I recently wrote about who needs to enroll in Medicare and who doesn’t.  For some people, enrolling in Medicare is very straightforward, but this is not the case for everyone.  Here are some details that can cause confusion about enrolling in Medicare.

Medicare Part A

A person who turns 65 and has employer health insurance does not need to enroll in Medicare Part B, which has a monthly premium ($104.90 in 2013). But what about Part A?

Part A has no premium.  Anyone who has worked 10 years (40 quarters) and paid Medicare taxes gets Part A when they turn 65. Part A covers hospitalization, home health care, skilled nursing facility charges, and hospice.

People who delayed Part B because they continued working after 65, and kept their employer health insurance, will have different effective dates for Part A and B on their Medicare card when they finally enroll in Part B. This detail is very important when a person applies for a Medicare Advantage plan or Part D drug coverage.

Happy Birthday!

If your birthday is the first of the month, say July 1st, 1948, your Medicare doesn’t begin on July 1st – it begins on June 1st. Don’t ask me why.

Part D late-enrollment penalty

Part D is voluntary, but….. if you don’t sign up when you are first eligible, you will face a late-enrollment penalty if you ever do enroll in a Part D plan. This applies to Medicare Advantage plans that include Part D.

I have heard stories of insurance agents who got complaints because they failed to explain this to clients who had never enrolled in Part D, but were enrolling in a Medicare Advantage plan that included drug coverage.

Here’s an example:  Mr. Smith is 70 years old and has been on Medicare since he turned 65 – but he never enrolled in a Part D drug plan. During the last Open Enrollment Period, he signed up for a zero-premium Medicare Advantage plan that includes Part D.

Mr. Smith was happy with all the benefits of his Advantage plan:  no monthly premium; a free gym membership; free dental cleanings twice per year;  reasonable co-pays to see his doctors.

Then Mr. Smith got a letter from the Medicare Advantage plan telling him he would have to pay $18 per month because of the Part D penalty.

Mr. Smith complained to his Advantage plan that his agent never informed him of the Part D penalty – and he didn’t want to pay $18 for something that is supposed to be “free”.

If the agent had asked Mr. Smith about his previous Part D coverage, he should have known Mr. Smith would be hit with a late-enrollment penalty.

There’s one more thing the agent should have told Mr. Smith.  Mr. Smith will pay this Part D penalty for as long as he is enrolled in a Part D plan. And because the penalty is based on the average cost of Part D plans throughout the country, it will go up (or down) from year to year.

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For a brief overview of your Medicare choices, take a look at this six minute video: Intro to Your Medicare Choices

There are 1,736 Part D prescription-drug plans available to people on Medicare. In Arizona, seniors have 26 plans to consider.  According to a recent study by Health Affairs, seniors on on average overspend by $368 more per year on their Medicare prescription drug plans because they tend to pay for more than they need.  The study concluded that only 5.2% of seniors chose the most economical Part D plan available to them.

I’m sure the folks who studied Medicare Part D are very smart people – but it doesn’t take a PhD to figure out what’s wrong with the program. There are too many plans!

There are too many plans, and each plan is a bit different from the others: Some drugs aren’t covered on some plans.  On one Part D plan a brand drug co-pay might be $45, while that same drug will cost $95 on another plan.

Another problem I see with Part D is that the plans change every year. Some plans change a lot while others change just a little.

Last year, one Part D plan raised its premium from $32 in 2011 to $72 for 2012. I wrote about that last year around this time. In January, a woman read my blog and emailed me to say she had just realized she was in that plan and had not read her Annual Notice of Change (ANOC).  At that point it was January, and she was stuck in that $72 per month plan for the rest of 2012. I told her to call Medicare and ask for an exception – but I told her they’d probably say, “Tough luck! You should have read the materials your Part D plan sent you in September!”

Part D plans come as “stand-alone” when a person is on “Original Medicare”. These folks use their Medicare card when they go to the doctor.  But Part D also comes as part of most Medicare Advantage plans.  The Part D in a Medicare Advantage plan works the same as the stand-alone plan. They all have co-pays and they all have the donut hole.

Some Advantage plans offer some very good benefits in their Part D. One company covers the full cost of insulin for people enrolled in their Diabetes plan.  Another Advantage plan has a $10 co-pay for insulin, and this plan even covers insulin pens for a $10 co-pay.  Sorry, I can’t name names, or I’d be seen as promoting these plans.

Another Advantage plan has always had a really good deal for their enrollees who use their mail order.  Brand drugs could be ordered by mail and a person would get three months for the price of two. So instead of paying $135 for a 90-day supply, people would pay just $90. But in 2013, people in this Medicare Advantage plan are going to be surprised (maybe shocked) to learn they no longer get this big price break.

I wonder how many people have found this bit of information in their annual notice of change. Advantage plans and stand-alone Part D plans are required to inform people of changes to their plans for the next year – but very few people read the details of the ANOC.  In January or February, when they get the bigger bill for their meds, it will be too late to change their Advantage plan.

I really get peeved by Part D because of the things I’ve written about here. It just seems so wasteful that 1,700+ plans are spending money on marketing and materials, and figuring out how to make a profit.  Sure, seniors have lots of plans to choose from.  But do they really want so many choices? And can they deal with the changes that happen every year? And are they saving money because of all the choices?

The Health Affairs study says the answer to my last question is “no”. Seniors are not benefiting from having so many choices. And I’m pretty sure Medicare is not saving money. It really seems like a dumb way to offer prescription coverage to people on Medicare. Of course, the insurance companies (and Paul Ryan) think it is a brilliant way to run a very expensive Medicare program that is vital to so many seniors and people with disabilities.