Open Medicare enrollment season gives clients a chance to save

Mary Beth Franklin on how Medicare's annual open enrollment season is an ideal time for clients to shop around for new Medicare coverage — even if they are happy with their current plan — to see if it is still appropriate for their needs.

Medicare’s annual open enrollment season is an ideal time for clients to shop around for new Medicare coverage — even if they are happy with their current plan — to see if it is still appropriate for their needs.

Open enrollment this year begins Oct. 15 and runs through Dec. 7.

Checking on the coverage your clients currently have could be extremely worthwhile. Only 19% of current Medicare beneficiaries say they understand their health care options, according to a recent Merrill Lynch study conducted by AgeWave on the convergence of health and retirement planning. That lack of understanding could be costing your clients a lot of money.

(Don’t miss: 7 things you don’t know about Medicare)

Insurance plans unveil new pricing and benefits during the annual open enrollment period every fall, so it is important for clients to review their Medicare options each year. They shouldn’t assume that their drug coverage and other co-payments will remain the same next year.

During the annual open enrollment period, Medicare beneficiaries have a right to change their health and drug coverage without restriction. They may change Part D prescription drug plans, switch Medicare Part C Advantage plans or enroll in Medicare Part C Advantage plans for the first time. The changes will take effect Jan. 1.

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The first step in reviewing Medicare coverage is to read the new plan benefit summary statement that insurance companies must send by Sept. 30. Check if co-payments, co-insurance, deductibles and other plan feature will cost more next year.

The list of drugs covered by individual Part D plans often change from year to year. Coverage restrictions, such as quantity limits, prior authorization and “step therapy” (which require a person to try another drug before the plan will cover the prescribed medication) can also change from year to year.

A growing trend, according to the Medicare Rights Center, is for Part D drug plans to differentiate between “preferred” and “non-preferred” pharmacies within their network. Beneficiaries pay the least when they use preferred pharmacies. Therefore, they should make sure the pharmacies they use are preferred.

There is some good news about drug costs for next year. The Medicare Part D coverage gap, also known as the “donut hole,” is shrinking. Medicare beneficiaries will receive a 55% discount on the cost of the brand-name drugs during the donut hole coverage gap and the discount for generic drugs during that period will increase from 28% to 35% in 2015.

The vast majority of people pay too much for their Medicare coverage by focusing on the lowest monthly premiums rather than total costs that include co-pays and deductibles, said Katy Votava, president of Goodcare.com, a consulting service that works with consumers and financial advisers on health care coverage, and author of the guide “Making the Most of Medicare.”

Ms. Votava said Medicare beneficiaries should pay particular attention during annual open enrollment if their prescription medications have changed since last year, if scheduled premium increases are uncomfortable or out-of-pocket costs are difficult to manage. Other reasons to re-shop Medicare plans include poor customer service from an existing plan or if a plan is no longer being offered.

As a quick refresher: Medicare has several moving parts — Parts A, B, C and D, to be specific.
Medicare Part A covers hospitalization and is free. Even if clients continue to work past 65, most sign up for Medicare A. But if they do, they can no longer contribute to a health savings account.

Medicare Part B covers doctors’ visits and outpatient services and costs most retirees $104.90 per month in 2014. It is expected to remain at this level in 2015. But if a client’s modified adjusted gross income — which includes tax-free interest — exceeds $85,000 per year if they are single or $170,000 if they are married, they pay more.

Most people who choose traditional Medicare, which includes Parts A and B, also purchase a supplemental insurance policy, known as Medigap, to fill in the gaps of Medicare coverage such as deductibles and co-payments. People usually purchase a Medigap policy when they first become eligible for Medicare. They can switch Medigap policies at any time, but may face limitations after their initial enrollment period.
Alternatively, some people prefer to combine Medicare Parts A and B and supplemental coverage into a single policy known as a Medicare Advantage plan or Medicare Part C. These managed care plans often offer lower premiums or additional benefits that traditional Medicare doesn’t include, but can also limit services to network providers.

To cover prescription drug costs in retirement, clients can purchase Medicare Part D plan to add to Part A, Part B and Medigap coverage. High-income retirees also pay a surcharge for Medicare Part D based on the same income brackets that apply to Medicare Part B. Prescription drug coverage is often included in a Medicare Advantage plan.

(Questions about Social Security? Find the answers in my new e-book.)