How to Shop for Medicare Plans

shopping photoYou often can find a better Medicare Part C (Medicare Advantage) Plan, a Part D Prescription Drug Plan, or a Medicare Supplement (Medigap) Plan if you shop every year. You don’t necessarily need to switch plans, but you can use these tips to ensure your current coverage is still appropriate at the lowest cost.

Take 30 to 45 minutes to understand how you used your private Medicare plan this year and whether you are likely to have the same needs next year. Armed with this information you can review your 2016 options and decide whether to switch plans.

Remember, insurance coverage is all about the dollars and cents. Just as insurers try to minimize their risk for each premium dollar collected, you should try to maximize your benefits for each premium dollar paid. Insurers don’t give loyalty discounts for sticking with them – so shop, shop, shop!

Background on Private Medicare Plans

There are three types of private Medicare plans.  You can have, at most, two of them.  It depends on which coverage option you chose when you signed up for Medicare:  Option 1 – original Medicare Parts A (hospitals), B (physicians), and D (prescription drugs), or Option 2 – a Part C Medicare Advantage Plan.

Original Medicare (Option 1): Medicare Parts A and B are fee-for-service plans. Medicare fee-for-service means you can receive services from any physician, hospital, or clinic that accepts Medicare (which most do). There is no premium for Part A, but there is a premium for Part B that depends on your income (the higher your income the higher the premium). You can also purchase a private Part D plan that covers prescription drugs.

If you use Option 1, you may also have a private Medicare Supplement (Medigap) plan. These plans pay some or all of the costs that original Medicare does not cover. They fill the gap. Insurers are required to offer the same benefits in each plan. There are 10 versions of Medicare Supplement plans, which also are identified by letters (A through N). This blog provides tips on how to make sense of Medicare supplement policies.

If you are using Option 1, you can shop each year for a new Part D Prescription Drug plan and/or a Medigap policy.

Medicare Advantage (Option 2): The other option is a private Part C Medicare Advantage plan in which you choose among competing insurers. You pay one premium and the plan combines hospital and medical coverage. Your Medicare Advantage plan may also include prescription drug coverage or you can purchase a separate Part D Prescription Drug plan.

If you use Option 2, you can shop each year for a different Part C Medicare Advantage Plan and Part D Prescription Drug Plan (if you purchased drug coverage separate from your Part C plan).

Whether to Switch Part C Medicare Advantage or Part D Prescription Drug Plans?

Medicare has one open enrollment period each year for consumers to shop and switch their Part C and/or Part D Plans. The open enrollment period is October 15 – December 7, 2015. Elections made during this period are effective starting January 1, 2016.

I recommend getting an understanding of how you used your coverage this past year before beginning to shop for a new plan. Ask yourself the following questions to better understand your needs.

Part C Medicare Advantage Questions:

  • Are the physicians and other medical providers you use in the plan’s network for next year?  Make sure your plan includes your preferred physicians and hospitals as they may change from year to year.
  • How is your current plan rated using Medicare’s star system? Five stars are the highest rating.
  • What is your premium?  Check to see if it is staying the same or increasing next year.
  • How much did you spend out-of-pocket for copays and coinsurance this past year? Calculate the total amount.

Part D Prescription Drug Plan Questions:

  • Does your plan cover all of the medicines you take?  Make a list of your current medicines and see that they are included in your plan for next year. For example, another Part D plan in your area may cover the drugs you take with fewer restrictions and charge you less.
  • How much did you spend out-of-pocket for prescription copays this past year? Often generic medicines can be purchased at a lower price at Costco or Walmart than if you use your insurance coverage at a retail pharmacy. You also can use this independent site operated by ProPublica to check on retail drug prices and physician prescribing practices.
  • Did you save enough in out-of-pocket payments to justify your plan’s premium? If not, you may want to find a less expensive plan.

Use the Medicare plan finder tool to research your plans. On this site you can enter information about your income, the Medicare Parts you already have, your drugs, and healthcare needs and the tool will help you shop for and compare plans.

Even if you are satisfied with your current Medicare coverage, look at other Medicare options in your area and compare them with your present coverage. Research shows that people with Part D or Medicare Advantage plans can lower their costs by shopping among plans each year.

Whether to Switch Medigap Plans

There is no set period or deadline for switching your Medigap plan as there is for Part C Medicare Advantage and Part D Prescription Drug plans.  But if you are shopping for a Part D plan, then you may also want to shop for a Medigap plan at the same time.

Before doing so, watch this video by Dr. David Belk.  He discusses a good way to think about Medigap insurance.

His point is that you may be paying for insurance that doesn’t provide you an overall benefit. He points out that most Medigap policies are unnecessary because the annual premium amount is more expensive than your likely out-of-pocket costs if you didn’t have the coverage. I agree with his point, especially if you have a robust emergency fund that can pay for out-of-pocket expenses. In this case it makes sense to reconsider your coverage options.

But for a deeper dive in to whether your should maintain this coverage ask yourself the following questions.

Medigap Policy Questions:

• Are you paying for benefits you don’t or may never need.  For example are you paying for help to cover the co-insurance amount that you are unlikely to use?
• Do you need more benefits now than when you first bought your policy?  You can switch among the different Medicare Supplement Plans, each which have different benefits.
• Are you satisfied with your insurance company’s handling of your claims?  If not, you may want to look for another company.
• Are you paying too much for your plan?  If so, you may want to shop for a new plan.

If you’re satisfied with your current Medigap plan, a good option is usually to stay with your plan for as long as the coverage and insurance company continue to meet your needs. If you are unhappy with your coverage or costs, however, consider switching to a new Medigap policy.

But be forewarned, you won’t have a right under federal law to purchase a Medigap policy without medical underwriting if you decide to cancel now and then buy later. That does not mean you can’t switch or cancel your policy, but it may be more difficult (or more expensive) to get coverage if you need it a later point.

Changing Medigap plans guarantees you a 30-day “free look” period where you could temporarily carry both plans to see which one you like better. However, during this period, you’ll pay premiums on both plans.

In sum, understand your health needs and shop for a Medicare Part C Plan (Medicare Advantage), Part D Prescription Drug Plan, or Medicare Supplement (Medigap) Plan that best meets your needs.

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