It’s that time of year again. If you’re one of the roughly 44 million Americans enrolled in Medicare, get ready for some year-end shopping. Medicare’s annual open enrollment period runs from October 15th until December 7th and presents seniors with a great opportunity to manage their health care costs for the coming year. Any changes or new enrollment will become effective on January 1, 2019.
There are several important changes to the Medicare program for 2019, including the elimination of the coverage gap for certain prescription drugs and updates to the Medicare Plan Finder tool that will make it easier to use. Beneficiaries should note that Medicare Advantage and Medicare Part D prescription drug plans can and do make changes throughout the year that may affect their coverage. And even if you’re content with your existing plan, options with better coverage, fewer restrictions, and lower costs may be available. Now is your chance to find them.
Changes you can make during Open Enrollment
- Change from Original Medicare (Parts A & B) to a Medicare Advantage plan.
- Change from a Medicare Advantage plan back to Original Medicare.
- Change from one Medicare Advantage plan to another, including from a plan that does not include prescription drug coverage to one that does.
- Change from one Medicare Part D prescription drug plan to another.
- Enroll in a stand-alone Medicare Part D prescription drug plan, although a late-enrollment penalty may apply.
- Drop coverage under a Medicare Part D prescription drug plan.
Individuals enrolled in low-income programs such as Supplemental Security Income (SSI), Medicaid, a Medicaid savings program and/or the Medicare Extra Help prescription drug program have the ability to enroll in a Medicare Advantage or Medicare Part D prescription drug plan throughout the year, but for most Medicare beneficiaries the annual open enrollment period is the only time during the year that changes to their coverage can be made.
Where to Begin?
Medicare Advantage and Part D prescription drug plans are required to provide participants with an Annual Notice of Change (ANOC) and Evidence of Coverage (EOC) each year. These are mailed in late September and detail any material changes in the plan’s coverage for the coming year. The ANOC will note any changes to the plan’s service area, premiums, deductibles, copayments or coinsurance, and updates to the plan’s prescription drug coverage and formulary. The Evidence of Coverage is a much heftier document and details what the plan covers, how it works, how to access plan benefits or file a complaint. Useful as a reference, a review of the important features of your plan, and a more thorough reading of the ANOC should provide a good baseline to begin your search.
Next, compile a list of medical providers and medications and compare it to the ANOC. If coverage for a medication you take is not included, or a physician or medical facility has dropped out of your Advantage plan network, the statement will reflect this. Since Medicare Advantage plans are only as good as their network, be particularly diligent when reviewing the plan’s provider list to ensure that it contains your favorite providers and a sufficient network of specialists. The time to find out that your Advantage plan lacks a highly-rated Oncologist is not when you’re in need of one.
Medicare beneficiaries that receive their prescription drug coverage through a Part D plan should review the changes made to their plan’s drug formulary. When comparing plans, make a list of your prescription drugs, the dosage, and the pharmacies you can use to fill your prescriptions (don’t forget online and foreign pharmacies may be a good option for some). Determine whether your medications are included in the plan’s formulary and whether the plan imposes any restrictions on obtaining the drug, such as receiving a prior authorization. If the plan does cover your drug(s), determine what tier they are assigned and how much they cost. If a drug is not included in the plan’s formulary, determine whether the plan covers an alternative drug that might be just as effective (plans generally cover several drugs in a given category). At first glance, this may appear to be a daunting task, but Medicare’s Plan Finder can help you efficiently sort through your options.
Review the Basics
- Original Medicare is a fee-for-service model where the government pays your health care providers directly for your Part A (hospitalization) and/or Part B (medical) services. Most people receive Part A benefits without paying a premium and have their Part B premiums deducted directly from their Social Security check. While premiums are modest- $135.50 per month for most Part B recipients- Original Medicare includes deductibles and coinsurance costs that quickly add up. For this reason, many people enroll in a Medicare Supplement Insurance plan to defray these costs.
- Medicare Supplement Insurance (also referred to as Medigap insurance), is a supplemental plan of insurance designed to work in conjunction with Original Medicare by covering the cost of deductibles and copayments that the beneficiary would otherwise be responsible for paying. These policies are governed by federal and state law and insurers must provide a standardized list of benefits for each plan. There are currently ten plan options, though this list will be reduced to eight in 2020. Medigap insurance policies work with any physician that accepts payment from Medicare, but do not provide prescription drug benefits and do not pay for services that are not covered by Original Medicare, such as vision or dental benefits.
- Medicare Advantage plans, which are sometimes called “Part C” plans, are offered by private insurance companies that contract with Medicare. Participants are still enrolled in Medicare parts A & B, but receive their coverage from the Advantage plan and not Original Medicare. Medicare Advantage plans are paid a fixed amount per enrollee and must provide the same benefits as Original Medicare. The plans may, however, use different deductibles and cost-sharing arrangements to deliver care, and may include services such as routine dental or vision care that is not covered under Original Medicare. Medicare Advantage plans are structured as a Health Maintenance Organization (HMO), Preferred Provider Organization (PPO), Private Fee-For-Service Plan (PFFS), and also include specialized plans such as Medical Savings Accounts (MSA) and Medicare Advantage Special Needs Plans that provide targeted medical care to those with a qualifying medical condition.
- Medicare Part D outpatient prescription drug coverage is provided by private insurance companies that contract with the government. Beneficiaries enrolled in a Medicare Advantage plan will generally receive prescription drug coverage through the plan, so Part D plans are often referred to as “stand-alone” drug plans and are used primarily by those that receive their medical coverage through Original Medicare. Beneficiaries pay a monthly premium and must satisfy the plan’s annual deductible before coverage begins. In addition, beneficiaries must pay a percentage of the medication’s total cost through a coinsurance charge, and a set amount of the cost via a copayment. These cost-sharing mechanisms will generally contribute far more to a beneficiary’s total prescription drug costs than will the plan’s monthly premium and should be scrutinized. Beneficiaries should pay special attention to their Medicare Part D plan’s drug formulary, which assigns each drug to a tier from low-cost preferred generics to a high-cost specialty tier. The tier the drug falls into can have a profound effect on your prescription drug costs.
- Prescription drug coverage gap. No review of Medicare prescription drug coverage is complete without addressing the coverage gap, often referred to as the “donut hole”. Prescription drug coverage progresses in phases, beginning with the deductible phase were beneficiaries pay 100% of the medication’s cost. The 2019 standard initial deductible will increase from $405 to $415, though some plans have no deductible. After satisfying the plan’s annual deductible, the initial coverage phase begins. In this phase the beneficiary and plan share in the cost of covered prescription drugs via a copayment and coinsurance. This phase extends until such time as the initial coverage limit is reached. If beneficiaries reach the initial coverage limit ($3,820 in 2019, and including all spending by the beneficiary and the insurance company) they enter a coverage gap. While in the coverage gap, the beneficiary pays 100% of the cost of their medication until total spending exceeds $5,100. In this final catastrophic coverage phase, the insurance company pays 100% of additional costs for the remainder of the year. It’s important to note that exposure to the coverage gap will be eliminated for brand-name prescriptions in 2019 by modifying the cost-sharing arrangement between plan beneficiaries and insurance companies, and by requiring pharmaceutical companies to provide a discount on brand-name drugs purchased in the coverage gap. The Affordable Care Act (ACA) will close the coverage gap entirely in 2020, at which time beneficiaries will pay a 25% coinsurance for any prescribed medication from the time they satisfy the plan’s deductible until they reach the out-of-pocket spending limit.
A word of caution about Medicare Supplement (Medigap) Plans
Medicare Supplement (Medigap) plans are offered for sale throughout the year, though attempting to purchase a plan outside of your Medigap Open Enrollment Period may subject you to medical underwriting. Guaranteed-issue rights are afforded to beneficiaries that sign up during their open enrollment period, which lasts for six months and begins on the first day of the month in which they are age 65 or older and enrolled in Medicare Part B. During this period, insurers cannot charge a higher premium or deny coverage because of a preexisting condition (although they may delay coverage for up to six months).
Although certain states, including NY, CT, MA and ME provide residents with guaranteed issue rights that are either continuous or extended on an annual basis, most states afford little or no protection. Medicare beneficiaries should exercise caution when attempting to purchase a plan outside of their Medigap Open Enrollment Period. For help understanding the protections afforded in your state, contact your State Health Insurance Program counselor for assistance.
What is noteworthy for 2019?
- Medicare Part B base premiums increase slightly from $134 per month to $135.50- but may be lower for those subject to Medicare’s hold harmless provision. As in years past, higher income individuals are subject to increased Medicare Part B and Part D premiums. The increase is designed to shift a higher portion of Medicare costs to those of greater means and is known as the Medicare Income-Related Monthly Adjustment Amount (IRMAA).
- The Medicare Part B and Part D Income-Related Monthly Adjustment Amount (IRMAA) will add a new income tier beginning in 2019. Individuals with modified adjusted gross income exceeding $500,000 or married couples filing a joint return with income in excess of $750,000 will pay a total of $321.40 per month in addition to the Part B base monthly premium of $134.00. The Medicare Part D plan IRMAA is assessed on top of the national average Part D plan premium of $32.50 (2019) and will add an additional cost of $77.40 per month.
- Medicare beneficiaries enrolled in a Part D prescription drug plan will no longer be exposed to a coverage gap for brand-name drugs, but the coverage gap, also known as the “donut hole”, will continue for generics until being fully closed in 2020.
A Checklist for Open Enrollment
- Review your Annual Notice Of Change (ANOC) and note any material changes in prescription drug or medical coverage.
- If you plan to join a Medicare Advantage or stand-alone prescription drug plan, verify that you are eligible to participate in the plan. Confirm that you have Medicare Part A and Part B coverage and live within the geographic service area that the plan covers. Note that those with end-stage renal disease generally cannot join an Advantage plan.
- Decide if your current plan meets your needs. Those with Original Medicare might find the expanded services and potentially lower costs available in an Advantage plan to be very attractive. Balance these services, the network of providers, and out-of-pocket costs to the enhanced flexibility associated with Original Medicare.
- Confirm how Medicare integrates with retiree or veterans benefits. Speak with your organization’s benefits administrator to discuss how your insurance works with Medicare. Most plans require you to enroll in Medicare, but enrollment in Medicare Advantage or stand-alone drug plans may cause you to lose coverage under your retiree plan. Ask for any restrictions in writing.
- Know your timeline. For those switching Medicare Advantage or stand-alone drug plans, this is more straightforward, but those switching from an Advantage plan to Original Medicare should confirm what, if any, changes to make during Fall open enrollment and what should wait until the Medicare Advantage Disenrollment Period (MADP).
- Crunch the numbers. Plan premiums are only one consideration. Out of pocket costs such as co-payments and deductibles may add up quickly. Avail yourself to preventative-care visits and screening procedures that are offered at little or no cost.
- Remember that those newly eligible Medicare recipients are subject to an Initial Enrollment Period that is based on your birth date, while those ending their employment may be eligible for a Special Enrollment Period.
Medicare and your state’s Health Insurance Assistance Program (SHIP) can be reached by calling 1-800 MEDICARE (1-800-633-4227). Enrollment can be done by calling Medicare directly or enrolling online. Be sure to print your confirmation number and summary of choices.
The Medicare Rights Center maintains a free telephone line (1-800-333-4114) and can explain the differences between Original Medicare and Medicare Advantage plans, and help in selecting an appropriate plan type.
Medicare’s website provides a variety of resources such as the Medicare Plan Finder tool that can help you compare Medicare Supplement and prescription drug plans. The process of shopping for a new plan need not be a daunting task if you do a little research first.
John Male, CFP®, RICP®
The Gassman Financial Group
The Retirement Maven™
9 East 40th Street
New York, NY 10016