Do's and Don'ts for Medicare Open Enrollment

Christine Benz: Hi, I'm Christine Benz from Morningstar.com. Medicare open enrollment runs through Dec. 7. Joining me to discuss what goes on during open-enrollment and what you should be looking for is Mark Miller, he's a Morningstar.com contributor.

Mark thank you so much for being here.

Mark Miller: Hi, Christine.

Benz: Mark, let's talk about what open enrollment is. What are the specific items that people are shopping for?

Miller: For people who are enrolled in Medicare this is the time of year when you can make changes in your coverage. You can either change either in or out of traditional fee-for-service Medicare and Medicare Advantage that’s kind of choice one.

Benz: OK.

Miller: And then you can also make changes in a standalone prescription drug plan, Medicare Part D. You would be doing that probably only if you are in traditional Medicare because most Medicare Advantage plans not all have the prescription drug coverage baked into it. That’s the basic thing people can do this time of the year.

Benz: You always urge retirees who are enrolled in Medicare to reshop their coverage. Let's talk about why you think that's important to do at this time of year.

Miller: The plans can change from year to year. The premiums can change, the out of pockets can change, what's covered can change. The provider networks can change. Just assuming that because it was good for you last year that it will continue to be good for you next year is not always a safe assumption. That's the basic reason.

Benz: And you can save yourself some money potentially.

Miller: You can definitely save yourself some money.

Benz: Let's talk about that, first fork in the road: Medicare Advantage versus traditional Medicare. This is your opportunity to make a switch there, right?

Miller: Yes. Traditional Medicare I always say is sort of the gold standard from the standpoint of flexibility of providers. Almost all healthcare providers take your traditional Medicare card. With Medicare Advantage there may be some money saving opportunities because the plans roll together a bunch of different services. For example I mentioned prescription drug is often rolled in at no extra cost. Lots of them have vision coverage, a number of them provide some level of dental insurance, which by the way maybe a topic for another day. Traditional Medicare does not really cover most dentistry services.

Benz: And huge surprise cost for a lot of retiree households.

Miller: Indeed, it is. The trade-off though with Medicare Advantage is they are typically either HMO or PPO, meaning that you must use in-network providers in order to get the most advantageous services. That can be an issue. I think Medicare Advantage works really well for younger, healthier seniors. The issue that comes up--let's say you are in the middle of the plan year, and something really serious comes up and you want to see the top specialist in your town on whatever this is. That person may or may not be in your plan. It's a typical trade-off of managed care really.

Benz: Even though Medicare might be the gold standard, traditional Medicare, you are still going to have to bolt on some additional coverage though, right?

Miller: Right, a lot of people perceive as a downside of traditional, there is more moving parts, whereas Medicare Advantage is kind of all in one coverage. Here you are going to have your basic coverage of Medicare Part A and B. You are probably also adding a prescription drug plan, Part D, and many people also buy a Medigap insurance plan, which, as you are referencing, is supplemental coverage that capture out-of-pocket expenses and really can smooth out variations near health spending in a very meaningful way. 

The sticking point that's relevant to open enrollment on Medigap is this: If you want to move out of Medicare Advantage into traditional Medicare and you are already several years down the pike in terms of being on Medicare, you've missed the best opportunity to buy Medigap. The best opportunity to buy Medigap is when you first enroll. Because it is an open enrollment period at that time and the insurers cannot do so-called medical underwriting, meaning charge you more because of the health condition or even turn you away for coverage. You can make this switch several years into the road, or whenever. But know that you may have more challenges with Medigap either you are paying more or even being turned away depending on health status.

Benz: In terms of trends that you see when you look at the Medicare Advantage plans, when you look at open enrollment for 2019, let's talk about that.

Miller: The Medicare Advantage. One thing that people may have heard about is that Medicare Advantage plans are now starting to experiment with the new class of services that relate to things like home care, adult care at home, and the like. There is a whole raft of these services, which actually I detailed in the column on Morningstar.com that kind of goes with this discussion we are having. The key thing to know about that is most plans have not rolled out new services this year because the new rules on this just came out in the spring. You probably see more of that in 2020. 

The other interesting change I think is a small one but could be important for some people is that there is kind of do-over period that runs from January to the end of March. If you enroll in a Medicare Advantage plan that you don’t like for some reason, you can make a change during this do-over period. Its also then expanded a bit and that you can now also move it back into traditional Medicare if you like during that period. Those I think are the key new things to know about Medicare Advantage.

Benz: Moving on to the Part D, the prescription drug coverage. This is another option, this would be something for people who are covered by traditional Medicare, it's their time to review their coverage and decide if they want to switch insurance plans. Let's talk about the virtue of doing that and more importantly how to do it, assuming that I am confronted with this choice.

Miller: What you find is there is 10 plans that basically are most of the market. When you look at what's going on with the projected premiums for next year, you see that it's kind of all over the map. The overall weighted average increase in premiums for Part D drug plans next year is only expected to go up 2%. But nobody's average and people are enrolled in specific plans. The important thing to do is to look at your plan. When you look at the top 10 for next year the projection is that five of them will have substantial increases, 5% to 10% even. Three of them will go down a bit, and there are two that will be unchanged. There are also changes to the deductible structures in some of them. Basic point is you got to take a look at your own plan. Don't just read that somebody wrote, costs are only going up 2% next year. that may or may not be your situation. You have really got to take a look. 

Everybody gets in the mail what's called the annual notice of change, these arrive back in September, that detail any of these changes to your plan that you are enrolled in. Take a close look at that, and if it looks like there is a substantial increase, that you are not happy about, you go on the Medicare Plan Finder at Medicare.gov. and you can run a search to see what might be better options for you. You'll plug in your Medicare number plus your specific prescriptions and the site does a good job of sifting through and showing what might be good fit plans for you.

Benz: That's good advice. Let's talk about a little bit of good news that came to retirees in terms of the cost of living adjustment that Social Security recipients will get. I'd also like to discuss Medicare premiums in that context, the Part B premiums.

Miller: They are related, because in most cases the Medicare Part B premium is deducted from your Social Security benefit. The good news is that we're going to see the highest cost of living adjustments since 2012 next year for seniors. The cost of living adjustment will be 2.8%. The last time it was anywhere this close was 3.6% in 2012. These are set by a formula under federal law that’s tied to the cost of living in the Consumer Price Index.

Benz: The bad news is that there are higher costs coming online.

Miller: Inflation is higher. It's coming through in the form of the COLA. Equally good news is that--we won't know the Part B premium for next year until probably little later this year--but it was projected earlier this year by the Medicare trustees to only be going up $1.50 to $135.50.

Benz: A month?

Miller: Yes, a month. Thank you. That means that in short most seniors will get to keep most of the COLA next year which is great.

Benz: Thank you Mark. It's always great to get your perspective.

Miller: Thanks for having me Christine.

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