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Managing Medicare's Costs

Medicare's compressed enrollment periods

Since 2006, Medicare has been gradually tightening its enrollment rules and limiting the times when people can change plans. As a result, most retirees now believe that once the annual open enrollment has passed, the door is closed on any opportunity they have to improve their coverage.

While that is sometimes true, there are numerous exceptions. As an example, most of the 21 million people who are either enrolled in Medicare Advantage plans or who own Medigap policies may still be able to make changes to their coverage. And, people who take a brand-name drug or several generic drugs may be able find ways to trim costs in their existing plans.

Retirees currently enrolled in Advantage plans (11.4 million people) have until February 14 to disenroll from their plans and change their coverage to original Medicare. Last year the rules were more liberal – during the first three months of the year, individuals could enroll in an Advantage plan as well as move from one Advantage plan to another (as long as they weren’t changing just to obtain drug coverage).

There are some retirees in Advantage plans who can benefit by switching to original Medicare (which they will need to combine with a Medigap policy and a stand-alone drug plan). One example might be those who did not analyze their Rx drug costs during the recently concluded open enrollment period. If they now determine that they can save money with a stand-alone drug plan and Medigap policy, they may want to abandon their current Advantage plans.

Another example is someone who has recently learned that his or her physician is leaving an Advantage plan’s network. Or, a retiree who is soon to undergo expensive therapy treatments that are not fully covered. In these and other cases, individuals are likely better off with original Medicare and a Medigap policy (although in most states they will be subject to medical underwriting before they can purchase a Medigap policy).

As for the 9.6 million retirees who currently have Medigap policies, many of them have some flexibility. In most states Medigap policyholders can shop year-round and if they find an insurance company that will sell them a particular Medigap plan at a lower premium, they can switch. There are a few states, however, that limit the periods when existing policyholders can change Medigap plans or insurers.

A small number of states even provide retirees with access rights to Medigap policies that are better than Medicare’s rights. California, for instance, mandates an annual 30-day open enrollment period for current Medigap policyholders. During this period, which begins each year on the retiree’s birthday, people who have Medigap policies can switch to equal-or-lower benefit Medigap plans sold by any insurer. Nor do they have to go through medical screening or face new waiting periods. Another example: New York and four other states allow policyholders to change Medigap plans at any time without medical underwriting.

As for prescription drug benefits, retirees can often find opportunities during the year to reduce costs in any type of plan. Here the tactics that they may want to consider: 1) find the lowest-cost refill schedule (30-day or mail order) and if there are substantial savings, change to that schedule; 2) use physician-prescribed substitute drugs for certain expensive brand-name drugs; and, 3) consider splitting pills to reduce costs for certain brand-name drugs – an approach that has been advocated by Consumer Reports and the Harvard Men’s Health Letter. The savings that retirees can achieve by taking these steps are often small, but perhaps still worth pursuing.

Overall, the shortened enrollment times involve tradeoffs. One positive effect has been greater administrative efficiency. Another has been to reduce the gamesmanship that sometimes took place before 2006, when retirees could change plans at any time during the year.

In that environment, insurance companies were sometimes accused of encouraging seriously ill people to disenroll during the year. And retirees occasionally took unfair advantage of the continuous open enrollment, changing plans as they maximized certain benefits so that they could start over in new plans.

On the downside, the number and complexity of Medicare options make it difficult for many retirees, especially as they age, to evaluate and make their choices during a six-week period near the end of the year. It’s true that employer plans typically have four-to-six week open enrollment periods, but most of these plans offer retirees only three or four choices.

By contrast, Medicare beneficiaries who do not have employer plans often have more than 1,500 possible combinations to choose from. And several studies have shown that the negative effects of the abbreviated enrollment periods fall primarily on sicker and lower-income people, who have lost flexibility during all but six weeks of the year to move to better plans.

Here are Medicare’s current enrollment rules.



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