Medicare D and Medicare Advantage: How to Pick Plans

Last Updated Jan 7, 2010 12:31 PM EST

If Andy Williams believes this is "the most wonderful time of the year," he obviously hasn't waded through the Medicare D open-enrollment registration process. Whether you're trying to navigate the Medicare maze yourself or helping your parents do so, it's a tough slog. You've probably seen the avalanche of ads pitching the optional subsidized Medicare D (prescription drugs) and Medicare Advantage (comprehensive medical coverage, usually through managed-care networks) plans from private insurers.

As painful as it may be to sift through the details, it’s important to shop wisely for 2010 coverage before the open-enrollment period ends December 31. Without choosing a Medicare D or Medicare Advantage plan, someone over 65 automatically gets just traditional Medicare with no prescription-drug coverage in 2010.

It is especially important to pick the right plan because costs are rising and benefits are shrinking. In 2010, Medicare D premiums and out-of-pocket costs will jump 11 percent and 60 percent of the plans will charge deductibles, up from 45 percent in 2009, according to the Kaiser Family Foundation. Many Medicare Advantage plans are dropping benefits such as vision and dental coverage. And around 7 percent of Medicare Advantage participants — including ones in some UnitedHealth Group and WellCare Health Plans — will see their plans eliminated in 2010, due to a federal initiative aimed at streamlining the program.

To begin the Medicare selection process, set aside plenty of time and keep cool. The Medicare D and Medicare Advantage options are maddeningly complex; thorough shopping can easily take five to eight hours. But making the right choices can save you or your folks thousands of dollars and ensure the appropriate coverage. Here’s what you need to know:

What Are Medicare D and Advantage Plans?

People over 65 buy Medicare D and Advantage plans because the basic Medicare program doesn’t limit their out-of-pocket expenses and doesn’t cover prescription drugs, over-the-counter medicines, or dental costs. Don’t confuse Medicare D and Advantage plans with Medigap supplemental plans, though. Medigap plans don’t cover prescription drugs and are designed to cap out-of-pocket health expenses only for seniors enrolled in basic, fee-for-service Medicare. Buying a Medicare Advantage plan means there’s no need for a Medigap policy and often no need for Medicare D.

  • Medicare D prescription-drug plans generally reduce pharmaceutical costs for policyholders and charge monthly premiums. In 2010, 60 percent of the plans will include annual deductibles ($250 to $310). Beneficiaries receive coverage up to the notorious “doughnut hole” made famous in the health care reform debate — in 2010, beneficiaries must pay 100 percent of costs between $2,830 and $4,500. After $4,500, “catastrophic coverage” kicks in. Some Medicare D plans offer limited coverage inside the doughnut hole, but experts caution that it’s often not worth the cost. AARP has a Doughnut Hole Calculator that can help you to do the math.
  • Medicare Advantage plans offer all-in-one coverage and typically include prescription drugs, as well as extras such as dental, vision, and hearing coverage. Choices include preferred provider organizations (PPOs), health maintenance organizations (HMOs), and private fee-for-service and specialty plans. There are usually co-payments and deductibles, but a growing number of Medicare Advantage plans will cap out-of-pocket expenses at $3,400 for 2010.

Medicare D Shopping Tips

Since Medicare D plans routinely add and subtract drugs they cover, be sure to review the choices, regardless of whether you or your parents already have a plan. “Even if your medications haven’t changed, you need to shop your plan every year,” says Mike Chamberlain, a certified financial planner in Santa Cruz, Calif.

Don’t pick a Medicare D insurer simply because you know its name or because it’s your health insurer. And don’t be swayed by a pharmacist’s recommendation. Pharmacies have partnerships with particular Medicare D plans, so they may well recommend a plan that’s in the drugstore’s best interest, not the recipient’s.

The two most important Medicare D plan features to consider are 1) Whether the beneficiary’s drugs would be covered by a particular plan and 2) Whether the pharmacy you want would deliver the drugs. (Medicare D plans don’t work with all pharmacies and vice versa.)

Then, of course, there’s the cost. Medicare D premiums can vary by thousands of dollars among plans. For example, a healthy 76-year-old Sacramento man could choose between 47 plans costing $1,077 to $3,370. While it’s tempting to go for the lowest price, that can be a costly mistake. Watch out for these three traps when comparing plan costs:

  • Misleading drug prices: Examine the cost of each drug over the full year. The amount can vary month to month based on the way the plan sets prices. MoneyWatch blogger Stacey Bradford has advice about saving money on prescriptions.
  • Drug usage restrictions: A drug may be included in a plan, but with restrictions on its use. “There may be hurdles you have to jump through to get a drug covered,” says Kelly Brantley, senior program manager for Health Assistance Partnership, a nonprofit Medicare education group. “Using it may require prior authorization from a physician. Or the plan may require that you first try an alternative medication.”
  • High delivery costs: Mail-order drug delivery is less expensive with some plans, but not with others.

Medicare Advantage Shopping Tips

When you’re looking for a Medicare Advantage plan, it’s important to find one that matches all your health needs.

You’ll want to study the plan’s provider network to see whether the doctors and hospitals you need are in it. The most popular Medicare Advantage plans are HMOs, which force patients to use in-network doctors and hospitals — or pay much higher fees for out-of-network providers. And many health care providers are opting out of Medicare Advantage these days. If you want to find a Medicare Advantage plan but can’t locate one with the appropriate physicians and medical centers, that may require choosing new health providers who participate in Medicare Advantage.

It may be that no Medicare Advantage is quite right, especially if you or your parents live in different places throughout the year. “If you’re spending half the year in Florida and half in New York, you probably don’t want Medicare Advantage, because it will be hard to get care in both places,” says Vicki Gottlich, senior policy attorney at the Center for Medicare Advocacy. For these patients, basic Medicare — which has no geographic limitations — will be a better fit, coupled with a Medigap policy.

Getting Help

Fortunately, there’s plenty of help — often free — to make Medicare shopping easier.

Medicare’s Site

The Medicare Web site, Medicare.gov, is actually a fairly useful way to find the right plans because its instructive tools let you compare plans offered in a given area. Read the 2010 edition of Medicare & You, a clear guide to all Medicare plans and services. You can download the book as a PDF at no charge.

To find a Medicare D plan, use the site’s Medicare Prescription Drug Plan Finder by plugging in the beneficiary’s Medicare number and drugs (you’ll need each drug’s name and dosage). The finder then displays a list of possible plans; their estimated cost, premiums, and deductibles; which drugs are covered; and customer-satisfaction ratings. The finder also throws in advice about drug utilization and restrictions.

The site’s Medicare Options Compare tool lets you compare Medicare Advantage HMO and PPO plans. You’ll find information on premiums, drug coverage, provider choices, and customer-satisfaction ratings. And you can compare the managed-care offerings with traditional fee-for-service Medicare coverage.

Free Counseling Services

You can go to a free counseling session at the local office of State Health Insurance Assistance Programs (SHIP), the national Medicare counseling service. If you’re looking for a Medicare plan for your parents but don’t live near them, arrange a joint discussion with a counselor by phone. The sooner you make the visit or call, the better, since SHIP offices become increasingly swamped as year-end nears. The nonprofit Medicare Rights Center also offers free counseling over the phone (800-333-4114).

Hiring an Adviser

If you’re willing to pay to get advice and help with paperwork, hire an independent, fee-based, counseling service such as Allsup Medicare Advisor, based in Belleville, Ill. (888-271-1173). For $200 to $300, Allsup assigns an adviser who will provide a written personalized plan analysis and offer phone consultations. You or your parents may find the Medicare shopping experience a little less intimidating by doing it with a pro.

Mark Miller writes the weekly syndicated newspaper column Retire Smart, contributes to The Huffington Post, and blogs at RetirementRevised.com.

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