Are you prepared for Medicare open enrollment?

Editor’s Note: Journalist Philip Moeller, who writes widely on aging and retirement, is here to provide the answers you need in “Ask Phil.” Send your questions to Phil. Check out his Recommended Reading section with links to notable stories and reports at the end of today’s post.

Medicare’s annual open enrollment period begins Oct. 15 and runs through Dec. 7. During this period, Medicare beneficiaries are free to select new plans. The experts who track annual changes in Medicare know that the terms and costs of plans change so much each year that millions of beneficiaries could save money in 2017 and improve their health coverage by picking new plans.

They also know that if as many as one in four of you do so, that would be a huge shift in behavior. Medicare is so complicated that beneficiaries usually do nothing during open enrollment. But doing nothing is not really doing nothing. It amounts to permitting the automatic renewal of the coverage you already have, even if it is no longer (or never was) your best insurance plan.

By now, all Medicare beneficiaries with private insurance should have received copies of their insurer’s 2016 plan documents. These go by the snappy names of ANOC (annual notice of change) and EOC (evidence of coverage). Read the shorter ANOC and use the more encyclopedic EOC as a reference document. But do read them.

Next, understand the basic choices you have. There are only a few, so this part of open enrollment need not be complicated at all.

Original Medicare includes Part A hospital coverage and Part B insurance for doctors, outpatient expenses and durable medical equipment. People with Original Medicare can choose whether to also buy a Medigap policy, which is also called a Medicare supplement policy. Medigap policies fill, to varying degrees, the holes in Original Medicare. The biggest hole is that Part B pays only 80 percent of covered expenses, leaving beneficiaries on the hook for the other 20 percent. As anyone with major health issues knows, that can be 20 percent of a big number.

READ MORE: Signing up for Medicare? Read this cautionary tale first

If you don’t have Medigap or even if you do, you can select a Medigap plan during open enrollment. There are 10 different Medigap “letter” plans. Coverage within each type of plan must be identical. This means that all letter A plans are the same, all letter B plans and so on. But premiums can and do vary a lot. So shopping around for the best rate is a must. Specific coverage requirements of the various plans have not changed much since I wrote about them.  You can find them on page 82 of “Medicare & You 2017.”

Unfortunately, Medigap policies may be very pricey for people once they’ve passed the early period when they first were eligible for Medicare. During this period, most people had what is called “guaranteed issue” rights to Medigap. This means that private Medigap insurers had to sell them a policy, regardless of their age or medical condition. They could not “underwrite” them to tack on higher premiums or coverage restrictions tied to a person’s pre-existing medical conditions.

Once that period has ended, switching from one Medigap plan to another may be expensive. And if you have serious medical issues, insurers may not even have to sell you a Medigap policy once you’re no longer protected by those guaranteed issue rights.

People with Original Medicare also have the option during open enrollment of buying a Medicare Advantage plan. And those with Medicare Advantage can pick a different Medicare Advantage plan. They cannot be denied coverage or required to pay more because of pre-existing conditions. (An exception to this rule is that people with end stage renal disease are not eligible for Medicare Advantage plans.)

People with Original Medicare who switch to Medicare Advantage cannot keep their Medigap plan should they have one. The two plans provide overlapping coverage and insurers are not allowed to sell both of them to the same individual.

Everyone with Medicare — the roughly 70 percent with Original Medicare and the 30 percent with Medicare Advantage — also have the option during open enrollment of changing their Part D prescription plan.

For now, your homework is to locate your EOC and ANOC documents and read them. You also might pick up some pointers from this week’s reader questions.

Susan – Fla.: I have medical coverage through a large municipality of over 700 employees. I plan to retire in mid-2017. I turn 67 this month (October 2016). I did not sign up for Medicare or Social Security at 65 since I have a high-paying job and wanted to continue saving for retirement. At the time I turned 65, the municipality had a medical PPO (Preferred Provider Organization) plan. It’s now switched to a high-deductible health plan with no option for employees to switch between plans. This October is the beginning of my second year on the health savings account plan. I plan to make no employee contributions to my account since I read you can’t make contribution six months before signing up for Medicare without a penalty if you have an HSA account. I had surgery on Aug. 30 for a parathyroid condition that was successful. Other than that, I have no major health issues and only take one medication to keep cholesterol low. I have the option of going on COBRA when I retire if necessary. What is the best time and process for me to sign up for both Social Security and Medicare? I need to know what to do and when.

Phil Moeller:  Congratulations for doing such a good job of planning ahead for your Social Security and Medicare needs. My first question is whether your current employer offers any kind of retiree health coverage? Many units of government do. If yours is among them, you need to know what it covers and how it coordinates coverage with Medicare. Most retiree plans become the secondary payer of health claims and Medicare becomes the primary payer. In their role as secondary payer, some retiree plans can provide protection against high out-of-pocket expenses. Some also provide drug coverage, so you might not need a Part D drug plan. If you have a good retiree plan, you might need only Part A (hospital expenses) and Part B (doctors, outpatient, and durable medical equipment costs) of Medicare. Plugging the holes of basic Medicare with either a Medigap or Medicare Advantage plan might not be necessary.

If you have no retiree insurance, you would need to explore the full range of Medicare products. I will be writing about these a lot over the coming weeks in pieces that deal with Medicare’s annual open enrollment season, which I’ll note again runs from Oct. 15 through Dec. 7.

I would urge you against getting COBRA coverage when you retire and your current employer group coverage ends. COBRA, which is named after the law that created it, is not considered active employer health coverage. This means that your enrollment window for getting Medicare will begin when you retire, not when your COBRA coverage ends. And you don’t want to be late in enrolling for Medicare, as you risk lifetime penalties on your Part B and even Part D premiums. You also could find yourself without primary health insurance, as your COBRA insurer might argue that Medicare is your primary insurer, not COBRA.

While you will need Medicare as soon as you retire, you need not sign up for Social Security at that time. If your finances can stand the wait, putting off Social Security until age 70 will raise your benefits at the rate of 8 percent a year from mid-2017 (when you said you planned to retire) until you turn 70 in October of 2019. Given that you easily may live another 20 or even 30 years after claiming Social Security, having those extra dollars amounts to having terrific longevity insurance.

Best of luck.

Ken – Calif.: I signed up for Social Security as my 70th birthday approached on Aug. 5. On Aug. 30, I was laid off. As part of a severance package, the company agreed to pay premiums on my health insurance for eight months under a program called COBRA. That takes me through April 2017. I thought I could wait until then to sign up for Medicare Advantage or Part B, but things I have read since then call that into question. It might be possible that the government would punish me for not signing up when I should have, because COBRA is not considered health insurance from a “current” employer. The penalty for getting this wrong is months without health coverage and a lifetime penalty on the amount I pay for Medicare. This is scary. Can you clarify my situation? Should I sign up in this open enrollment period or can I wait until COBRA runs out?

Phil Moeller: You are correct in what you’ve heard. As I told Susan, your eight-month enrollment period for Medicare began when you lost your active group insurance, not when you began COBRA coverage (even if the two policies offer you identical coverage). Talk with your COBRA administrator and find out the most advantageous time to sign up for Medicare. If you wait until the end of your COBRA policy, you risk having a Medicare coverage gap, as it can take several months between when you sign up for Medicare and when your coverage takes effect.

Gam – Fla: Some Medicare Advantage plans offered by insurance companies entice you to join by offering a complete or partial refund of the Part B premium. How can one find the companies who offer the largest refund? We are healthy, so getting the most from a refund may make sense rather than seeking more health insurance coverage.

Phil Moeller: You can find this out by using Medicare’s Plan Finder tool. Follow the instructions and enter your ZIP code to see the plans available where you live and what they cost. I won’t lecture you about such plans perhaps having skimpy coverage, because you stress that you’re aware of this. Good luck.

Mary Beth – Fla.: I just clicked on an online Medigap information page. It showed policies for people under age 65. I am on Social Security and have Original Medicare, Parts A and B. I am 67 and need to cover what Original Medicare doesn’t.

Phil Moeller: There are different rules for people under and over 65 that govern their access to Medigap. I am not sure why you were only seeing policies for people younger than 65. But if you go to Medicare’s Medigap Policy Search page, you should be able to find available policies for people age 65 and older. Your note doesn’t say how long you’ve had Medicare. If it’s been more than six months, you may have missed your initial Medigap sign-up window. This can be an important issue, because insurers may be able to charge you much higher rates for Medigap policies or might not have to insure you at all outside of this window. So, I’d urge you to shop very carefully. Keep in mind there are 10 different Medigap “letter” plans that offer different coverages. However, each letter plan must offer coverage identical to other Medigap plans with the same letter. The biggest variables for Medigap are the premiums you pay and the underwriting terms the insurer users to set those premiums. Spend some time reading Medicare’s annual guide to Medigap to better understand how these policies work.

Best of luck.


“Which hospital you go to after a heart attack matters, study finds”

A study of Medicare patients who had heart attacks found that their choice of hospitals had a big impact on how long they lived. Researchers looked at how people fared 17 years after their heart attacks. (No, I don’t know why they picked that time frame!) People who used hospitals with high ratings for quality care lived from 9 to 14 months longer than people who received care from hospitals with low ratings on quality measures. Of course, the speed with which you get to the hospital is also crucial. So call 911 right away. And if you do identify a high-quality hospital ahead of time, make sure it’s close by. (Source: The Associated Press.)

“Secret Rebates: Why Patients Pay $600 for Drugs That Cost $300”

Drugmakers give insurers and benefit managers more than $100 billion a year in rebates and other discounts to reduce the skyrocketing cost of drugs for diabetes, asthma, arthritis and allergies. These discounts usually are not passed on to consumers, many of whom must pay the full price for such drugs until they reach their insurance plan’s deductible. And with more and more people having high-deductible plans, consumers often are on the hook for much higher spending than in the past. (Source: Robert Langreth for Bloomberg.)

“Tracking Who Makes Money On A Brand-Name Drug”

Here’s a really interesting graphic that follows a drug through the pipeline from manufacturer to consumer. It shows the money received along the way by the wholesaler, insurer, pharmacy benefit manager and insurer, including rebates paid by pharmacy companies in some cases. (Source: Julie Appleby for Kaiser Health News.)