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Medicare Open Enrollment - What You Need to Know

By aboutLife staff

You can be forgiven if that Medicare packet you (or your mom and dad) recently got in the mail is lost in your to-do pile. In it is detailed information about your current plan and any changes that are in store for you beginning in January. If you want to switch your coverage, you’ve got until December 7 to do so.

If you’re like most people, though, you’ll end up doing nothing. Why? It’s not because your current plan is so great. More likely, you dread the thought of going through the process of figuring out if another Medicare plan is better for you. You’re not to blame: there’s nothing fun or easy about switching Medicare plans - or any other health care plan for that matter. Even the experts admit as much.

Try not to be discouraged, though. It could end up costing you. Why? Because Medicare plans can change from one year to the next — sometimes by a lot. Premiums increase. Doctors exit the program. The plan you signed up for originally because it was the cheapest option available may now be the most expensive.

Take a look at what’s happening with Medicare prescription drug coverage. For the first time in several years, premiums for medication coverage will rise in 2016 — by an average of 13 percent. Other costs are rising, too. Deductibles, for instance, will register their biggest increase since drug coverage began a decade ago. "People will leave real money on the table if they don’t look and they don’t think about their [Medicare] options," warns Tricia Neuman, a senior executive at the Henry J. Kaiser Family Foundation.

There are other reasons to consider changing your Medicare coverage in 2016. Maybe you can afford a more expensive plan, or your budget requires a cheaper one. If you’re taking a new medication, you might want to make sure your drug plan covers it at the lowest cost available. Maybe you’re healthier than ever. In that case, you might want a plan with a lower monthly premium in exchange for higher out-of-pocket costs.

Whatever your health needs are, now’s the time to think about your Medicare coverage and pay attention to changes in 2016. You might end up saving several hundred dollars a year, but you’ve got to do your homework today. We’ll get you started here — and guide you on how best to weigh your options — but it’s up to you to get it done. Your effort might just pay off.

What’s Happening to Medicare Right Now

Every year, from mid-October to early December, Medicare allows existing enrollees to sign up for or change their participation in two of its programs: Medicare Part C, which is more commonly known as Medicare Advantage and provides basic coverage for doctor and hospital visits. The big difference, however, is that Medicare Advantage plans are managed by private insurers instead of the federal government and typically an HMO or PPO. Medicare members who choose Medicare Advantage can pay higher premiums but, unlike original Medicare, there are limits on out-of-pocket costs. Also, Medicare Advantage plans can cover extra benefits, like vision, hearing and dental coverage, that you won’t get with original Medicare.

The second program that’s now open to new participants or changes by existing ones is Medicare Part D. This is Medicare’s primary insurance for prescription drugs (we say "primary" because most Medicare Advantage plans offer medication coverage, too).

Who Doesn’t Need to Worry About Open-Enrollment Period?

###1. If you are 65 and not enrolled in Medicare

What if you aren’t currently enrolled in Medicare, but are eligible because you are 65 years or older? This open-enrollment period doesn’t apply to you; Medicare runs separate enrollment periods for new members.

###2. If you are enrolled in Medicare Part A and Part B and plan to keep it that way

Also, there’s nothing for you to do right now if you’re signed up for Medicare’s two other programs, Medicare Part A and Part B (which is known as "original" Medicare and helps pay for your doctor and hospital visits), and you want to keep your current coverage. Also, you don’t have prescription drug coverage and don’t want to sign up now.

Who Needs to Pay Attention to This Open-Enrollment Period?

  • Any of the 39 million people enrolled in original Medicare who are thinking of moving to a Medicare Advantage plan or signing up for drug coverage for the first time.

  • Any of the 17 million people enrolled in a Medicare Advantage plan who might want to change plans or switch to original Medicare.

  • Any of the 24 million people who have Medicare prescription drug coverage.

What You Can Do During Open Enrollment For Medicare Advantage and Part D:

  • Change from original Medicare to a Medicare Advantage plan.

  • Change from a Medicare Advantage Plan back original Medicare.

  • Switch from one Medicare Advantage Plan to another.

  • Switch from a Medicare Advantage plan that doesn’t offer drug coverage to a Medicare Advantage plan that does.

  • Switch from a Medicare Advantage plan that does offer drug coverage to a Medicare Advantage plan that doesn’t.

  • Join a Medicare prescription drug plan.

  • Switch from one drug plan to another drug plan.

  • Drop Medicare prescription drug coverage completely.

Where to Start With Medicare Open Enrollment

You should have received your enrollment package from your existing Medicare Advantage and Part D provider by the end of September. If you haven’t reviewed it yet, you should do it now. In it, you’ll find details about your current plan and any changes in coverage, cost or service area that will go into effect January 1.

If you think you might want to change plans or sign up for a new one, the first step is use the Plan Finder tool on Medicare.gov. There, you can generate lists of plans available in your geographic area. The service is fairly easy to use, but be prepared to wade through a lot of information. Nationwide, the average number of Medicare Advantage plans available to Medicare members is 19. When it comes to prescription drug plans, the average number of plans available is 26. Remember that these are averages; depending on where you live, you might have more choices or you might have fewer. The same goes when you read about average price increases.

Here’s how far off the average Medicare prices can be: Florida residents who have Medicare Advantage pay average monthly premiums of $6. A Massachusetts resident, on the other hand, pays about $100 a month. Premiums for prescription drug coverage range from $20 to $60, depending on where you live. Costs will even vary widely within a state, too.

So don’t be alarmed if the prices you see on plans through Medicare.gov are a lot higher (or lower) than the averages you read about. The price difference is simply a function of where you live.

4 Steps to Find the Best Medicare Plan for You

When reviewing your choices, there are four more steps you’ll want to take before making a decision about your coverage in 2016:

1. Review All of The Plan’s Costs

Premiums tend to get all of the attention. But plans have additional costs in the form of deductibles, the flat fee you pay when you show up at the doctor’s office (known as your co-pay), and the portion of your medical provider’s bill that you have to cover (known as co-insurance). All three additional fees have been rising.

Pay attention, too, to the out-of-pocket limits on each plan. Maximum out-of-pocket costs represent the most you’ll be expected to pay in a single year beyond your monthly premium. Remember, though, that if you’re thinking about switching to original Medicare, which tends to have lower monthly premiums, there aren’t any caps on how much you might have to pay out of your own pocket in 2016.

The takeaway: The more you’re willing to pay out-of-pocket, the cheaper your insurance will be. The opposite is true, too: the less you pay during and after a doctor’s visit, the higher your monthly premium will be.

2. Make Sure Your Doctors and Nearby Hospitals Are Providers

You’ll pay a hefty price for going out-of-network to see a doctor or go to a hospital that’s not in your Medicare plan. If you want to do a broader search of medical providers in a plan, you’ll have to do some serious investigation. In order words, you’ll need to download each plan’s provider directory and compare one list to the next.

The takeaway: Even if you think you don’t want to change your Medicare coverage right now, at minimum you’ll want to make sure your current doctors and hospitals will remain in your existing plan next year.

3. Check Prescription Drug Coverage

You can find out on Medicare.gov whether your medications will be covered by a particular plan in 2016 and how much you’ll be expected to pay to get them. Pay close attention to the difference between the price of a generic versus a brand-name drug. According to the Kaiser Family Foundation, there are typically five different price tiers for medications. Also, drug plans increasingly are signing "preferred cost sharing" deals with giant pharmacies like Walmart or CVS. Under these deals, you’ll pay much less to fill a prescription at one of the preferred pharmacies versus the corner drug store. For example, you might pay a $20 co-pay for a brand-name drug at a preferred pharmacy and a $33 co-pay someplace else.

Something else to keep in mind when trying to figure out your medication costs in 2016: the shrinking "donut hole". The donut hole reflects the point at which you have to pay the full cost of your medication, no matter which prescription drug plan you have. So, in 2015, once the total amount of money you and your insurance company spend on your prescription drugs hits $2,960, you have to shoulder 100 percent of the costs until total spending for the year reaches $4,700. In 2016, the gap will start at $3,310 for covered drugs and will end at $4,850. The monthly “Explanation of Benefits” your insurance company sends you will help you determine how close you are to reaching, or getting out of, the “donut hole”.

2015 Donut hole: You pay 100% of your prescription drugs between $2,960 and $4,700.

2016 Donut hole: You pay 100% of your prescription drugs between $3,310 and $4,850.

2017-2020: Donut hole will gradually close and be gone entirely by 2020.

The good news is, the "donut hole" is gradually closing and will be gone entirely by 2020, thanks to the Affordable Care Act. For now, enrollees caught up in the gap will receive discounts on the prices they pay for generic and brand-name medication. In 2016, the cost of brand-name drugs will be discounted 55 percent and you’ll receive a discount of 42 percent on generic drugs.

The takeaway: If you don’t take many prescription drugs, go with the most basic drug plan you can find. If you’re on medication, make sure you live near a plan’s preferred pharmacy — or be prepared to pay more to fill your prescriptions.

4. Check Medicare’s Star Ratings

Medicare rates Medicare Advantage and prescription drug plans on a 5-star scale. The stars are based on a number of factors, including the quality of a plan’s customer service, the types of treatment covered for long-term conditions and the overall health of its insured members. You can sort plans available to you based on their quality ratings by using the Plan Finder tool. A 1-star rating represents the lowest score, while five stars are the highest.

The takeaway: Consider only plans that have at least a 4-star rating. Also, try to talk to doctors in the plan to find out what they think of it and whether they plan to stay in it themselves.

Once you take these steps, you’ll probably get a pretty good idea of the Medicare plans that might work best for you. If you’re still unsure, download Medicare’s official free handbook, "Medicare & You 2016," which offers all kind of tips and additional resources.

What’s Next for Medicare Enrollment

Like it or not, the process we’ve just described is one you’ll want to go through every year. Think of it as one of life’s necessary evils — just like paying taxes.

There are other Medicare deadlines you might want to pay attention to. For example, let’s say you’re enrolled in a Medicare Advantage plan and you want to revert to original Medicare. You can do that every year between January 1 and February 14. If you want prescription drug coverage under Part D, too, you’ll have until February 14 to sign up.

What if you’ve just turned 65? If you’re receiving Social Security benefits, you’ll automatically be enrolled in original Medicare. If you don’t take Social Security yet, you’ll have to enroll in Medicare yourself. You have a 7-month period to sign up that starts three months before your 65th birthday and ends three months later.

If you didn’t sign up for Medicare when you were first eligible, you can do so from January 1 to March 31 every year. Keep in mind that you might have to pay a late-enrollment penalty — and your coverage won’t start until July 1.

There’s more. Medicare also allows you to sign up or change plans if you’re eligible for one of its "Special Enrollment" periods. For example, if you move and are no longer in your plan’s service area, you can sign up for a new plan without paying a penalty. For a full list of circumstances that allow you to enroll in Medicare outside of the normal deadlines, go here.

For other ways to make your money go further in retirement, visit aboutLife’s free Financial Planning Tool.

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