Seven tips for navigating Medicare maze

Consumer ReportsNov 1 2010

Consumer Reports Health and NCQA Publish Free Rankings of 183 Medicare Advantage HMOs, Plus Free Rankings of 104 Medicaid Plans  

If you're about to turn 65, you'll be part of the first wave of baby boomers signing up for Medicare.  Consumer Reports Health recommends signing up as early as three months ahead of your birthday.  Failing to do so could potentially cost you thousands of dollars down the road.  That's one of seven tips for navigating the Medicare maze available in the December issue of Consumer Reports and online at www.ConsumerReportsHealth.org.

"If you don't stay on top of the process when you first sign up, you can blunder into decisions that could lock you out of certain types of coverage, costing you thousands in extra premiums and out-of-pocket costs," said Nancy Metcalf, senior program editor, Consumer Reports Health.  "Medicare is filled with traps so it's well worth your time to dig into the details of the program and make sure you choose wisely based on your individual needs."

In addition to the do's and don'ts spelled out in the report, free rankings of 183 Medicare Advantage HMOs are available online at www.ConsumerReportsHealth.org.  The Rankings are produced by the non-profit National Committee for Quality Assurance (NCQA), the main U.S. group that sets measurement standards for health insurance, accredits plans, measures the quality of care they achieve, and publicly reports the findings.  Subscribers can access more detailed information such as how well plans perform based on consumer satisfaction, providing preventive services, and treating common conditions.  Rankings and more detailed information on 104 Medicaid plans will be made available for free.

Here are seven tips for navigating the Medicare maze:

DO sign up for Medicare before you turn 65.  Even if you're still working and have health benefits, you need to sign up for Medicare Part A, which covers hospital expenses.  The initial enrollment period spans the three months before, the month of, and the three months after your 65th birthday.  If you sign up during the first three months, your Medicare coverage starts at the beginning of your birthday month. If you sign up during your birthday month, then coverage starts at the beginning of the following month. If you wait until the last three months, you'll face increasingly lengthy delays in the start of your coverage.  

DON'T delay Medicare Part B signup after you stop working.  While Medicare Part A is free to anyone who has paid Medicare taxes for more than a decade (or is married to someone who has), Medicare Part B has a monthly premium ($96.40 or $110.50).  Part B covers most other medical expenses, except for prescription drugs.  If you don't sign up for Medicare Part B the minute you or your spouse stops working, then you will fall into what is potentially Medicare's biggest trap and you'll be hit with a permanent increase in your premium of 10 percent for every year that you could have signed up but didn't.  There are some special rules for certain groups, detailed at www.ConsumerReportsHealth.org.

DO understand that Part D, the prescription-drug benefit, has different rules.  Part D is delivered exclusively through private plans with an average premium of about $41 a month in 2011.  As with Part B, you will pay a premium penalty for late enrollment, but for Part D, it's 1 percent extra for every month that you could have enrolled but didn't. If you have low drug bills now and feel that Part D is unnecessary, think through that calculation and weigh your immediate savings against the penalty later on should you need costly prescription drugs.  Use Consumer Reports' Best Buy Drugs, which provides drug ratings for more than 35 common medical conditions, to gauge the cost of drugs.  The free program provides ratings based on cost, safety and efficacy, detailing the costs associated with different doses for most available drugs in each category.  

DON'T confuse original Medicare and Medicare Advantage. There's the original government-run Medicare which comes with substantial deductibles and co-insurance (for example, an $1,100 deductible for a hospital stay and 20 percent of outpatient doctor visits). People who don't have a secondary retiree plan from their employer usually buy a separate private Medigap policy to help with those deductibles and coinsurance.  About one in four Medicare recipients opt for the newer Medicare Advantage plans.  These are private plans -- mostly HMOs -- that take the place of original Medicare plus Medigap, and usually the Part D drug plan as well.  While you'll probably pay lower monthly premiums, bear in mind that you will not have Medigap to cover any deductibles and co-pays, which can vary from plan to plan.  Thus, one of the downsides of an Advantage plan is potentially higher out-of-pocket costs if you get seriously ill.

DO find out how your retiree plan works with Medicare.  Retiree plans take many forms such as stand-alone plans and plans similar to active-employee plans. Either type will pay secondary to Medicare.  Declining your retiree coverage and signing up for a Medicare Advantage plan on your own can become a major pitfall.  It's worth noting that your employer might not let you re-enroll if you leave your retiree plan, so before signing up for anything, find out exactly how your retiree plan works with Medicare.

DON'T accidentally lock yourself out of Medigap coverage.  Buying a Medigap plan can be tricky, particularly if you have developed a pre-existing condition.  State laws vary, but in most locations you have the right to buy a Medigap plan without medical screening only at certain times, such as when you first sign up for Medicare Part B, when you lose your Medicare Advantage coverage because a plan shuts down or you move out of its service area, or when you lose your retiree coverage.  Find out the rules of Medigap in your state by checking with your State Health Insurance Counseling and Assistance Program (go to www.shiptalk.org to find your state's program).

DO recheck your Plan D formulary every year.  All Part D plans have a formulary, a list of covered drugs.  Bear in mind that the formulary can change from year to year, meaning that your drug could drop off the formulary or move to a more expensive payment tier.  Plans can also put new restrictions on drugs, such as requiring your doctor to get approval from the insurer before prescribing them.  You can change to a new plan once a year if your plan makes changes that don't work for you.   Use the interactive formulary finder at Medicare.gov and stay on top of the best drug choices for your condition by using drug reports published for free at www.ConsumerReportsHealth.org (click on the Prescription Drug tab).