, you would just be re-enrolled in it automatically with whatever changes have been made. And so, everybody gets something called the annual notice of change in the mail. It should have arrived in your mail by Sept. 30, notifying you of any significant changes to a drug or Advantage plan--meaning premiums, coverage of your medications has changed, doctor networks that have come in and out of an Advantage program, and so on. So, you've received a notification that you should take a very careful look at to see if you want to make a change. If you do nothing and the plan is continuing, and most plans do continue from year to year--though, there is some consolidation from year to year--you'd be automatically re-enrolled. If you did nothing and your plan was discontinued, you probably got a notice of that, too. So, there is some active effort to get you to move into something new.

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Benz: You say one area that is particularly worth extra scrutiny is this Medicare Part D. This is for prescription-drug coverage. You always say that it's important to reshop that each year.

Miller: Yes.

Benz: Why is that so important?

Miller: Because, number one, you can save money. There was a study released last fall by the Kaiser Foundation, which studies and researches all aspects of Medicare and health care more generally, documenting that only about 13% of people do bother to reshop every year, but that among those who did, about half saved at least 5% or more in many cases on their premiums primarily by doing that. So, the big reason to reshop is saving. Now, the costs in this program, on average, have been quite stable lately. The average premium is expected to only go up $1 dollar next year, if you look at the average of the top 10 plans where the lion's share of the enrollment is. But we don't pay the average; we pay our specific premium.

Benz: Exactly.

Miller: One thing that does happen if you look at the list of the top plans is that it's just like a yo-yo. There are a couple of plans that are boosting premiums as much as 50% next year; there are some that are cutting premiums as much as 30%. So, you better take a look and see what you are going be charged next year. That would be the first thing.

Benz: So, does it tend to be that the ones that were low cost in the past are some of the ones that are experiencing the biggest premium jumps?

Miller: Sometimes, yes. If it's a new, let's say, introductory rate, they are trying to gain market share and then they are making adjustments as they go. Although not always. The lowest-cost plan, which is the [Humana Walmart Rx Plan], is a little under $16 a month. And it's staying at that level. So, there is no one-size-fits-all answer to your question, unfortunately. That's a reason why people should take a look.

Benz: In terms of resources that I might use if I want to do my homework on this front and make a good decision: What are the resources you would recommend?

Miller: You start with Medicare itself. And especially if you are comfortable with the Internet and a computer, you go to something call the Medicare Plan Finder, which you find at Medicare.gov. You plug in your Medicare number; it will bring up your plan options. So, you plug in your number, you plug in the medications you take plus dosages, and it will come back with a list of plans that are the best fit for you. You can also call Medicare, at 1-800-MEDICARE, and talk to a person about this and they can walk you through some of this. As an aside, I would mention that it's a good idea, when you get around to selecting a plan, to do that with Medicare as the intermediary rather than going to the plan itself. And the reason for that is because then Medicare has a record of this transaction. If anything gets messed up in the enrollment, if any errors are made, you can go back to Medicare and they have a record of what you had been trying to order and they can straighten it out for you.

Benz: So, as I am doing this homework, I'm looking at the level of premiums obviously. I'm looking at the drugs I take and whether they are covered and how much I will pay for them. And I'm also looking at donut-hole issues.

Miller: Before we go to the donut hole, take a close look not only at the drugs and whether they are covered but under what rules are your drugs covered. There is something called the formulary in every plan. You look at that and see if your drug is just covered or if it is covered first with the insurance plan having a right to challenge your doctor and ask you to try another medication first, or if there is a limitation on the quantity [that is covered].

Benz: Covered under certain conditions--

Miller: There can be all kinds of rules that can trip you up. The last thing to take a look at there is the method of delivery. Most of these plans are now going into the so-called "preferred pharmacy network" option, meaning that [in order to get the best prices] your drugs will be delivered through whatever their preferred option is. It could be mail; it could be that you have to go into CVS or Walgreens. Whatever it is, it's not necessarily a problem, but check and make sure that you are OK with the way they want to deliver your drugs.

Benz: And the donut hole--I know that you've written about why it's so important to stay attuned to this issue. When does the donut hole kick in and when does it end?

Miller: So, the donut hole affects people with high drug usage. It's a gap in the Part D protection that has been there since the program began. It's gradually being closed under the Affordable Care Act. It will disappear in 2020. Basically, it means that when you and your drug provider hit a certain amount of combined spending, coverage stops. You are responsible for all the payments until you hit the top of the donut hole--so-called catastrophic level of coverage. The numbers change a bit every year as part of this closing process. Some drug plans you can buy with gap coverage, but you're going to pay a lot more for that. And the number of them that provide it is shrinking because the donut hole itself is getting to be a smaller problem in the program. So, for next year, the donut hole starts when combined spending by you and your insurer has hit $2,960, and coverage restarts at $4,700. So, that's the gap in between.

Benz: You areresponsible for that amount.

Miller: Then, the other thing to know is that there are discounts, as part of this reform, on the amount that you pay while you are in the gap. The discount next year for brand-name medications is that you will pay 45% of the cost. And on generic medications, you will pay 65%. Both of those percentages are down a bit from where they were last year. So, the reform has these two components: Close the size of the gap and make the gap a little bit less expensive over time as we get to 2020.

Benz: Mark, such an important topic.

Miller: Yes.

Benz: I know retirees are very much attuned to trying to cut their health-care costs, so these are great tips.

Miller: You bet.

Benz: Thanks for watching. I'm Christine Benz for Morningstar.com.

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