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Medicare Enrollment Checklist

It's important for seniors to reshop their coverage every year--especially this year.

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The nation's biggest Medicare prescription drug plan is boosting premiums an average 14% next year. But the third-largest plan will cut premiums about 9%. And premium changes for the top 10 drug plans will be all over the map, according to an analysis by consulting and research firm Avalere Health.

The widely divergent price moves underscore just how important it is for seniors to reshop their coverage every year during the annual Medicare enrollment season--especially this year. "This is a year of change," says Dan Mendelson, Avalere Health's CEO. "It's a year where patients really need to shop."

It's also a year to get going on plan shopping earlier than in past years. The 2010 health reform law moved up the annual enrollment period by several weeks starting this year. Enrollment will be open from Oct. 15 to Dec. 7. "Enrollment used to end on Dec. 31, right in the holiday rush," says Joe Baker, president of the Medicare Rights Center, a nonprofit advocacy group that provides Medicare counseling assistance to seniors. "Moving it away from the holidays will give folks a better time period to make these decisions."

Enrollment and Shopping
The enrollment period provides seniors an annual opportunity to change their Medicare coverage. The two basic options include:

  • Traditional, fee-for-service Medicare alongside a stand-alone Part D prescription drug plan; or,
  • A privately managed Medicare Advantage all-in-one option (including hospitalization, outpatient services, and prescription drugs).

You're free to make as many changes as you want before Dec. 7; your changes take effect on Jan. 1. There's also a disenrollment period that runs from Jan. 1 to Feb. 14, which can be used by seniors who pick an Advantage plan but want to change their minds. During that period, you can switch back to traditional Medicare but not to a different Advantage plan. And, if you do leave Advantage, you can add a stand-alone drug plan during that period.

With dozens of plans available in most parts of the country, Medicare shopping can be a complex chore. Reshopping your plan annually makes sense--especially Medicare Part D drug plans, where insurance companies often change their offerings year-to-year in ways that can increase drug costs by thousands of dollars, or make it more difficult to get certain drugs. At the same time, your drug needs may have changed since the last plan selection period in ways that make a plan less beneficial for you.

The new health-care reform law is reshaping certain parts of the Medicare marketplace--for the most part, in ways that benefit seniors. Avalere Health projects that average premiums for both prescription drug and Advantage plans will fall 4% for 2012.

But the enhanced competition doesn't mean prices are coming down across the board. Although some of the top 10 drug plans--which cover 77% of enrollees--are cutting premium prices (see chart), six are raising prices.

 Medicare Prescription Drug Premium Price Changes for 2012 Will Vary Widely
 Average increases for top 10 plans, covering 77% of all enrollees   2012 Average Premium ($) % Change
2011-2012
AARP MedicareRxPreferred 39.70 14 Community CCRxBasic 30.84 4 Humana Enhanced 39.62 -9 CVS Caremark Value3 30.49 -8 First Health Part D Premier 32.88 -11 Humana Walmart-Preferred Rx Plan 15.10 2 WellCareClassic 32.97 4 CIGNA Medicare Rx Plan One 31.19 -11 HealthSpringPrescription Drug Plan 34.14 3 BravoRxPDP 36.09 10
Source: Avalere Health analysis of 2012 prescription drug plan data from federal Centers for Medicare & Medicaid Services.

"Each plan tries to price for profitability on its own book of business--the population they are serving, and how generous their offering will be," says Mendelson.

In some cases, premiums might be higher when plans have lower deductibles--or none at all. Perhaps most important, the projections on average premiums are just a broad guideline on trends. Determining the best-fit plan depends on a senior's specific drug needs and how they match up to a plan's formulary rules--the list of drugs that a plan will cover and under what circumstances.

Here's a checklist of key factors seniors should consider in evaluating prescription drug and Advantage plan options this year.

Prescription Drug Plans
Picking a Medicare D plan really boils down to two critical considerations:

  1. Does a plan cover the drugs you need? It's important to look closely at plan formularies to understand if your drugs are covered, at what cost, and the co-pays and deductibles involved. Formularies might also feature drug-coverage restrictions, such as requiring direct prior authorization from a physician, which can slow the process, or quantity limits. Some might also require "step therapy"--a situation where your doctor prescribes a drug, but the plan requires that you first try a less expensive option.
     
  2. Can you use the pharmacy option that you prefer? Medicare D plans don't work with all pharmacies, and vice versa. Be sure the pharmacy you use is a preferred network pharmacy--or that a different delivery option is acceptable. Mail-order drug delivery is less expensive with some plans, but not always. For example, the Humana Walmart-Preferred Rx Plan has been shaking up the market with an ultralow premium averaging just $15.10 next year--the lowest in the industry. And enrollees who use the in-store  Wal-Mart (WMT) pharmacy pay less (the plan also has a restrictive formulary and a high deductible).

The health-care reform law gradually closes the notorious "doughnut hole." This refers to how--for 2012--coverage stops when the total (insurer and patient) spending on drugs hits $2,930, and it resumes at the "catastrophic" level of $4,700. The doughnut hole is the gap between the stopping and resumption points. This year, the law requires pharmaceutical companies to provide a 50% discount on brand-name drugs to low- and middle-income beneficiaries who find themselves in the doughnut hole, and a 14% discount on generic drugs.

Cost-sharing for seniors in the coverage gap will shrink every year until it is closed completely in 2020. Although some plans offer gap coverage in exchange for higher premiums, the discounts will make this unnecessary for many seniors. "Depending on the specific medications you take, you could be just as well off without gap coverage," says Juliette Cubanski, associate director of the Medicare project at the Kaiser Family Foundation.

Gap coverage will vary widely next year. Avalere reports that 58% of drug plans won't offer doughnut hole coverage; 21% will offer coverage of a subset of generic medications; and 21% will cover some generics and some branded drugs.

 

Medicare Advantage Plans
When the health-care reform law was passed in 2010, critics decried reforms that slashed Medicare via reforms to the Advantage program. They predicted that the gradual elimination of generous subsidies to private Advantage providers would send premiums through the roof and decimate plan offerings.

That hasn't happened. Insurance companies view Advantage as a very attractive market opportunity, and they are competing hard for business. Providers interviewed for a recent Kaiser Family Foundation study expressed optimism about the program's future and new bonus payment systems that reward quality improvements, though some think the shakeout isn't finished.

The number of plans offered is holding fairly steady in most regions of the country. Premiums will drop 4% on average next year, according to Avalere, and enrollments are rising. What's more, the insurance companies are working hard to meet the health reform's new quality standards, which qualify them to receive bonus payments.

Seniors can opt for Advantage over traditional Medicare. Most Advantage plans are managed-care programs, such as HMOs or PPOs. When you join an Advantage plan, Medicare provides a fixed payment to the plan to cover your Medicare Part A (hospital) and Medicare Part B (medical insurance) coverage. There are usually additional co-payments and deductibles, depending on the type of plan you join.

Starting this year, Advantage plans won't be allowed to charge cost-sharing, such as co-insurances, co-pays, or deductibles, for certain preventive services that don't have cost-sharing under traditional Medicare. These include the program's initial preventive-care visit, annual wellness visits, and screening procedures.

Although an Advantage plan will save money for some seniors, it's important to review the plan's network of doctors to make sure yours are in the plan. Also pay close attention to the plan's co-pays, co-insurance, and deductibles for in-network and out-of-network care. Pay particular attention to the drug coverage offered by Advantage plans. Because Advantage plans are responsible for all aspects of a patient's care, some offer enhanced drug coverage that might help save them money elsewhere. "Some will cover more over-the-counter medications or preventive drug therapies," says Mendelson.

Shopping Tips
The best online tool for shopping plans is the Medicare Plan Finder at the Medicare website. Plug in your Medicare number and drugs (you'll need each drug's name and dosage). The tool then displays a list of possible plans; their estimated cost, premiums, and deductibles; which drugs are covered; and customer-satisfaction ratings. The finder also will give you advice about drug utilization and restrictions.

All seniors receive an annual notice from their current providers by the end of September that summarizes plan changes for the coming year. However, the statement doesn't offer a detailed, personalized summary of formulary changes that might affect your coverage. For that, it's important to use the Medicare Plan Finder.

Another useful feature of the Plan Finder is the plan quality rating system, which utilizes data gathered by the federal government measuring whether patients received appropriate procedures and patient satisfaction feedback.

Although it's possible to enroll online via the Plan Finder, the MRC recommends that you confirm coverage information by phone with a plan representative and that you keep a written record of that conversation. The Center also recommends enrolling by calling Medicare's enrollment hotline (1-800-MEDICARE), rather than talking directly with the plan.

"If you get erroneous information from the government, that's a reason to let you out of a plan later if necessary," says Baker. "If a plan representative gives you wrong information, you're out of luck."

If you don't have a copy handy, download the federal government's free guide to Medicare benefits, Medicare & You. This is the definitive source on all things Medicare and can be useful in plan decision-making.

Free plan selection assistance is available from the local offices of the State Health Insurance Assistance Programs, or SHIPs, which provide Medicare counseling. The MRC also offers free counseling by phone (1-800-333-4114).

If you're willing to pay to get advice and help with paperwork, hire an independent, fee-based, counseling service such as Allsup Medicare Advisor (1-866-521-7655). For a few hundred dollars, Allsup assigns an advisor who will provide a written personalized plan analysis and offer phone consultations.

Note: A correction was made to this article since original publication. Please click here to see the details.

Mark Miller is a retirement columnist and author of The Hard Times Guide to Retirement Security: Practical Strategies for Money, Work and Living. The views expressed in this article do not necessarily reflect the views of Morningstar.com.

Mark Miller does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.