health care

Mark Your Calendar: Medicare Open Enrollment Is Almost Here

You can’t tell it by looking at the calendar, unless you know what you are looking for, but we are getting ready to head into one of the most important times of the year. No, I’m not talking about the holiday season, although I’m sure we will be hearing Christmas songs sometime soon. It’s a particularly important time of year if you, or a loved one, are covered by Medicare. It’s the Medicare open enrollment period, the time when Medicare beneficiaries can make changes to their plan and pick one that works best for them. In effect, each year you get a “do-over” on choosing your plan. The open enrollment period starts on October 15 and ends on December 7.

Open enrollment is a big deal, but unfortunately, most people don’t take advantage of it. Make sure that you do not let December 7 slip by without at least reviewing your Medicare options. Don’t assume that the plan that was best for you in 2017 will be the best for you in 2018. Plans change every year, and the open enrollment period is your chance to trade in your old plan for one that fits you better.

Are you satisfied with your current Medicare plan? Has it changed? Have premiums or out-of-pocket costs gone up? Has your health changed? Do you anticipate any change in medical care or treatment? Is the drug coverage you have still appropriate? These are all important questions to ask yourself because during open enrollment, you can switch from Original Medicare to a Medicare Advantage plan, or from a Medicare Advantage plan to Original Medicare; you can change from one Medicare Advantage plan to another; you can enroll in a Medicare prescription drug plan (Part D) or switch from one Part D plan to another.

Speaking of prescription drug coverage, one of the big changes that occur every year is a plan’s formulary, the plan’s list of medicines that are covered and how they are covered. Drug makers can raise or lower their prices, which will have an effect on your plan. Maybe a cheaper, generic version of a drug you need has become available. A plan’s formulary is one of the things you must review when evaluating Part D coverages. What good is a plan if it doesn’t cover the drugs you need?

So, where do you start? First, you should receive a notice from your current plan about any changes that will occur in 2018. They are required to send the notice to you for review. And while it’s a bit of a long document, it’s not difficult to work through if you know what you are looking for. Here are some of the things you should be reviewing: monthly premiums—and any change from last year; deductibles—they generally change a bit each year, and some plans will absorb some of the cost increases; copays and coinsurance—and any changes in amounts or requirements; drug tiers—to see if any drugs that you take moving from one pricing tier to another; out-of-pocket-maximums—you may have two caps to review, one for health coverage and one for drug coverage; provider networks—to see if your doctor and hospital choices have changed; drug formularies—for the reasons mentioned above.

There are also two sites I would recommend that you spend a little time on. The first is Medicare.gov, which can help answer a lot of your questions. The second is Medicare Plan Finder, which will help you get specific information on the plans that are available to you.

Open enrollment is also important because it gives you, as a consumer, a big say in what plans are offered. The best plans available are rewarded with new business as consumers exercise their right to choose. The plans that consumers don’t like will have to either change or disappear. But while open enrollment is good in theory, most people typically stay with what they have, even despite evidence that they would be much better off by changing to another plan.

Don’t be most people. By spending a few hours each year reviewing the changes in your plan, and the other plans that are out there, you can become a savvy Medicare shopper. Many articles have been written about what health care costs will be in your retirement years. Here is one way that you can work to control those costs.

Which Type of Medicare Advantage Plan Is Best for You?

What to do about health care is one of the major decisions that everyone faces when getting close to retirement. A lot of people delay retirement until they reach age 65 because they don’t want to lose their employer-sponsored health plan. Even if they are financially able to retire, they will often continue to work until they are eligible for Medicare. With the uncertainty that is the state of our health care system right now, it’s hard to blame them.

But what do you do once you turn 65 years old and are eligible for Medicare? In the first part of this series on Medicare planning, I discussed the importance of timing your Medicare enrollment (Medicare Enrollment—Not As Easy As It Sounds). The second part of the series (Medicare—Which Path Is Right for You?) was a discussion on the differences between Original Medicare and Medicare Advantage. In this post, I will discuss the types of Medicare Advantage plans that are available.

As a refresher, Medicare Advantage plans are sold and administered by private insurance companies. Original Medicare is administered by the federal government. Medicare Advantage plans must provide, at a minimum, the same coverage as Original Medicare Parts A and B. The plans often include prescription drug coverage and additional coverages like vision and dental, and some come with other benefits, like a gym membership. With Original Medicare, you can visit almost any doctor in the country. With a Medicare Advantage plan, you generally get care from within the provider’s network of medical professionals. Most people choose Original Medicare, but about 30% of enrollees select Medicare Advantage.

For this post, I am going to assume you have decided that a Medicare Advantage plan would be the right path for you. If that’s the case, it’s important that you understand the types of plans you will choose from. The most common Medicare Advantage plans are health maintenance organizations (HMOs), preferred provider organizations (PPOs), and private fee-for-service (PFFS) plans. Lesser-known plans under the Medicare Advantage umbrella include special needs plans (SNPs) and medical savings account (MSA) plans. We’ll take a closer look at each type and highlight the differences.

Health maintenance organization: With this type of plan, you select a primary doctor from the insurer’s network, and that doctor manages your health care. If you need to see a specialist, you usually will need a referral from your primary doctor, and you are typically not covered for services provided outside of the network, although there are exceptions. The rules of this type of plan may be the most restrictive, but it will generally offer the lowest plan costs.

Preferred provider organization: Under a PPO, you generally can go to any doctor or hospital, but you will pay more if you use a provider outside of the insurer’s network. If you need to see a specialist, you generally won’t need a referral, but if you select a provider outside of network, you will pay more. This type of plan is more flexible, but it usually comes with a higher premium.

Private fee-for-service plan: This plan was once the fastest-growing type of Medicare Advantage plan. It was popular because you didn’t have to choose a primary care doctor and usually didn’t need a referral to see a specialist. You had to be careful with this plan, however, because not all Medicare providers accepted it. The popularity of this type of plan has declined because of some changes in the Medicare laws. It’s important to make sure you understand the details of how the plan works if you opt for it.

Special needs plan: As the name implies, this type of plan is available for Medicare enrollees who have some type of special need. The plan will offer custom benefits designed to meet the specific needs of the plan member. You could be eligible for this type of plan if you have a severe and/or chronic condition like diabetes, end-stage renal disease, chronic heart failure, or dementia. Living in a nursing home is another example of a condition that would be eligible for this type of plan.

Medicare savings account: This type of plan is not as popular as the other types of plans. It combines a high-deductible health plan with a bank account in your name. When you select this type of plan, Medicare will make deposits into your bank account that you can use to pay for medical expenses. This type of plan is really only appropriate for you if you don’t need a lot of care, because the amount deposited into your MSA is often less than the deductible.

As I wrote in the first part of this series on Medicare, getting the coverage that is best for you is not a simple process. You don’t just show up at age 65 and sign up. You need to make sure you understand your options and make the best choices based upon your individual needs. Don’t pick a plan because a friend or family member picked it. Make sure that it’s right for you.

My Long-Term-Care Insurance Premiums Keep Going Up. What Can I Do?

In some ways, long-term-care insurance is like auto insurance. We pay a premium and hope that we never need to file a claim. If we have to file a claim against our auto insurance, it means that our car was damaged or stolen, or that somebody was hurt in an accident. If we have to file a claim against our long-term-care insurance, it means that we’ve lost the ability to take care of ourselves in some way. Our auto insurance will help pay to fix our car or pay someone’s medical bill. Our long-term-care insurance will help pay for someone, or some facility, to help take care of us.

That’s the way insurance works. We pay a premium and the insurance company steps in to pay for losses that we can’t afford. For most of the insurance policies we own (or should own), it’s not unusual for our premiums to increase over time. Of course, we know that if we are in an at-fault accident, our auto insurance premiums will jump dramatically. But if we don’t make any claims, we typically see modest increases, somewhat in line with what we would expect with inflation.

But it doesn’t work that way with long-term-care insurance premiums. Over the years, if you’ve owned a long-term-care policy, you’ve seen premium increases every few years, often as much as 40 to 60 percent each time. In fact, last year, the federal government announced that the long-term-care insurance premiums for federal employees and retirees would increase an average of 83 percent. In other words, the cost of protecting yourself against a future claim that may or may not occur would almost double!

The Double Whammy for Insurance Companies

Before we discuss how you might control your premium increases, let’s go over why we’ve seen such large increases. I’m not one to feel sorry for insurance companies, but when it comes to long-term care, the insurance companies face a double whammy. First, we are all living longer, which means that we may need our policies to pay for a longer period. And health insurance costs are also increasing. So the insurance company has to pay higher claims for longer periods of time—not a successful business model. It’s been so bad for so long that many companies in the long-term-care business have stopped selling policies.

How to Control Your Insurance Costs

So the insurance company can raise your premium or it can stop selling policies. But what choices do you have? While you do have a few options, none of them is great. We’ll discuss those now.

First, you can dig a little deeper into your pocket and pay the premium increase. If you like the coverages in your existing policy and you can afford the increase, this may be a good choice for you. This is also your best choice if you do not want to self-insure the risk of needing long-term care at some point.

On the other end of the spectrum, you could just not pay the premium and let your policy lapse. This is a tough call. If you let your policy lapse, you will effectively be self-insuring against the risk. Maybe you can afford to do so. Maybe not. Would you qualify for Medicaid? It’s important to know because Medicare provides only limited coverage for nursing home or custodial care.

You could shop around for a policy with another company. Unfortunately, as I mentioned earlier, there just aren’t many companies selling long-term-care policies any longer. So this might not be a good option.

The option that we see most often is to reduce the benefits in your policy. A long-term care policy includes many features and options. They are the coverages provided by your policy and include:

  • The benefit period: This is the length of time the policy will pay benefits and is typically three to seven years, although some early policies provide for an unlimited benefit period.

  • The amount of coverage: This is typically quoted as a daily or monthly amount (e.g., $150/day or $4,500/month).

  • The inflation protection: This is designed to make sure that the amount of coverage in your policy keeps up with inflation. There are two types of inflation protection: simple and compound. The compound feature results in higher coverage and, therefore, higher premiums.

  • The elimination period: This is basically your deductible. It is the number of days that you must pay for care before the policy kicks in and starts paying.

These are not all the features and options of a policy, but they are the major ones. They’re also the ones that you can typically adjust to reduce the premium. For example, if you have an unlimited benefit period, you could reduce it to a three- or five-year coverage period, which would result in less risk to the insurance company and a lower premium to you. Another adjustment that we see often, and one that my wife and I have used for our policy, is to change from compound to simple inflation protection.

Please keep in mind that these are just examples of ways that you can manage the premium increases that have become all too frequent for many. Before making any changes to your policy, you should consider your situation carefully. Determining the best way for you to protect you and your family from the costs of long-term care can be complicated. We recommend meeting with a professional who can help you clarify and understand your options.