Paul Barrett Insurance Services Blog
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The Premium Penalty - The High Cost of WaitingIf time is money, then "Procrastination" also has a price. It now seems that even doing nothing may have a high cost when it comes to the Medicare Part D program.
The first Medicare Part D Open Enrollment period began November 15, 2005 and ended May 15, 2006. For those missing the May 15 deadline, the total increase for 2006 was an automatic 7% (representing the delay from May to December 2006). This percentage is then multiplied by the average premium cost for Medicare Part D plans (in 2006, this value is around $32.50). Some have called this cost increase a "life-time premium penalty" because anyone who incurs the premium penalty must pay the penalty each month for a long as they are enrolled in a Medicare Part D plan.
How does the work? Well, if this year's average monthly premium for a Medicare Part D plans is $32.50 per month, a person who waited 7 months to enroll in a Medicare Part D plan would add an extra $2.25 per month to their monthly premium (calculated - 1.07 * $32.20 = $34.45 or an additional $27.00 per year). The premium "penalty" will stay in effect for the life of the Beneficiary's Medicare Part D plan and may even increase over time (although in 2007 the average value of a plan will be reduced to $27.35).
Please note, that these penalties or additional costs may not apply if you currently have drug coverage through a former employer or union considered by the Centers for Medicare and Medicaid Services (CMS) as "creditable coverage". Also, anyone who qualifies for the "Extra Help" program will not be charged a Late Enrollment Penalty.Commonly known as Medicare Advantage, Medicare Part C more closely resembles traditional medical insurance. Beneficiaries choose from a variety of plans, offered by a number of insurance companies. Each plan must provide, at minimum, the same coverage offered by Medicare Parts A and B, with one exception. Medicare Advantage (MA) plans do not have to cover hospice care (although some do include this coverage). Many MA plans offer additional benefits, such as dental, vision, and prescription drug coverage.
What Is Medicare Advantage?Many private insurance companies offer Medicare Advantage plans, with the most common being health maintenance organizations (HMOs) and preferred provider organizations (PPOs). These plans provide the same hospital and medical coverage found in traditional Medicare, but many people prefer MA, as these plans typically require lower out-of-pocket costs along with improved benefits. For example, many MA plans include prescription drug coverage, saving beneficiaries the added confusion of choosing a Medicare Part D plan.
HMO plans include a network of providers, from doctors to clinics to hospitals. Members must visit in-network providers to ensure coverage. PPO plans also have a network of preferred providers, but members willing to pay a higher co-pay may choose to go out of network.
Medicare Advantage does not allow beneficiaries to purchase a Medigap policy to help defray their out-of-pocket costs. However, the plans place a limit on these costs.
Plans may change from year to year. These changes may include premiums, covered services, and provider network. Beneficiaries are encouraged to review their MA options every year.
The Benefits of Medicare Advantage PlansOne of the main reasons Medicare beneficiaries choose MA is to lower their healthcare costs. You still have to pay the premium for Medicare Part B, but even then, MA premiums are often lower, especially when you combine the Medigap policy premium with your cost for Parts A and B. Another potential savings is the out-of-pocket max, which varies from plan to plan. Once you reach that total, you have no further expenses for that calendar year. Traditional Medicare does not offer this benefit.
Members also appreciate the cohesiveness of an MA plan, which typically includes a single card, as well as a solitary system to navigate. This is especially true for new members coming off a standard employer-provided insurance plan. Most Medicare Advantage plans closely resemble this type of coverage, and that familiarity makes them popular with many recent retirees.
Of course, after worries about costs, it all comes down to benefits. While MA plans must include coverage included in traditional Medicare, most offer benefits that are more robust. Dental, vision, and hearing are not included in Parts A and B, but many MA plans offer this coverage. In addition, many include prescription drug coverage.
Finally, many beneficiaries like the coordinated care aspect of Medicare Advantage, especially if they choose an HMO plan. On these plans, members choose a primary care physician (PCP) from their provider network. Your PCP coordinates all aspects of your healthcare, an especially helpful feature for members with complex health issues.
Choosing Your Medicare Advantage PlanLook carefully at your plan options, as these vary from provider to provider, and consider your medical needs carefully. Review the details, including any fine print, to discover exactly what the plan covers and what it expects you to pay as far as co-pays and premiums. Look also at any restrictions listed, to ensure your plan meets your needs.
Do not ignore the provider network. If you have a preexisting condition and have long-standing history with a doctor or other provider, make sure the plan’s network includes your preferred provider. Remember, these networks include physicians, labs, hospitals, clinics, and more.
If you take any prescription medications (statistics say that you do), review the plan’s drug coverage. Not every Medicare Advantage plan includes prescription coverage. What’s more, drug formularies (the list of prescription drugs covered by the plan) vary by provider and plan type. Look closely at coverage, the formulary, and co-pays for your prescriptions.
It’s also important to predict what you may need over the course of the plan year. How do you determine future needs? Consider advice from your last yearly wellness exam. Did your doctor warn you about high blood pressure, pre-diabetes, or similar chronic conditions? Most treatment plans for chronic conditions include prescriptions.
The Bottom LineIf your goal is a comprehensive plan that covers medical, hospital, and drug coverage, a Medicare Advantage plan may be your best option. These plans typically carry lower out-of-pocket costs with broader benefits. However, they require beneficiaries to do a bit of homework to choose the best plan that meets their needs. In addition, although they help manage costs for the insurer, preferred provider networks limit flexibility for plan members. As in all things healthcare-related, do your research and compare your options before making a choice.
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