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Managing Medicare's Costs

Open enrollment is an opportunity to save money on prescription drugs (1 of 2)

Medicare’s annual open enrollment period will be greeted by a collective yawn when it begins on October 15. Most seniors ignore it even though it is their a once-a-year opportunity to re-examine their health coverage and see whether they can save money by switching to lower-cost plans. More than one-half of Medicare enrollees could save money if they changed their coverage, but only 13% of those who do not have employer coverage switch plans in a given year.

The reason people most often give for not re-examining their coverage during open enrollment is that Medicare is so confusing that they are not sure what to do. In 2013 seniors participating in focus groups in different parts of the country told researchers that they did not feel qualified to compare plans and did not know where to turn for assistance. The vast majority of them said they had never changed their health plans and were not considering doing so. And when they did seek help, they often relied on insurance agents or family members for suggestions.

While it’s true that Medicare is sometimes confusing, there is one simple task that may reduce your costs. At most, it takes two phone calls. If you are among the 26 million people enrolled in a Part D stand-alone plan, during open enrollment you should find next year’s lowest-cost plan for the drugs you take. And if your current plan is not the lowest-cost option and you can save money by changing to a different plan, you should do so.

To do that, the first call you would make is to one of the Medicare counseling agencies listed at the end of this post. After you give the counselor the names and dosages of the drugs you take, he or she will find the lowest-cost plan for 2016 and compare its costs to your current plan’s 2016 costs. If you want to change plans, call the plan you want to enroll in and sign up. Medicare will then dis-enroll you from your current plan at year end, and in most cases your prescriptions will be transferred to your new plan.

At least six studies have tried to estimate the percentage of people in Part D stand-alone plans that could save money by changing plans. Each study focused on a different sample population and time frame, but all of them found that the number of people paying too much for their prescription drugs was substantial. The percentages ranged from a high of 94% in one study to a low of 62% in another study.

The most recent of these was a six-year study by pharmacists on the faculty of the University of Pacific in Stockton, California. They used public service announcements to invite people to have their drug coverage evaluated at upcoming events at senior centers, churches, and retirement communities. The events were held during Medicare’s annual open enrollment so that people who wanted to change their drug plans could do so.

This long-running study continued for six years and included 59 community events. A total of 2,200 people asked to have their drug coverage re-examined. Almost 1,500 of them were enrolled in stand-alone plans, and 80% of them were not in the least expensive plans for the prescription drugs that they took. By switching to the least expensive plans, they saved $728, on average.

Insurance companies are not only aware of retirees’ reluctance to change stand-alone plans, but there’s some evidence that they rely on it. According to one analysis, the companies that sponsor Part D plans price set their premiums low to attract people who are first-time enrollees. In subsequent years, however, some companies raise premiums sharply knowing that most people will not change plans. Meanwhile the companies introduce alternative plans to attract new enrollees, with the newer plans having premiums 10% lower than comparable older plans.

The only way to find the lowest-cost plan is to use Medicare’s Plan Finder, which is what the Medicare counseling agencies use. After a counselor enters the names and dosages of the drugs you take as well as the pharmacy you use, the Plan Finder crunches the numbers – premiums, deductibles, and the co-payments for each drug – to calculate the total costs for every available plan. The plans are then ranked by their costs for your drugs.

When people don’t use the Plan Finder or have a Medicare counselor do it for them, they typically select plans based on a single criterion. They may choose a plan because it has low premiums, for instance. But unless they are among the 10% of seniors who do not take any prescription drugs, that is not a good method of choosing a plan. Sometimes a low-premium plan will turn out to be an expensive choice because co-payments are high. Or occasionally people will select a drug plan because it is sponsored by a well known brand like AARP or Blue Shield, but neither is that an effective way to choose a low-cost plan.

Besides using the Plan Finder, another way you may be able to save money is to select the least expensive refill schedule — either retail refills at your local pharmacy or mail-order refills from the plan. Let’s say that you prefer retail refills, in which case your lowest-cost choice is the ABC plan at $800 a year. But if you use mail-order refills, the least expensive plan is the XYZ plan at $675. Thus you can save $125 next year if you’re willing to change to a mail-order refill schedule. The Plan Finder can sort plans by their costs for retail refills as well as for mail-order refills.

After you are enrolled in the lowest-cost plan for your drugs, another step you can take that may reduce your drug costs is to see if the pharmacy you use is in the plan’s preferred pharmacy network. Three-fourths of stand-alone plans have pharmacy tiers, and you will pay more if your pharmacy is not among your plan’s preferred pharmacies.

If you take several drugs and get monthly refills, it is important to find out whether your pharmacy is a preferred pharmacy in the plan you are enrolled in. If it’s not, you may be able to save a substantial amount by using a preferred pharmacy. To find out how much you can save by going to a different pharmacy to fill your prescriptions, call the plan.

The following agencies will do a drug plan search for you at no cost. Annual open enrollment is their busiest time, so it’s smart to call during the first week or two in case they need to take your number and call back later.

State Health Insurance Program (SHIP). Every state and most counties have a Medicare counseling agency that is staffed mainly by volunteer counselors. SHIP agencies have various names, depending on the state. To find the name and telephone number of your nearest agency, go to this link and select your state. Counselors usually try to determine whether you qualify for a low-income subsidy that can help reduce your costs.

Medicare Rights Center Helpline. Call 800-333-4114 Monday through Friday. The Medicare Rights Center is the country’s largest private Medicare counseling agency and its helpline counselors answer thousands of questions a year. MRC does drug plan searches and will also try to determine whether you qualify for financial assistance

800-MEDICARE. This is the federal government’s number for Medicare questions. Because counselors are working at a fast pace, they may not have as much time to answer questions or explain details of your coverage as the agencies listed above. But an advantage of calling 800-MEDICARE is that a counselor will also enroll you in another plan if you want to switch, which saves you a call to the plan. ◊◊

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