I actually read the House bill on healthcare reform that was announced on Thursday by Nancy Pelosi – well, I read the parts dealing with Medicare Advantage and Part D. You pretty much need a translator to understand the odd language that refers to previous bills and paragraphs and all sorts of mumbo jumbo, but I did understand a few points that will be well-received by seniors.

The bill directs certain actions to be taken as early as 2010 which will affect many seniors and Medicare beneficiaries with high drug costs:

The Part D initial coverage limit would be raised by $500 for 2010. The current level at which people with high drug costs will fall into the donut hole in 2010 is $2,830. This would be raised to $3,330, allowing some seniors to stay out of the donut hole a bit longer. The initial coverage limit would be raised each year until there is no donut hole in 2019.

The bill also requires pharmaceutical companies to agree, by December 31st of this year, to discount the cost of their drugs by 50% for Medicare beneficiaries who find themselves in the donut hole. It looks like this change will also take effect for 2010. If pharmaceutical companies do not agree to provide this discount, they would not be allowed to sell their drugs through Part D prescription plans.

The bill also mandates the elimination of the Open Enrollment Period from January 1st to March 31st, when people can switch Medicare Advantage plans. This would limit the period for switching Medicare Advantage plans to the period of November through mid-December each year. Currently people can switch Medicare Advantage plans between November 15th and March 31st. The change will not take place until 2011, so seniors will be able to change Medicare Advantage plans between January and March of 2010. 

This change will make the Annual Election Period in the fall very chaotic – especially if cutbacks to Medicare Advantage plans result in major changes to plans next fall.  Ten million seniors will have 45 days to figure out how to change their Medicare Advantage coverage and what the best plan might be – or if they should (and could) go back to Medicare.  Next fall is going to be VERY interesting and VERY chaotic.

All of this depends, of course, on the healthcare legislation being voted on…and being passed by both the House and Senate.

Medicare Advantage faces cuts because Medicare pays too much money to these private insurance plans which allow seniors to pay low or no monthly premiums and obtain extra benefits.  Medicare Supplements are the next target because seniors who pay monthly premiums for these plans are costing Medicare more money than those who have not purchased a medigap plan.

Out of 43 million people on Medicare, 7 million have individual medigap plans and 14 million seniors have employer-sponsored health coverage in retirement. These retirement health plans are usually a Medicare supplement (medigap)  received through a company, union, state or municipal government. Medicare pays first and the supplement pays second, and many supplement plans leave the senior with no co-payments for doctor visits, tests, hospital stays, chemotherapy, and even scooters.

This is a problem according to a June 2009 report commissioned by the Medicare Payment Advisory Commission (MedPAC).  The study showed that seniors who don’t have to pay for their Medical care use the healthcare system too much, thus Medicare is paying out more money.

Through regression analysis of Medicare claims, the study determined that seniors who paid less than 5 percent of their medical bills averaged 68 to 83 percent higher total Part B spending than those who only had Medicare and no supplemental insurance.  Part B of Medicare covers services such as doctor fees, lab tests, x-rays, MRI’s, CT scans, radiation therapy and chemotherapy.

The MedPAC study determined that seniors with secondary insurance to supplement their Medicare had more elective hospital admissions for things like knee replacements. According to the  report “Preventive care, minor procedures and endoscopies were strongly affected by secondary insurance coverage, with substantially higher use among those with private secondary insurance”.

Beginning in June 2010, two new Medicare Supplements will be offered to try to get seniors to take on higher co-payments for their medical care. These plans will have lower monthly premiums but will not offer 100% coverage.

Plan M includes 50 percent coverage of the Part A deductible ($1,100 in 2010) and no coverage of the Part B deductible ($135 in 2010). Plan N includes 100 percent coverage of the Part A deductible but no coverage for the Part B deductible. Plan N will also require a $20 co-payment for Part B services such as doctor visits, lab tests, oxygen, and chemotherapy.

More changes are likely down the road as the Senate Finance Committee healthcare bill included proposals to create new medigap plans for C and F that include “nominal cost sharing to encourage the use of appropriate Part B physician services”. The new plans C and F would be available in 2015.   Currently, Medicare Supplements C and F offer the most complete coverage for a senior, eliminating almost all medical bills because Medicare pays first and these supplements pay the balance of the bills.  It looks like this type of nearly 100% coverage may not be allowed after 2015 if these changes are in the final healthcare bill this year.

October is a big month for people enrolled in Medicare Advantage plans.  These are people who have chosen to get their Medicare benefits through private plans such as Health Net, Humana, Secure Horizons, Universal, Unicare, and a few other companies here in Arizona.

Folks enrolled in Medicare Advantage plans will be receiving very important correspondence from their plan with details about how their coverage is changing in 2010.  This information is called the Annual Notice of Change (ANOC) and is a must-read.   The information will show exactly how and where the plan is changing for 2010.  It will have a side-by-side comparison of 2009 benefits and co-pays with 2010 benefits and co-pays. 

Some people will see that their monthly premium is going from $38 to $60. And quite a few people who have had no premium for their Medicare Advantage plan will find they will be asked to pay $36 per month for 2010.  Co-pays for hospital stays will be going up considerably in some plans, as will co-pays for doctor appointments.

Because each Medicare Advantage company offers three or four plans, I can’t list all the changes here. But it is important for people on Medicare who carry cards from Health Net, Secure Horizons, Humana and other insurance companies to study thier ANOC thoroughly.

Insurance agents will be calling their clients soon to talk about the changes. Seminars will be held to talk about the changes and options for moving to another plan under the same company umbrella or switching to another Medicare Advantage company.

Things pick up in November when people can fill out applications to change their plans for 2010. People with Medicare Advantage plans need to take time in October to understand their plan benefits and co-pays and whether or not they should stay put or make a change.

From what I’ve seen and heard so far, some plans are changing a lot while others will have modest increases in co-payments for medical services.  With over 32% of Arizona Medicare beneficiaries enrolled in Medicare Advantage, lots of people are going to be affected by the changes.  So pay attention to the mail from you Medicare Advantage company!