Special coverage: Medicare

The A, B, D's of Medicare

. . . and HMOs and PPOs. The good news: Most of you have until Dec. 31 to pick a plan. The bad news: There's a lot of homework to be done.

By STEPHEN NOHLGREN, Times Staff Writer
Published October 30, 2007

Here we go again.

Between Nov. 15 and Dec. 31, people on Medicare can sign up for 2008 coverage, whether they want traditional Medicare, a private drug plan, an HMO or some combination.

End-of-the year signup windows began two years ago, when Medicare first offered drug coverage.

Before that, you could switch Medicare plans every month, if you wanted. Now, most people are locked into a year's worth of coverage as soon as that glittering New Year's Eve ball hits the ground at Times Square.

The next several pages of Life Times offer guidance on how to sort through Medicare's dizzying array of options. Next month's issue will repeat some of this information, because you will still have a month to make up your mind.

Good luck.

Understanding Medicare

Medicare is a patchwork of public and private programs that provide health insurance for older and disabled Americans. Here's how the puzzle fits together:

-- "Traditional" or "Original" Medicare is managed by the government. Services often require you to pay copayments and deductibles, which usually makes traditional Medicare more expensive than private Medicare Advantage plans.

The advantage to traditional Medicare is that you pick who treats you and you can switch doctors at will. And you decide when you need service. No profit-making insurance company is second-guessing you.

Traditional Medicare consists of Parts A and B and is complemented by Part D and Medicare supplement policies:

-- Part A mainly covers in-patient hospitalization. You pay no premium.

-- Part B covers doctor bills and other services. You must pay a $96.40 monthly premium to qualify, which is usually deducted from your Social Security check. Part B is optional, but if you don't sign up for it when you are first eligible for Medicare, you will pay a stiff penalty if you want it later.

You must also pay the Part B premium to qualify for a private Medicare plan, though some plans pay this premium for you.

-- Part D stand-alone drug plans began two years ago. These are administered by private insurance companies but complement Parts A and B, which are administered by the government.

You make copayments for the medications and must pay Part B and Part D premiums to qualify. You must sign up for some kind of drug coverage when first eligible or you will pay a stiff penalty later if you want any type of drug coverage. Low-income people get breaks on premiums and copayments.

-- Medicare supplement policies are optional, private insurance plans designed to pay some Part A and Part B deductibles and copayments. Though some supplement plans once covered drug costs, they no longer do. Medicare supplements are not used with private Medicare Advantage plans or with Part D drug plans, only with traditional Parts A and B.

-- Medicare Advantage plans are sold by private insurance companies as alternatives to traditional Medicare. You pay your $96.40 Part B premium and the plans cover doctors, hospitals and other services. These plans may include drug coverage; it is important to learn whether they do.

Medicare pays these private plans a generous stipend to administer care for everyone who signs up. This government stipend allows some plans to offer perks not available under traditional Medicare. These could include paying your Part B premium, gym membership, dental, eyeglasses and hearing aid coverage.

Out-of-pocket expenses for Medicare Advantage plans are usually lower than for traditional Medicare. The disadvantage is that you sometimes cannot choose the doctor, hospital or nursing home.

Types of Advantage plans

-- HMOs, where treatment comes from the plan's network of doctors, hospitals and other providers. Sometimes, your primary doctor must make a referral before you can see a specialist. Some HMOs allow out-of-network care for higher prices.

-- PPOs also have networks of providers, but give you more flexibility in seeking care outside the network. The PPOs are usually more expensive than comparable HMOs.

-- Private Fee For Service plans try to negotiate rates from doctors and hospitals on your behalf and to offer extra perks. In theory, you get to pick where you want treatment. In practice, some providers refuse to treat PFFS patients. These plans are new and heavily marketed. Make sure you know what you are buying.

Review your options

If you do not pick new coverage by Dec. 31, Medicare will automatically continue your current arrangement and you will be locked into it for 2008.

Keep in mind that Part D drug plans and Medicare Advantage plans change their provisions, networks and drug formularies yearly. An inexpensive plan this year may be more costly next year.

Even if you like your current coverage, it is a good idea to review your options before renewing with that company.

Note that only your current insurance company is allowed to contact you unsolicited. Many companies market multiple plans with differing commissions for the agents. If you like your current coverage and someone from your current company contacts you and asks you to sign up for a plan, make sure you are getting the plan you want, not just a plan that carries a big commission for the agent.

Explore outside drug coverage

If you qualify for drug coverage outside of Medicare, you probably shouldn't pay extra for Medicare coverage, either through a standalone plan or a Medicare Advantage plan.

VA, Tricare and the Federal Employee Health Benefits program offer good drug coverage, for example, as do many retiree plans run by employers and unions.

Make sure your employer or union can certify that its coverage is "creditable" or you could face a penalty down the road. "Creditable" means that the plan is as generous as Medicare drug coverage.

Get some drug coverage

If you do not have "creditable" drug coverage outside of Medicare, you should buy some kind of Medicare drug coverage or you will face a stiff premium penalty if you need coverage in the future. The government does this to keep people from waiting until they need drug coverage to buy it.

The penalty is an extra premium of 1 percent for each month you delay coverage from the time you were first eligible to buy it. This premium is calculated against an average-cost plan, not the cheapest plan.

By delaying for as little as three years, the penalty could double the cost of a cheap plan, for the rest of your life.

Floridians now can buy a stand-alone plan for as little as $145 a year. That gives you drug coverage if you get sick and it protects you against penalties in the future. A Medicare Advantage plan with drug coverage also protects you against penalties.

In recent years, Target, Kmart, Wal-Mart and other retail outlets have offered generic drugs and some brand drugs for $4 or less. You may find that buying some drugs outside a Medicare plan saves you money. Still, sign up for some kind of plan, even if you don't use it right away.

Learn how coverage works

Whether you buy a stand-alone plan or a Medicare Advantage plan, Medicare's drug coverage formula follows a basic pattern:

-- Medicare pays the plans a stipend to defray the cost of your drugs.

-- The plan negotiates discounts from manufacturers and pharmacies and establishes a "formulary," or list, of which drugs it will cover, at what prices. You get your drugs through a retail pharmacy or through the mail.

-- You pay a premium for coverage, though some Medicare Advantage plans waive that premium.

-- You pay a $275 deductible before coverage kicks in, although many plans waive the deductible.

-- You pay a portion of your drugs' cost until you reach the "coverage gap," which has been nicknamed the "doughnut hole."

Your copayments might range from nothing for a generic medication to $50 or more for brand-name drugs. This continues until the total cost of the drugs reaches $2,510. (Total cost is the combination of what you pay and what your plan shells out for the drugs, not just what you pay out-of-pocket. So you will hit the coverage gap well before your personal costs reach the $2,510.)

-- After costs reach $2,510, you pay 100 percent of any further prescriptions -- although some plans continue to cover generic drugs in this coverage gap and a few plans will even cover some brand-name drugs. But the coverage gap continues until your payments for drugs total $4,050.

-- "Catastrophic" coverage kicks in after your costs reach that $4,050. In this phase, your copayments for both brand and generics are quite low. Insurance premium payments do not count toward out-of-pocket costs, but the $275 deductible does.

People with high drug costs who expect to reach catastrophic coverage should consider buying a lower premium plan with a deductible, instead of a higher premium plan with no deductible. Paying the deductible helps get you into catastrophic coverage more quickly. The lower premium compensates for having to pay the deductible.

Compare plans online

Plans are so complicated that the only good way to compare them is on Medicare's Web site, www.medicare.gov.

This site lets you list the drugs you take and then calculates your cost under each plan. It even can tell you when you will hit the coverage gap. The site also contains quality ratings by people who have used different plans and has links to programs that give free or reduced priced drugs to low-income people.

Getting help

Florida's Department of Elder Affairs runs an excellent program in which volunteers help people 65 and older and disabled people with insurance issues. The program is known by the acronym SHINE.

You call for an appointment, and a trained volunteer will call you back. The volunteers can use Medicare's Web site to help you find a suitable plan.

To contact a SHINE volunteer, call Florida's Elder Hotline toll-free at 1-800-963-5337 between 8 a.m. and 5 p.m. They will refer you to the nearest SHINE office.

You can also call toll-free 1-800-633-4227 for help. This Medicare office has hundreds of employees trained to take calls. If you have a complaint with an insurance company, that is also the number to call.

Make sure anyone giving you help plugs your individual drugs into Medicare's site. Any shortcut could cost you money.

Editor's note: At press time, law enforcement agents had seized documents from WellCare Health Plans of Tampa, a Medicare Advantage company. Agents and company officials said there should be no disruption of service.

Stephen Nohlgren can be reached at (727) 893-8442 or nohlgren@sptimes.com.

[Last modified December 5, 2007, 22:21:49]