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….
Another Scott
Thanks for this. J and I were hiking in the GSMNP last week and she started talking about how we need Single Payer and Medicare for All, and I mentioned that Medicare doesn’t cover everything. She said “other countries do it, we can too”, and I pushed back a little – saying it’s complicated, no country pays for everything, people on Medicare often have supplemental insurance, etc. – but not too much (didn’t want to ruin the hike).
I wish more people understood the complexity of our existing system and the vital importance of incremental progress. We’re never going to get to MFA all at once, and we have to decide what it will pay for and how…
Thanks.
Cheers,
Scott.
Steeplejack (phone)
@Richard Mayhew:
Typo in your second paragraph. The annual enrollment period ends on December 7 of this year, not 2017.
Steeplejack (phone)
@Steeplejack (phone):
Feel free to delete this/these.
WereBear
I also wish to remind everyone to get it in writing.
Mr WereBear was outright lied to several times, and it wasn’t until we got into actually using the plan that we discovered that.
Richard Mayhew
@WereBear: AMEN — and if the agent is promising the moon, call the state regulators.
Suzan
Thanks for all of this.
Aurona
Thanks Richard; long time lurker, full time reader. I’m 69, live in Seattle and have an Advantage plan. Great coverage, full network (“the I-5 corridor”) that runs up and down the Puget Sound area and since I take no drugs, the RX plan for me is included and I pay $0 premiums (except for extra dental insurance). I’m also a mystery shopper (I shop health insurance companies other than the one I’m with) and have a chance to see how the big guys are doing and what they are offering. It is very important to use those star ratings for your selections of doctors, hospitals and drugs included in your plan. The company I am with is one of those big guys, and having that big network was the most important to me in the event of a medical issue. Thanks for all your information, it really does help!
Mary Lincoln
Thanks for this; Medicare is confusing. I just turned 64 and realize I need to figure this out soon. I am wondering what a healthy person who takes no drugs should do. How can I pick a part D plan if I have no prescriptions? Should I not sign up for Part D? (I know there is some kind of penalty for that somewhere down the road.) What factors go into deciding whether I need a MA plan?
RealityBites
This is the last week to sign up for next year’s insurance at my company. Did I miss a post from you? I was hoping to get some accurate information to counter all the maroons at my job (and a friend’s job) who are blaming all the price increases and the downgrading of coverage on the ACA. For example, my friend says her employer is going to transition to 100% high deductible over the next few years. Will you be posting about this or can you recommend a good source of information? Thanks
Larkspur
Thank you. I’ve got some work ahead of me.
Richard Mayhew
@RealityBites: No missing post yet… just have not written it (life got busy :) )
Marty Jack
@Mary Lincoln: You should sign up for a Part D plan when you enroll in Medicare. If you go without, the penalty increases the longer you go without, and stays unabated for the rest of your life. You can change Part D plans every year, so I would pick the least expensive option initially if you are not taking anything.
bemused senior
I am about to turn 68, and my husband is 6 years younger and still working. I didn’t sign up for Medicare when I turned 65, because I was covered by my husband’s plan — better coverage for a lower price. Now I’m wondering if I made a mistake because of the penalty for delaying Medicare coverage. Should I opt for Medicare and opt out of my husband’s coverage? How can I figure this out?
nutella
@Another Scott:
I like to tell people who think Medicare for All is a panacea to go look up when they can get on Medicare now and what exactly it covers and doesn’t cover. And come back in 10 minutes. It’s impossible to figure it out quickly so they won’t.
JanieM
@bemused senior: I wonder about this too. I’ll be 67 on my next birthday and am still employed, with a very good employer-sponsored health plan at work. I didn’t sign up for any part of Medicare when I turned 65, because I was told at work that I didn’t have to as long as I had the work coverage. A quick google search suggests that that’s true for parts B and D, but the search only made me more confused about part A. I wonder if Richard can point me/us to a good primer…or maybe he has written one here; since I’m a relatively recent BJ reader, I suppose I should go back through the archives. But if there’s a quick answer I’d love to hear it! If I’m covered at work, is there still a penalty for not signing up for Part A when I turned 65?
Why do we have to have a system that’s so opaque? What did I get all those advanced degrees, for, anyhow, if I still can’t understand the $#*&(@&(*$ health care system? (Rhetorical question. ;-)
bemused senior
@JanieM: Indeed! At least with Social Security, I can tell that putting off applying for it till age 70 will mean a higher benefit. Then there is the mystery of the 401K drawdown.
Richard Mayhew
@bemused senior: talk to both the Area Agency on Aging and a broker… if they agree on their advice, go with it. If not, talk to AARP or another information source.