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What to Consider if You Re-Shop Your Medicare Coverage

Mark Miller
Christine Benz

Christine Benz: Hi I'm Christine Benz from Medicare open enrollment is up and running until Dec. 7. Joining me to discuss why you should consider re-shopping your coverage, and what factors you should bear in mind if you do, is Mark Miller. He's a Morningstar contributor.

Mark, thank you so much for being here.

Mark Miller: Glad to be here, Christine.

Benz: So, Mark let's talk about this. In a recent article for us on you talked about how inertia seems to set in for a lot of people who are enrolled in Medicare. People don't re-shop this coverage. Let's talk about some of the numbers that people who don't look at re-shopping their coverage and what they could save potentially if they do take a look at this?

Miller: Sure. Well, the studies show that relatively few people do re-shop, it's 10% or less on an annual basis. It's not that everybody should re-shop their coverage every year. And I should say that if you are enrolled in traditional fee for service Medicare and you have a Medigap supplemental policy on top of that and nothing else, you don't have a Part D prescription drug plan for example, and if you are happy with everything as it is, you could probably just--there is nothing you really need to do in that situation.

Benz: So, your coverage will kind of roll over …

Miller: It just continues.

Benz: You need to do nothing.

Miller: Yes.

Benz: OK.

Miller: But if you have a Part D plan, the prescription drug plan, or if you are in Medicare Advantage, which is basically the managed care alternative to traditional fee for service Medicare, then it pays to at least take a look. That begins with what's called the Annual Notice of Change statement that all Medicare enrollees get at the end of September in the mail.

Benz: So, they should have gotten this already.

Miller: It basically tells you anything that has changed in the coverage you have. And there's a couple of things to look at there. One is any changes in the drug coverage if it's a standalone Part D plan. These plans do change the terms of coverage from time to time. That might affect your medication, the so-called formularies--that's the term that's used for what the plan coverage is--and there could be new restrictions imposed on your drugs for example. There might be what's called step coverage, step therapy which is where your doctor prescribes one drug and the plan says we want you to try something else first that's cheaper. These cumbersome prior authorization requirements that we've all probably dealt with at one time or another with health insurance and so on. So, you want to take a close look at that.

On the Medicare Advantage side, everything I said about drugs might well apply because drug coverage is often rolled inside of the advantage plan. Then on top of that because it's managed care all of your network health provider coverage is inside Medicare Advantage. Medicare Advantage plans are free to change their network of providers at any time actually during the year not just at the annual enrollment point. So, you want to try to take a look and see if your providers are still covered. One issue that's cropped up there in the last year that has come to my attention and I think some others, there is some research suggesting that its actually not so easy to check on the providers.

Benz: So, it's a cumbersome process.

Miller: Yes. The providers are not necessarily listed in the Medicare Plan Finder which is the tool on the Medicare website that people use to shop for plans. Sometimes it involves contacting the plan, asking for a copy of the directory. But the research also suggests that these directories are riddled with errors. So, a good idea would be if there is a key provider of healthcare that you care about to contact that provider.

Benz: Go to the provider rather than …

Miller: And say are you in this plan that I am thinking about signing up for just to be on the safe side.

Benz: So, you referenced that there are really two parts to this open enrollment. Looking at the Medicare Advantage plan.

Miller: If you are in one.

Benz: If you are in one. And also the Part D coverage, the prescription drug coverage. Let's spend a little bit of time on the prescription drug coverage and talk about some of the pricing trends that people who have been participating in those plans have experienced.

Miller: Well, there are 10 plans that account for about 90% of the market. They are very popular plans and the research suggests that premiums are going up on average in the top 10 plans for next year anywhere from about 5% to 9%. That's just the averages because the numbers will vary around the country. Some of them are experiencing even sharper increases, 25% or more. Those tend to be plans that were very low priced to start with. So, the premiums bounce around. The other thing that can change is the maximum out-of-pocket that you can be charged, that's going up by $40 this year to $400, it doesn't mean that every plan's doing that. But it's something to look for because it's possible that out-of-pocket costs are going up too. So, there are some savings to be had by taking a look and re-shopping rather than just riding along with whatever price increase is put through on the premium.

Benz: And of course the senior's own drugs may have changed as well. So, things that they perhaps had covered in the past, they are not taking any more. So, that's also.

Miller: That's worth taking a look for sure.

Benz: I want to talk about something you wrote about called an enhanced plan for Part D coverage. Let's talk about that and talk about what it is first of all and then talk about for whom such coverage would be most appropriate.

Miller: So, Part D prescription drug plans come in two flavors, basic and enhanced. The enhanced plans are plans that--the big difference is that they offer coverage in the so-called doughnut hole or the gap in coverage. The gap in coverage and Part D plans are something that, this is something that affects people who have heavy-duty use of prescription applications. So, what happens is for next year the gap in coverage starts when the combined spending by you and your insurance company reaches $3,700 for the year. At that point coverage stops and you are responsible for 100%. And then it picks up again when your out of pocket spending alone, not with the insurance company, reaches $4,950. So, there is this gap there. It effects a relatively small part of the Medicare population. But it's big spending for those who do get hit by it I think the way to evaluate the need here is first everybody knows what their drug use is and you consult with a doctor.

Benz: Have you been in this in the past?

Miller: Yeah. Are you in it now? Then you'd want to stick with an enhanced coverage. The other way to do this is to just use the Medicare Plan Finder because when you use that you plug in all your medication uses and it spits back a list of recommended plans. So, if it sees that you are using a lot in high class medication is going to point you toward enhanced plan. So, it's going to carry higher premium. But in most cases it would work out in your favor if you are in this heavy-duty usage category.

Benz: OK. Mark, healthcare expenses are big ticket item in many retiree households. Thank you so much for being here to discuss open enrollment.

Miller: Thank you.

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