Medicare Advantage Disenrollment Period: Having Second Thoughts?

January 1 through February 14 is the annual Medicare Advantage Disenrollment Period, also known as the MADP.  This time of the year is strictly for folks who have a Medicare Advantage Plan (MAPD) and wish to drop it and revert back to Original Medicare.

If you’re like most people and you’re satisfied with your Medicare Advantage plan and all is well in the world.   By now, you should have received your ID cards in the mail and probably filled some prescriptions and all is well.  But…

If all is NOT well, or if  you’ve had some unexpected changes to either your health or your healthcare providers, this time during the year may become more important to you.  As an example, let’s say you just opened your mail and opened a letter from your beloved that your primary care physician is moving out of the plan’s network.  Could be one of your necessary prescriptions disappeared from your plan’s formulary.  If you want to go back to Original Medicare at this point (A and B) you can, and you also have to enroll in a stand-alone Medicare PDP plan, too.

Essentially, for whatever reason you choose, if you have an MAPD plan, during this timeframe you can drop it, no questions asked.  Any other time during the year you generally have to keep it.  The same time period does NOT apply to those already on Original Medicare, or those with Medicare Supplements.

To enact your rights during the Medicare Advantage Disenrollment Period, you can contact your current plan or get in touch with the folks at Medicare by calling 1-800-MEDICARE.  Your disenrollment will occur as of the first day of the month following its acceptance and at that time you will be back on Original Medicare only.  Again, you will want to pick up a PDP plan so you have prescription drug coverage and might also want to consider picking up a Supplement, also referred to as Medigap.  Check Medicare.gov to see which companies offer Supplements in your area.  Each company offers the same Supplements as their benefits are dictated by the state but each private insurance company prices the product differently.  You can compare all the plans prices at Medicare.gov.

Before you go dropping your Medicare Advantage plan , it’s important to remember you are absolutely not guaranteed enrollment in most Medicare Supplement policies unless it’s during your 6 month Open Enrollment Period that takes place when you turn 65 and/or when you enroll in Medicare Part B, whichever happens last. During this time, you have guaranteed acceptance and the insurance company cannot turn you down based on preexisting conditions and they also cannot make you wait for any treatment that was prescribed prior to your enrollment.  Which means if you’re not in your OEP that there is the possibility that you won’t be able to medically qualify for a Supplement.  If this happens, you’ll l remain on Original Medicare.   only until the fall when the next AEP rolls around.  Make sure that this is an acceptable outcome to you prior to dis-enrolling from your current plan.

The Takeaway:

Medicare Advantage Disenrollment Period can be a benefit to exercise if you’re dissatisfied with your current MAPD plan.  It can allow you to leave a plan that is not a good fit for you.  Just make sure you’re aware of the implications of doing so and are content with the benefits offered by Original Medicare.  Also be sure to pick up that Prescription Drug Plan if you don’t want to pay a late enrollment penalty down the road.

 

 

Medicare Deductibles and How to Avoid Them

Deductibles are essentially flat dollar amounts you must pay before your Medicare benefits kick in.  All told, in 2017 the total Medicare deductibles add up to potentially $3,187 in costs just for this year!  Plus, keeping up with them is no small task as they change (almost) every year.

To keep things simple, just remember this: A Medicare deductible is the amount of money you are required to spend out of your own pocket (first!) every year before your Medicare Plan starts paying for things. That’s really all there is to it.  If you have Original Medicare Part A, Original Medicare Part B and Medicare Part D, you’ll be “satisfying” deductibles before any of your claims or prescription drugs are paid for.  There are of course ways to not have to pay those deductibles, and we’ll quickly review those options below.

Some background: The Centers for Medicare and Medicaid Services (CMS) usually publish their deducible amounts for the following year in November for Medicare Part A and Medicare Part B.  They usually get around to publishing Medicare Part D deductibles in October of the prior year.  Like I said, they change every year.  Here’s what they are for 2017.

Medicare Part A Deductible:

$1,316

Medicare Part B Deductible:

$183

Medicare Part D Deductible:

$400

As I mentioned above, in 2017 this means if you have Original Medicare and a basic PDP plan, you’re going to potentially have to come up with $3,187 out of your wallet (or purse) before anything gets paid.  That’s quite a bit of money exposure I’m sure you’d much rather keep under the mattress or spend it on a vacation to the beach.  (If you do, go to the beach, make sure to see if your Medicare benefits will travel with you by clicking here).

While somewhere in the neighborhood of 20% of folks on Medicare don’t have either an MAPD or a Medicare Supplement, I’m a big fan of having some sort of supplemental or additional policy on top of having Original Medicare A and B.  I’m definitely not a big fan of going “bare with Medicare” as I outlined in a previous post, essentially because Original Medicare A and Medicare B do not protect or limit your financial exposure should a catastrophic health even happen to you.  You really need a MOOP!  If you’d like to read more about this, go ahead and click here.

The Takeaway:

If you’re shopping for Medicare Advantage plans (MAPD) the best place to do it (objectively of course) and really the ONLY place to do so to see all of your options at once is on the Medicare.gov site.  You can get there by clicking here.

If you don’t want to buy a Medicare Supplement or MAPD plan from a private insurance carrier and choose to keep Original Medicare for your medical coverage, you’ll still need to buy a PDP plan.  You can save yourself the pain of having to pay a $400 deductible for your prescription drugs by simply choosing a PDP plan that doesn’t have a deductible. Most “basic” plans (cheapest) have the deductible, but there are usually a few every year that are reasonably priced ($25-$35 per month range) that have no deducible.  You can search for those plans by clicking here, right on the Medicare.gov website.

Medicare Part B vs. Part D Prescription Drugs – Are You in the Right Medicare Plan?

If you’re in the wrong type of Medicare coverage, you may be paying a whole lot of money for prescription drugs billed under Medicare Part B, not Medicare Part D.  This is especially true if you get cancer.  How can this be?  Read on.

Medicare Part D covers Prescription Drugs, right?  Not always… Medicare Part B can play a big role.  In fact, there are many instances when Medicare Part D actually doesn’t cover all drugs you may need during the course of your healthcare.  When medical conditions get serious, many medications aren’t covered by Part D.  Instead, they’re covered by Part B.  Knowing the difference between the two could save you hundreds if not thousands of dollars when choosing your Medicare coverage.  This is especially true if you have cancer as chemotherapy drugs and all the associated medications that come into play during cancer treatment are extremely expensive.  

Medicare Part D Covers Prescriptions at Retail Pharmacy Locations or Mail Order

Generally, Part D covers prescription drugs at a retail or mail-order pharmacy.  Let’s say you get bronchitis; you make an appointment with your primary care physician, he/she sends your prescription into your local pharmacy.  When you pick it up, you pull out your PDP or your MAPD card, swipe it and pay the associated copay or coinsurance.  Simple, right?  Right.  

But what if you need a prescription drug that’s administered by a doctor? Let’s say you have macular degeneration, and you’re seeing an ophthalmologist for treatment.  Many folks with this condition get very expensive shots in the eye to slow the degeneration.  Clearly (no pun intended) you can’t do this yourself.  When this happens, the doctor actually bills the prescription under Medicare Part B, not Medicare Part D. 

Same goes for prescription drugs that are administered in an outpatient setting.  If you’re having your knee scoped or drained, and the doctor shoots localized anesthesia into your knee before the procedure, that will hit Medicare Part B, not D.    

So, generally, Part B covers drugs that usually aren’t self-administered, which is a fancy way of you’re not taking them by yourself.  The doctor, nurse practitioner, surgeon, anesthesiologist, etc. are giving them TO you.

Here’s a short list of medical conditions that, when prescription drugs are used in your treatment, are covered under Medicare Part B, and not covered under Medicare Part D.  

Cancer
  • Oral cancer drugs: Medicare helps pay for some cancer drugs you take by mouth if the same drug is available in injectable form or is a prodrug of the injectable drug. As new oral anti-cancer drugs become available, Part B may cover them.
  • Oral anti-nausea drugs: Medicare helps pay for oral anti-nausea drugs used as part of an anti-cancer chemotherapeutic regimen. The drugs must be administered immediately before, at, or within 48 hours after chemotherapy, and must be used as a full therapeutic replacement for an intravenous anti-nausea drug
Hepatitis

Hepatitis B shots: Usually a series of 3 shots covered only for people at high or medium risk for Hepatitis B.

Osteoporosis
  • Injectable osteoporosis drugs: Medicare covers an injectable drug for women with osteoporosis who meet the coverage criteria for the Medicare.
Transplants
  • Immunosuppressive drugs: Medicare covers immunosuppressive drug therapy for people who received an organ or tissue transplant for which Medicare made payment.

Other Prescriptions Covered Under Medicare Part B, not Medicare Part D

  • Some other vaccines when they’re directly related to the treatment of an injury or illness (like a tetanus shot after stepping on a nail).
  • Durable Medical Equipment (DME) supply drugs: Medicare covers drugs infused through an item of DME, like an infusion pump or a nebulizer.
  • Injectable and infused drugs: Medicare covers most injectable and infused drugs given by a licensed medical provider if the drug is considered reasonable and necessary for treatment and usually isn’t self-administered.
  • Antigens: Medicare helps pay for antigens if they’re prepared by a doctor and given by a properly instructed person (who could be the patient) under appropriate
  • Blood clotting factors: If a person with Medicare has hemophilia, Medicare helps pay for clotting factors they give themselves by injection.
  • Parenteral and enteral nutrition (intravenous and tube feeding): Medicare helps pay for certain nutrients for people who can’t absorb nutrition through their intestinal tracts or can’t take food by mouth.

Are You In The Right Medicare Plan?  

Here’s where it gets interesting.  If you have a Medicare Supplement Plan (Medigap), these drugs are usually covered at 100%, especially for the two most popular plans, Medigap C and Medigap F.  That’s because these plans cover 100% of the Medicare Part B costs, which includes the deductible and any associated coinsurance.  The third most popular Medigap plan is Plan N, and if you have this one you’d be covered at 100% after paying the Part B deductible.

If you’re on a Medicare Advantage (MAPD) plan, odds are you’ll be paying 20% of the cost for Part B drugs, all the way up to the annual Maximum Out Of Pocket (MOOP).  To make sure, you need to pull out your Annual Notice of Change or your Summary of Benefits right now.  Flip to the Section entitled, “Medicare Part B drugs.”  If I were a betting man, (and I’m not) I’d bet you right now your MAPD plan doesn’t cover Medicare Part B drugs any more than at an 80% level, leaving you 20% to pay.  You stand a very good chance of hitting your MOOP very quickly if you have cancer, or any other serious condition requiring hospitalization involving prescriptions administered by hospital staff.  

The Takeaway:

If you’re turning 65 or otherwise now eligible for Medicare, this is an often overlooked “gap” in traditional Medicare, as well as most Medicare Advantage plans.  Most agents breeze right by this section in their presentations, and it’s not prominently one of the topics in “educational” presentations or seminars.  But, you clearly need to pay attention to it since over 1.6 Million people in the United States will get cancer in a given year.  Chemotherapy drugs are not cheap by any stretch of the imagination if you happen to be stricken with cancer and neither are osteoporosis drugs.  

If you’re playing it safe and this gap is of concern to you, I’d seriously consider getting a Medicare Supplement plan, if you can afford the monthly premium.  9 out of 10 times, a MAPD plan is going to be cheaper (along with a whole other set of considerations, click here for more on those) but you’ll have to cough up 20% of the Part B drugs if you need to.  

 

The Basics of Medicare and Enrolling

In this quick, easy post, I’ll provide the basics of Medicare, explain its different parts and highlight how and when you can enroll.

What is Medicare?

Medicare in the United States is a national social insurance program. Medicare has been around since 1966, after its enactment in 1965 by Congress under Title XVII of the Social Security Act, signed by President Johnson.  Did you know Harry Truman and his wife, Bess were the first two Americans to get Medicare?  Now you do.  Anyway, Medicare generally covers people who are 65 years and above. However, there are some exceptions for younger people living with disabilities, end stage renal disease and Lou Gehrig’s disease (amyotrophic lateral sclerosis).

The Alphabet Soup of Medicare

Medicare is divided into 4 parts, A-D:
1) Medicare Part A: hospital insurance that will cover Inpatient care, skilled nursing facility care, hospice and home health care.
2) Medicare Part B: medical insurance that mainly covers outpatient care and preventive treatment services such as Pap smear tests for cervical cancer.
3) Medicare Part C: this is also referred to as Medicare Advantage and is a combination of Part A and Part B. Part C is offered by private insurance companies that have been approved by Medicare. Under this plan, you may be able to access more benefits and services, though sometimes at extra cost.
4) Medicare Part D: this plan covers drug prescription costs you’d normally get at a pharmacy or mail-order pharmacy.

How Do I Enroll in Medicare?

When enrolling for Medicare, there are really only two options available when you break it down.  I know, there are millions of websites and publications out there that are confusing.  I call it, “analysis paralysis.”  Don’t spend hours and hours trying to figure out what options are out there, because there really are only two.

1) Staying in Original Medicare: this is Medicare Part A and Medicare Part B. If you are interested in a PDP plan (and you should be) then you will have to find a Part D plan (PDP). It is important to enroll for Medicare Part D when you are first eligible, as this will protect you from paying the late enrollment penalty if you decide to do so later. You may also opt for supplemental insurance (Medicare supplement, or Medigap) that will plug gaps in the benefits offered by Part A and Part B.  And believe me, there are a lot of gaps to plug if you decide to go “Bare with Medicare.” Click here for my post about why you really need to think about a Medicare Supplement policy if you decide not to go with a Medicare Advantage plan. Also, check out my post on whether or not Medicare Supplement plan F or Medicare Supplement plan High-Deductible F makes more sense by clicking here.

2) Joining a Medicare Advantage Plan (Part C): this is the other option available. In order to be eligible for this plan, you must first sign up for the Original Medicare Part A and B.  Check out my post on whether or not a Medicare Advantage plan is right for you by clicking here.

When Can You Apply for Medicare?

For starters, most people get Medicare coverage automatically. These people include:
1) People already receiving benefits from Social Security or the Railroad Retirement Board.
2) People under 65 years, living with disabilities and have been receiving disability benefits for 24 months.
3) People living with ALS (amyotrophic Lateral Sclerosis) receive coverage the month their Social Security benefits start kicking in.

Some folks do have to sign up, for instance:
1) People close to 65 and not receiving Social Security benefits.
2) People with End Stage Renal Disease.
3) People living in Puerto Rico will have to sign up for Part B separately.

There are three enrollment periods when you can initially sign up:
1) Initial Enrollment Period: this is a 7 month part that begins 3 months before you turn 65 up to 3 months after your 65th birthday.
2) General Enrollment Period: If you did not sign up for Medicare during the initial enrollment period, you can do so between January 1st and March 31st every year.
3) Special Enrollment Period: this is for people (or their spouses) who are still working and are covered by their group’s health plan, or during an 8 month period that begins the month that their employment ends.

Finally, there’s the Annual Election Period (AEP) which begins on October 15, and ends on December 7th.  That’s when folks already on Medicare get to choose the PDP or the Medicare Advantage plan they want for the following year, without underwriting.

 

Do Commissions Influence Medicare Insurance Agents?

It’s one of the biggest questions many people silently ask themselves: How do I know if my Medicare insurance agent has my best interests in mind, and not influenced by earning the highest possible commissions for themselves when enrolling me in a Medicare plan? Is my insurance agent selling the policy that best fits my needs, or simply selling me a product that pays him/her as much as possible?

Let’s start with the basics. First of all, 99.9% of independent insurance agents are fine, upstanding, moral, high-character people who ALWAYS put the best interests of their customers first. If they’re not, they will soon be found out and kicked out of the business and stripped of their insurance license. But like any industry (financial planning, stock market, etc.) there are always a few bad apples who don’t do the right thing and more often than not, end up on the news.

Independent insurance agents selling Medicare products go to extreme measures to remain compliant with Medicare regulations and laws, must be licensed as an agent and sit through hours of classes for each company they represent to remain “certified” to sell MAPD and PDP plans every single year. They also must take continuing education classes every year to keep their insurance license. Insurance companies have an extremely low tolerance for agents who do not follow the rules and are quick to terminate their ability to sell their products if they suspect any improprieties.

So (very good) odds are, the insurance agent you’re dealing with for your Medicare insurance needs are highly trained, ethical, honest and highly regulated sales professionals who know their business, know the local market and know what plans are (usually) the best for you.

How Much Do Medicare Insurance Agents Make?

Independent insurance agents selling a Prescription Drug Plan (PDP) or a Medicare Advantage plan (MAPD) … ANY MAPD or PDP are paid exactly the same, regardless of the policy they sell you. Around 10 years ago, these commissions were not regulated, and that led to different insurance companies offering some staggeringly high commissions for selling MAPD plans… at times as high as $850 or more per sale. That led to a number of folks complaining to Medicare their agents were inappropriately placing them into a plan based upon those high commissions, and not because it was the best plan for them and their health and financial conditions.

That all changed around 2007, when Medicare stepped in and mandated Medicare insurance companies pay exactly the same commission amounts, and proposed steep penalties for not doing so.

Current MAPD and PDP Commission Rates

For plans that go into effect in 2017, agents selling an MAPD plan are paid $443 for the first year, and $221 every year after that, usually for 6-7 years. That $443 is paid if you’ve recently enrolled in Medicare, or are buying an MAPD for the very first time. If your agent is merely switching you from one MAPD plan into another MAPD, they only get $221 per sale, and get that every year until you choose a different plan. So, if you buy an MAPD from an agent and stick with the same plan for 6 years, the total amount that agent is paid for your enrollment could be around $1,500. Yes, that’s quite a bit of money! But because every MAPD plan is not allowed to pay more than those amounts, it’s hard to argue there’s an incentive for agents to inappropriately steer people to one plan over another. Remember, the vast majority of independent insurance agents are just that: INDEPENDENT. That means they’re independent contractors, with no base salary and no benefits, no car allowance, no gas money and pay taxes on those commissions. Factor in all those costs and $1,500 over 6 or 7 years doesn’t seem quite as high.

For PDP, that commission amount is $71 for the first year, and then half of that amount in the following years, usually stopping around year 6 or 7, depending upon the company. The same logic applies as found in the MAPD scenario above; it’s hard to argue an insurance agent has an incentive to enroll you in one PDP plan over another… because they make the same amount of commission for every plan.

These commissions are not paid by you, nor do they directly influence the cost of your MAPD. Your premium does not go up or down if you buy a policy from an independent Medicare insurance agent. Online, over the phone or in your home on your couch with your insurance agent, the MAPD premium (if there is one) and the PDP premium you’ll pay stays the same regardless of where or how you buy it.The price as they say, is the price.

Medicare Supplement Commissions

The issue of commissions gets a little murky when talking about Medicare Supplements. Unlike MAPD or PDP plans, Medicare supplements are regulated by the states, not the federal government. And unlike MAPD and PDP plans, commissions are not the same and can actually vary quite a bit. For example, Company A might pay $15% sales commission for year 1, and 10% commission for years 2-6. Company B might pay 22% sales commission for year 1, and 15% commission for years 2-10. If one company pays more than the other for the exact same Medicare supplement insurance policy… are you sure your agent is putting you in the product that best fits your needs and budget? Let me remind you, 99.9% of the time that answer is YES. But how do you really know?

How Do I Know If I’ve Got a Trustworthy Agent?

Most independent insurance agents represent multiple Medicare insurance companies. So, if your agent only presents you one option, get suspicious and ask questions. Ask them, “Why this option and not the others?” Be active and challenge them! There’s usually a good reason. Medicare Supplement plan F is the exact same plan, regardless of the company logo. In that case, your agent may be recommending you take one option over another due to lower premiums, for example.  Maybe your doctors and preferred hospitals are in one plan’s network and not the others. The key here is to ASK. Ask them WHY they think this is the best plan for you.

The Best Way to Size Up Your Medicare Insurance Agent

Ask them how much commission they’re making if you enroll in the product they’re selling. If they say they don’t know, or refuse to tell you, end the sales presentation right then and there. If your independent insurance agent won’t disclose their commissions to you, what else are they not telling you? A good insurance agent will have no problem telling you how much commission they make on a sale. Heck, they should be proud to tell you. They’re professionals who know their stuff, work extremely hard and ALWAYS put the needs of their clients FIRST.

The Takeaway

Commissions paid to insurance agents are standard for Medicare Advantage and Medicare Prescription Drug Plans. Commissions paid to insurance agents for Medicare Supplement plans are NOT standard. These commissions do not directly influence the price you pay for your insurance policies and the price you pay is the same regardless of where you purchase your policy; phone, web or agent.

Good, professional insurance agents who specialize in Medicare coverage are all around, but like any profession, there are bad actors. When meeting with an agent for the first time, act like Dan Rather or Charlie Rose and interview them. How many clients do they have? How long have they been doing this? What companies do they represent and why? Finally, how much commission will they make if you buy a policy from them? Use your gut; if they can’t (or won’t) answer those basic questions, it’s best to thank them for their time and find a better agent.

You Must Read Your Medicare ANOC (Annual Notice of Change)

If you have a Medicare Advantage plan or a Medicare Part D plan, it’s very important you read at least a portion of the Annual Notice of Change (ANOC) your insurance company sends you.  This will usually arrive in your mailbox in a large, intimidating package with your insurance company logo affixed in the upper left-hand corner.  Medicare insurance companies are bound by regulation to have this delivered and in your hands by September 30 of each year.  Please resist the temptation to throw this in the recycling bin, or stash it near the phone in the, “I’ll get to it later” pile!

Here’s why:  The AEP (Annual Election Period) is coming on October 15, and ends on December 7.  If you don’t read your ANOC before then, you won’t know what changes are being made to your plan until they go into effect on January 1!  By that time, it’s too late to make a change for an entire year if you want to pick a new Medicare Advantage or PDP plan.

The bad news:  It can be a thick, heavy document.  It’s also in black and white, and very boring and bland.
The good news:  I’m not asking you to read the whole thing, just the important parts.  What are the important parts? Immediately go the section entitled, “Summary of Important Costs 2017.”  It should be right up front, either page 2 or 3.

Medicare ANOC
Medicare ANOC Sample

Your Benefits Change Every Year

I’ve never seen a Medicare Advantage plan NOT change at least SOMETHING from one year to the next.  Same goes for PDP plans.  Almost every plan makes some changes for the new year, so the costs and benefits in place on December 31 may very different on January 1. Here are some changes that can really throw you for a loop!

You May Have a Premium!

Surprise!  If you had a $0 Medicare Advantage premium, that may have changed! Every year thousands of people get surprised in this way, all because they do not read their ANOC and only realize this when they either get a bill, or notice a new deduction from their Social Security checks in January or February.

Your Premium May Be Going Up!

The ANOC is where (and when) Medicare insurance companies announce you’re going to have to pay more (or not) in the upcoming year for your PDP or Medicare Advantage Plan

Your Plan May Be Disappearing

This happens all the time.  Sometimes insurance companies stop offering certain plans.  This is usually because they can’t make money in that area, don’t have enough willing doctors, physicians or pharmacies to participate in their plans.  Sometimes, plans go out of business or are terminated by Medicare.

Other ANOC Changes to Watch Out For

The plan may change its charges for premiums, deductibles, and copays.

Your very important Maximum-out-of-Pocket (MOOP) may be increasing! The maximum MOOP for Medicare Advantage plans for 2017 remains at $6,700 annually, not including Medicare Part D costs.

Your Medicare Advantage or PDP plan may move drugs to different tiers so the copays change.

The plan may alter its formulary (the list of drugs it covers) by dropping some drugs or adding others.  They can also do this at any time during the year.

For other changes, the plan must send you details in an ANOC.

The Takeaway:

The Annual Notice of Change (ANOC) is a document listing any changes in plan coverage, service area, or costs that will go into effect the following January. All Medicare plans are required to send this to plan members by September 30, or 15 days before the start of the Annual Election Period.

You should review at least the Summary of Changes in your ANOC Annual Notice of Change especially if you’re worried about whether or not your medications are still included in the plan’s drug formulary (the list of prescription drugs covered by the plan). If a drug you take is no longer covered, you may want to consider switching to a different Medicare prescription drug plan.

If you have a Medicare Advantage plan and notice your out of pocket costs going up, it’s a good idea to shop and compare your current coverage against other Medicare Advantage plans during the Annual Election Period. 

If you haven’t received the Annual Notice of Change by the end of September, you should contact your Medicare plan to request it.

Remember to read your ANOC (or, at least some of it)!  If you miss making a new plan choice during the AEP, you’re basically locked in for the next year, unless you qualify for a Special Election Period (which you shouldn’t count on).

 

Why Am I Paying More for My Medicare?

Amazed.  Dazed.  Incredulous.  Angry.  Frustrated.  These are words describing people on Medicare who get a nice, neat letter from the Social Security Administration People announcing their Medicare premiums are going to be more than they were anticipating.  A lot more.  Folks earning above $85,000 and married couples earning more than $170,000 in retirement are required to pay higher premiums for Medicare Part B and Part D, most often significantly higher.

As a reminder, Medicare Part B covers doctor visits, outpatient services and other care, Medicare part D covers prescription drugs. Your monthly Medicare Part B premium will be higher if your income is above a certain amount. You’ll pay more for Part B if the income you reported on your IRS tax return two years ago was above $85,000 per year ($170,000 for couples). The income that counts is the adjusted gross income you reported plus other forms of tax-exempt income.

Will I be Affected?

The qualifying income amounts are shockingly low.  If an individual makes $7,084 per month in retirement, their Medicare Part B premiums are a whopping 40% higher every month plus an additional $12.70 every month in Part D premium.  Add those up, and folks in this category actually pay 50% more for their Medicare coverage every single month.

“But I’ve been paying into Medicare my entire working career.  I went to college/graduate school/took a risk and started my own company and succeeded.  I’m proud to have made a good amount of money, but have also lived below my means, saved a high percentage of my pre and post-tax income to be able to retire on an amount I can live comfortably on for the rest of my life.  I’ve paid my Medicare taxes, I’ve been responsible and now I have to pay more?!?!

Yep.  I’ve heard hundreds of versions of the paragraph above.  It’s a shock to most people in this situation, and usually the reaction once the Social Security Administration letter announcing they’re now going to charge you more for being successful and responsible.   That’s essentially what this is… you can pay more than your neighbor or fellow retiree, therefore you will.  You’re subsidizing those who cannot afford to pay higher Medicare premiums.

As you may already be painfully aware, we’re not just talking about multi-millionaires here.  The Social Security Administration reports less than 5 percent of Medicare beneficiaries pay higher premiums, but small percentages can be deceiving.  That means almost 3 million people across the country have higher premiums than their neighbors, and the differences are significant.

Don’t worry, they’ll just take the extra premiums out of your Social Security check.  It’s really convenient.  (Apply dripping sarcasm)

The federal government looks at the modified adjusted gross income in the latest returns filed with the Internal Revenue Service (typically two years back) to determine if you must pay an income-related premium.

Adjusted Gross Income2016 Part B Monthly Premium Amount2016 Part D Monthly Premium Amount
Individuals with adjusted gross income of $85,000 or less
OR married couples with a $170,000 or less
Standard
premium:
$121.80
Your plan
premium
Individuals with adjusted income
above $214,000
OR married couples with adjusted income above $428,000
Standard
premium
+ $268.00
Your plan
premium
+ $72.90
Individuals with adjusted income above $160,000 up to $214,000
OR married couples with adjusted income
above $320,000 up to $428,000
Standard
premium
+ $194.90
Your plan
premium
+ $52.80
Individuals with adjusted income above $107,000 up to $160,000
OR Married couples with adjusted income
above $214,000 up to $320,000
Standard
premium
+ $121.80
Your plan
premium
+ $32.80
Individuals with adjusted income above $85,000 up to $107,000
OR married couples above $170,000 up to $214,000
Standard
premium
+ $48.70
Your plan
premium
+ $12.70

There’s even more good news (more sarcasm).  If you don’t fall into a higher-income Medicare bracket, you might sometime soon because the Affordable Care Act froze the income thresholds through 2019, rather than allowing the thresholds to rise with inflation.  This means as inflation marches on, the number of people considered “high income” will increase.

The Takeaway

If you make more, you’re going to be paying more. Much more.  If you disagree with the way the Social Security Administration has processed your tax information, file an appeal.  As you can imagine, in true bureaucratic fashion, there’s a form to fill out.  You may request an appeal in writing by completing a Request for Reconsideration (Form SSA-561-U2), or you may contact your local Social Security office to
file your appeal. You can find the appeal form online
at www.socialsecurity.gov/online or request a copy
through their toll-free number at 1-800-772-1213 (TTY
1-800-325-0778)

Convenience From your Medicare Part D Plan Is a Double-Edged Sword

When you have Medicare Part D, the last thing you want to do is spend your time reviewing the booklets, flyers and letters your plan and/or other competitive plans may send you. Other than an auto repair manual or circuit schematic of your TV, could anything be stuffier than relaxing on the couch with a Medicare Plan Guide…oops, “Decision Guide” as they like to call them? Please.

Then again, once you’ve enrolled in a Medicare Part D plan, and made it through the onslaught of mailers, flyers and Medicare advertising that’s made to look like official government business so you’ll open it, it’s a good idea to stay connected with them. This is especially true if your plan sends you a letter. It usually means they have something important to tell you about your drugs or your network or your cost. You should always read their letters—in particularly those that begin with “Dear Your Name” rather than “Dear Member.” The same holds true if they call you. Again, it means there’s news about something that could affect your pocketbook or the prescriptions you take.

On the other hand, if a Medicare Part D plan sends you something that looks like advertising, it probably is. The reason being that once a plan has you as a member, their only job is to then KEEP you as a member for as long as they can. One way plans do that is by continuing to embed you deeper and deeper into their realm by enticing you into what is known as “sticky services.”

Sticky services are just what the term implies: a Medicare Part D plan for example, wants you to sign up for their auto bill pay service or their mail order prescriptions or online ordering of your medications, because it’s convenient for you. While that may be, what they don’t tell you is that once they’ve convinced you to take advantage of those conveniences, it’s that much thornier for you to leave their plan.

Let’s say you’re the type of Medicare beneficiary that shops every year, because you’re not convinced there isn’t a Medicare Part D plan out there that can offer you more for less than the one you have now. And let’s say you happen upon a different Part D plan that covers your drugs, but does so for less than you’re currently paying. Or maybe the monthly premiums are lower, and you don’t want to continue paying more than you should. You decide then, that you’d like to switch from your current Part D plan to that cheaper plan in October.

Ah, but it’s not so simple when you’re “embedded” in your current Part D plan. That’s because in order to leave your current plan you must “undo” all of those “convenient” sticky services, which is anything but convenient. In fact, your current Part D plan hopes that the idea of undoing all of your convenience is just enough of a pain that you’ll stay with them to avoid the effort. Sticky is as sticky does.

Then again, you may be the kind of Medicare beneficiary that rarely shops. The kind of member Medicare Part D plans absolutely love because it would take an act of God to get you to go through the process of switching plans and starting over with a new Medicare Part D insurer. Bodies at rest, as they say, tend to stay at rest. And your Part D plan is counting on you to stay put because it’s “comfortable.” And why wouldn’t you if you’re in the right plan, and getting the best value for your Medicare dollar? If you’re sure that’s the case, then the convenient services offered by your plan are positives—especially since you’re “sticking” with them through thick and thin.

The moral of the story is this: before you buy into all the sticky convenient services your Medicare prescription drug plan offers you, wait a while. Take some time to be sure you’re in the right plan and not overpaying for the same quality you may get from another Part D plan for less. Part D plans are NOT all the same. And sometimes the Plan you loved when you enrolled is not so lovable because they changed the prescriptions they cover or the prices they charge during the year—AFTER they have your enrollment. Yes, Part D plans can do that! So it’s to your advantage not to be a body at rest. Take the time to compare plans to be sure there isn’t something better out there for your specific situation. Make a few calls, visit a few websites, and if you’re feeling really ambitious, visit Medicare.gov where all Part D plans compete for your business, and show you their wares.

If after shopping around, you still like the Medicare Part D plan you’re in, the way they treat you when you call, the coverage they offer and the prices you’re paying for your premiums and your prescriptions, then let the conveniences flow, and stick with them.

Mid-year Formulary Changes

While it’s true that companies selling Medicare Part D plans can’t raise their premiums mid-year, sometimes things can happen that affect the level of coverage you’re getting from.  One of those is called a mid-year negative formulary change.

A “negative formulary change” happens when a Medicare insurance company changes what prescriptions are covered and how much they’ll cost you, right in the middle of the plan year!

Can they do this?  Sure can, and happens all the time.  If this happens to one of the prescriptions you take, you’ll get a nice little letter from your insurance company telling you what’s happening, and why.  You’ll usually get notified at least 60 days before the change is made.  Common changes your insurance company can make mid-year are:

  1. Remove the prescription  from the formulary because it was removed from the market
  2. Stop covering a prescription because Medicare decided to stop paying for it
  3. The insurance company placing quantity limits on the drug (usually due to high cost, or potential for abuse)
  4. Mandating prior authorization (which means special permission needs to be granted in order for you to fill your prescription)
  5. Moving prescriptions in a higher Tier (more expensive for you)

Let’s say you have a Medicare Part D plan who makes a negative formulary change to one of your prescriptions.  Well, next time you fill that prescriptions, insurance companies are required to send a written notice to you within 3 business days of the fill, explaining that in the future, you’ll have to contact your doctor for a different prescription.

How can they do this?  Well, it’s complicated, but I’ll summarize: Every year, plans new and old begin discussing the plans, prices and benefits they’re going to offer the upcoming year around February.  That’s right! Mere weeks after the Annual Election Period (AEP) ends, companies begin to plan for the following year.  From there, companies on their bids which they submit to Medicare around June/July for the following January.  Insurance companies must bid each year, and if they’re approved to offer Medicare Part D, they only have permission from Medicare for the upcoming calendar year.  As a part of this bid, these companies must tell Medicare what drugs they’re going to cover, what benefits they’re going to offer (copay tiers, etc.) and how much monthly premium their plans are going to cost you, the consumer.  Once Medicare accepts an insurance company’s bid, the company is locked into those prices and benefits for the entire year.  Likewise, once you pick a Medicare Part D plan during the AEP, you’re usually stuck with it for a year.

What are your options if this happens to you?  Well, for one, you should call your doctor and ask him or her to switch your prescription to something else that is on the formulary.  That’s by far the easiest solution. If you’ve tried everything else and really need to keep that prescription going, you can call your insurance company and request an exception be made.  The process is long and tedious and yes, there are lots of forms to fill out and phone calls to sit on.  If that’s your thing, or you for some reason really need the particular prescription that’s being affected, then by all means please travel down this path.

But at Prepare for Medicare, we strive to simplify Medicare, so your best bet is to get your doctor to find an alternative prescription, or simply pay for it out of your own pocket until the fall.  Then, vote with your feet!  AEP begins October 15.  Grab your prescriptions, head on over to Medicare.gov and find a new Medicare Part D drug plan that meets your needs.

Welcome to Prepare for Medicare

Hello, world!  Welcome to Prepare for Medicare. We’re going to cover a lot of ground on this site, hopefully a bit educational and some fun sprinkled in to make your life easier, save you money and hassle.  We’re talking about everything Medicare on this site with (I’m sure) some sidebars into retirement, money matters, etc.  Along the way, I’m going to teach you what you need to know and how to filter out all the noise.

Just before your 65th birthday (and for the rest of your life) insurance companies will absolutely flood you with ads. Direct mail will jam your mailbox, TV and newspaper ads with smiling celebrities or unassuming presenters will urge you to call for, “information” and blinking, flashing pay-per-click advertising online will promise the moon.  Meanwhile, news anchors and newspaper headlines blare out various injustices and scams perpetrated by insurance agents and companies that hurt normal Americans just tying to buy the right coverage.   Yet, for the more than 40 Million people already on Medicare and the estimated 10,000 Baby Boomers turning 65 every day, coverage choices must be made.

Sticking your head in the sand won’t help; the wrong choice could cost you thousands of dollars.  How do you know if you’re in the wrong plan?  Paying too much?  Enrolling in a quality, reputable plan?  Using a quality, reputable insurance agent?  Is the system beating you, or are you beating the system? If you’re a caregiver helping your parents or other family members decide, what’s your role?  Where can you turn for objective guidance?

It comes down to this: You can learn how to use the system to your advantage.  You either need to educate yourself and understand the tools to do it yourself, or be able to identify a professional independent insurance agent to help you navigate through the maze.  This site is a living, breathing opportunity for you to do both.

Welcome!