This is a community service announcement and open thread.
Medicare started its annual open enrollment period over the weekend. It goes until December 7, 2016.
For people who are happily on traditional Medicare Fee for Service (FFS), you need to do very little except for your Part D drug coverage. For people who are either unhappy on FFS or are on a Medicare Advantage plan (MA) you have some work to do. We’ll talk about that.
We’ll start with Part D as everyone needs to deal with it.
Part D is the prescription drug coverage. The program is set up to have the insurer pay 75% of the costs of drugs after a $400 deductible and before the shrinking doughnut hole that starts at $3,700 where the individual is on the hook for all of the costs of the drugs until they spend another $1,250 in retail price drugs. After that catastrophic coverage kicks in where the individual is paying a small co-pay or small co-insurance with no out of pocket limit.
The one last thing that needs to be discussed is low income subsidies. People who make under 150% of the Federal Poverty Line (FPL) can get extra help on their out of pocket expenses. If you’re close or you know you’re under, talk to someone!
Every Part D plan is different in what they actually cover. Their benefit structure is similar but the covered items differ. The key item of difference is the formulary. The formulary is the list of covered drugs and which level of benefit/hoop jumping is needed. If you are on a set of drugs that work for you, you need to check the formulary of the plans to make sure they will still be covered for next year. The plans are required to cover a drug in each class but a particular brand may be in Plan A but not in Plan B. The least expensive Plan D offerings will tend to have the most restrictive formularies.
Medicare Advantage plans are also known as Part-C. Quite a few plans will offer to wrap up prescription drugs with their offerings. That can be easier but you need to make sure that the drugs you need are covered at an affordable price.
Let’s get into Medicare Advantage below:
MA plans replace Medicare Part A and Part B (docs and hospital coverage) of FFS Medicare. You need to pay your regular Medicare monthly fee and you could also be on the hook for a Medicare Advantage premium as well. Medicare Advantage looks a lot like Exchange or employer sponsored coverage. It has a network, it has a deductible, it has co-insurance and co-pays and it has a maximum out of pocket. The maximum out of pocket limit is, in my mind, the biggest selling point of Medicare Advantage.
Under traditional Medicare, as we saw when we looked at a million dollar a month patient in Iowa earlier this year, there is no catastrophic cap.
….They’ve run up $68,000 in personal responsibility payments just for inpatient care. And their benefit is exhausted by October. This is the case in Year 1, if it is a multi-year case, their benefit in Year 2 is gone in August in the best case scenario.
Now let us also assume that they are seeing three specialists per day (which is a very low estimate if they are in the ICU). Each specialist is getting $200 from Medicare of which the Part B co-insurance is 20%. So each day, the patient is running up $120 in medical bills. Over the course of a year that is another $44,000 in co-insurance.
If drugs cost $500,000 per month and they have a basic Part D plan with no extra help, they will pay a 5% co-insurance on everything above $7,000 per year. In Year 1 that means they’ll be on the hook for $300,000. In Year 2, they qualify for extra help so they’ll pay a $7.40 co-pay per brand name prescription. So Year 2 their prescription costs go down to the high four figures to the low five figures.
This is a worse case Medicare scenario.
If the individual has Medicare Advantage or a full Medicare Supplemental policy, their total exposure is capped from anywhere between $3,500 to $7,000 depending on what they bought.
Plenty of carriers offer Medicare Advantage plans. The key things to look at are the carriers’ Medicare Stars ratings. More stars is better. Four and Five Star plans are able to offer better benefits because they get paid more. After that, look at networks to see if your docs and hospitals are in network. And then figure out what you can pay per month and what your maximum exposure is.
Agents are willing to help you a lot because Medicare Advantage enrollment is a period where they can make some good money reasonably fast. Agents are paid by the carriers and their rates are capped by CMS. The incentive structure of paying a full commission for an unlike plan switch in the first year and then a half commission if someone keeps basically the same coverage for the second year does produce a skewed incentive. Agents will have an incremental incentive to produce churn. Churn makes them more money. So as a buyer, be aware that if you see an agent push a plan that looks a lot like your current plan and costs in both premium and expected out of pocket expenses but it is by a different insurer that their interests are diverging from yours. If they are pushing a different plan that is better, then great, the interests are close enough to aligning.
So open thread….