The importance of shopping during Medicare’s annual open enrollment season.
For anyone with either a Medicare Part D drug plan or a Medicare Advantage plan, now is the time to review your coverage options and, in our opinion, it’s something that you need to every year and it’s more important than ever.
Even though Medicare beneficiaries receive their “Annual Notice of Change” this time of year, statistics show that maybe 13% actually read it and less than a third of Medicare beneficiaries compared their current Medicare plan with other Medicare plans in their area, according to a Kaiser Foundation study of open enrollment in 2020.
From Oct. 15 through Dec. 7, Medicare recipients can pick a new Medicare Part D drug plan, a new Medicare Advantage plan, or switch from original Medicare into a Medicare Advantage plan or vice versa. (Medicare supplement aka “Medigap” policies are not part of open enrollment). Any coverage changes made during this period will go into effect Jan. 1, 2024.
You can compare plans online with the Plan Finder tool at www.medicare.gov, and if you need help, State Health Insurance Assistance Programs (SHIPs) offer unbiased assistance through volunteers.
Reviewing your coverage is important to do because Medicare plans can change from year to year.
Medicare Advantage Plans
Also known as Part C, Medicare Advantage plans offer care managed by private health insurers that contract with the government to provide Part A hospital coverage and Part B outpatient coverage. Most Medicare Advantage plans also include drug coverage.
Medicare Advantage plans are required to pass on any savings back to participants or use these savings to provide additional benefits. As a result, they typically use any savings to offer additional benefits, (dental, vision, hearing, etc.) which seem appealing and so these are the plans that you see advertised on TV.
But don’t be fooled, annual dental coverage is capped and typically will not cover the cost of major procedures. And the vision coverage may cover a moderately priced pair of frames annually.
More important, most Medicare Advantage plans are HMOs with narrow networks of participating doctors and hospitals and require pre-authorization for pretty much everything except seeing your primary care physician.
Year-to-year, your monthly premiums, coinsurance and co-payments may change, and doctors or hospitals in Medicare Advantage may drop out of the plan’s network and drug coverage may change. Click here for a recent article on hospitals dropping Medicare Advantage plans.
The bottom line is that Medicare Advantage plans include lots of “moving parts” that become more difficult to keep track of as we age. And obtaining out-of-network medical care or paying for prescriptions not covered by your plan can be a financial catastrophe.
As a result, many Medicare Advantage participants attempt to change back to original Medicare when they are older/sicker, however, those who want to switch back to original Medicare are surprised to learn that they may be denied or charged more for a Medicare Supplement (aka Medigap) plan as these are only offered on a guaranteed basis when they initially enroll in Medicare (with the exception of NY, CT, MA and ME). Attempting to switch back without a Medicare Supplement plan may leave you on the hook for the 20% of costs for hospital and doctor services that original Medicare does not cover with no out-of-pocket limits.
Part D drug plans
Enrolling in the wrong Medicare Part D plan can cost members more than $800 a year according to a 2022 GoodRx report (to understand how you can still use GoodRx if you have Medicare, click here for our commentary from last October).
If you input your medications into Medicare’s plan finder tool, it will show your estimated total cost, which includes premiums, copayments and coinsurance. Some plans might have a higher premium but better coverage of your prescriptions than a lower-premium plan, so it’s important to look at the full picture. Prices among your local pharmacies can vary also considerably and can make a big difference in how much you’ll spend so you need to look at this too.
If you take prescription medications and are expecting relief under the Inflation Reduction Act, then think twice, please. Next year, patient responsibility in the so-called catastrophic coverage phase drops from 5% to zero. And, in 2025, a $2,000 annual cap on out-of-pocket medication costs takes effect.
This all sounds great for Part D participants, however, the result of these changes isn’t likely to be free. Premiums are already increasing for 2024 plans as a result of the catastrophic coverage change for 2024. For 2025, Part D drug plans are expected to be on the hook for the roughly $4.5 billion in savings as a result of the $2,000 out-of-pocket limit. Part drug plans cannot afford to just eat this cost and we expect that it will be passed back to participants through higher premiums, co-pays and coinsurance. Plans may also drop certain medications, which means that you could be on the hook for the full retail price given that the $2,000 limit only applies to medications covered by your plan.
If you take a prescription like Stellara (for Crohn’s disease) and your Plan drops Stellara, then you could be looking at an out-of-pocket cost going from $3,000 in 2024 to potentially $300,000 in 2025.
As a result, if you haven’t shopped your Part D coverage in a few years or if you take multiple medications, it’s more important than ever to read your Annual Notice of Change, get online or get help to compare and shop your plan. If you can buy yourself something on Amazon, then you should be able to navigate Medicare’s plan finder online. If not this year, then potentially next year you may find yourself on the hook for significant prescription expenses.
As always, if you have questions, please reach out to your ACM Wealth Advisor.
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