Medicare open enrollment kicks off October 15 and runs through December 7. New and experienced Medicare beneficiaries can make plenty of mistakes during this time if they don’t review their coverage and get acquainted with the updated rules.
During this six-week period, beneficiaries basically have two choices for comprehensive coverage: They can select Original Medicare, a supplemental plan and a Part D prescription drug plan, or a Medicare Advantage plan that provides benefits rolled into one plan. Medicare also allows those with Advantage plans an additional window — January 1 to March 31, 2023 — to switch plans.
Although the Biden-Harris administration recently announced lower premiums for Medicare Advantage plans and Part D prescription drug plans in 2023, beneficiaries need to dig deeper rather than the lowest dollar signs.
Rethinking65 asked several Medicare professionals what financial advisors must understand to help clients make good Medicare decisions for the upcoming year.
We also asked our Medicare sources to describe the biggest pain points beneficiaries are facing or could face.
“Please remind everyone how important it is to review their coverage during open enrollment. We see many ‘red-flag’ situations,” says Diane Omdahl, RN, MS, co-founder and president of 65 Incorporated, a Wisconsin-based Medicare consulting firm that’s paid on a fee-for-service basis and doesn’t sell insurance.
Avoid these drug-plan faux pas
According to Omdahl, the clients likely to pay more for their drug coverage, should they fail to adequately review it, are those who don’t take prescription drugs and those who are on drug regimens that haven’t changed in years. In other words, many people are vulnerable.
“I had a client who turned 65 in July 2019. He enrolled in the plan with the lowest premium in his area, $14. I emphasized the need to pay attention but he hasn’t because he still takes no drugs. Last year, his plan was discontinued in a consolidation by the insurer. His Annual Notice of Changes told him he would be transferred to one with a $68.70 premium, unless he enrolled in a new one. He could have picked one with a $7 premium but he never looks at his notice. He will pay almost $750 more this year for not reviewing his coverage,” says Omdahl.
As for clients whose drugs remain unchanged, “chances are they’re still in the same plan and, if they take time to check what’s available, there’s an excellent chance they’ll find lower-cost alternatives,” she says.
Insulin and vaccine changes
The Inflation Reduction Act will have a big impact on Part D drug costs, adds Omdahl. Although some of the big changes such as Medicare negotiating drug prices with drug companies won’t be rolled out for a few more years [see timeline], two other changes that do take effect in 2023 will impact beneficiaries’ costs, she notes.
Cost-sharing limit of $35 per month for insulin
This applies to patients receiving insulin by injection or by pump, and it’s not subject to the deductible either. A $35 cap on insulin took effect in 2020. However, that was for injections only and not every company or plan was required to participate, Omdahl notes.
The impact of this new change will be most significant for insulin administered via pump, which is a Part B medical-insurance benefit, she says. For Original Medicare beneficiaries, insulin administered by a pump is currently subject to the deductible and 20% coinsurance. A Medicare supplement plan covers the 20% so these beneficiaries pay no more than $433 this year.
“Just about every Medicare Advantage plan I have reviewed charges 20%, more for out-of-network. Those costs add up quickly,” she says. The cap for injectable insulin takes effect January 1, 2023, and for pump, July 1, 2023.
Part D adult vaccines will be free
Part D drug plans cover vaccines, such as Shingrix and Hepatitis B, administered to non-high-risk individuals, and DTaP (diphtheria, tetanus and pertussis) but copayments can be high. “The copayment for Shingrix pushes $200 in many locations; that’s $400 for the two shots that beneficiaries won’t have to pay,” says Omdahl.
No shortage of pain points
“As for pain points, I could write an encyclopedia,” says Omdahl.
For example, “Comparing Medicare Advantage plans could be challenging,” she says. On average, an individual has 39 plans to compare this year. In Southern California, you can find 69 plans, 67 of them HMOs. Where do you start?”
“Most are zero-premium with similar out-of-pocket maximums. The differences come in out-of-pocket costs, comparing the costs for services you will/may need. Figuring out whether your physicians are in-network can be challenging.” Reviews conducted by the Centers for Medicare & Medicaid Services (CMS) have identified frequent inaccuracies in the online directories of Medicare Advantage networks.
Medicare Advantage plans combine hospital, medical and often Part D coverage, and can also cover other services that Original Medicare does not, including dental and vision care. With Original Medicare, there is only one choice for Part A (hospital insurance) and Part B (medical insurance), regardless of where one lives. In other words, there’s nothing to shop around for. However, Part B only covers 80% of medical costs outside the hospital so most people do shop around for supplemental plans (sometimes called Medigap).
Don’t be late
The updated Part D deductible or standard premium for 2023 will be as high as $505 per month, up $25, but “plans can charge less,” says Omdahl. The Part D late-enrollment penalty for 2023 is calculated by multiplying 1% of the national base beneficiary premium ($32.74 per month) by the number of months someone lacked coverage. “Other costs relate to the drug payment stages and get relatively complicated,” she says.
And, “If someone with a [stand-alone] drug plan doesn’t act by December 7, they are stuck until next year,” she says.
Also remind your clients that CMS already released (in late September) the 2023 premiums, deductibles and coinsurance amounts for Medicare Part A and Part B, and the 2023 Medicare Part D income-related monthly adjustment amounts. But even when these out-of-pocket figures aren’t revealed until November, as in the past few years, Omdahl doesn’t see a need to wait to enroll because “beneficiaries really can’t do anything except pay them,” she says.
Be selective about changing plans
Scott Schwalich, CFP, a wealth strategy advisor at Anderson Financial Strategies, a fee-only financial services firm in Centerville, Ohio, emphasizes the need for people to be pragmatic about changing their Medicare plans.
“I think the most important thing advisors should be conveying to clients as the annual enrollment period begins is to only make plan changes for a good reason,” he says. It’s also important, he says, to understand any long-term consequences changing plans could bring.
“Most clients are going to see a lot of ads and potentially be contacted by some agents and brokers during the annual enrollment period. It’s important that they go into that knowing what coverage they have, and what other kinds of options they may hear about, and the real differences between each,” says Schwalich.
Clients who’ve been on a Medicare supplement plan who haven’t used it much, or have seen premium increases, may be particularly likely to be talked into a Medicare Advantage plan during open enrollment, he says.
“I’ve seen that happen a handful of times where a client had a Plan F or G supplement, [and] some chronic health issues that would cause them to be denied on medical underwriting to go back to a supplement down the road, and they went for an Advantage plan because someone sold them on it,” he says. “In all cases, the client didn’t really understand the trade-offs they were making.”
If clients have a supplement plan, advisors should take the time to remind them of the advantages and disadvantages of that coverage compared with an Advantage plan, says Schwalich.
If they’re in an Advantage plan, “remind them to double check if doctors and medications are still covered and in network for the next year, and that there are no major negative plan changes in the Annual Notice of Change,” he says. “If everything is good, they would need to have a good reason to change to a different Advantage Plan, like superior benefits, and would again need to verify the doctors and drugs are in network and covered.”
In addition, “If they’re on an Advantage Plan and healthy enough, bringing up the option to switch to a Supplement while they’re healthy enough to pass underwriting could also be helpful and not something clients may be thinking about,” he adds.
Demand multiple options
David F. Smith, PhD, CFP, a long-time planner who now specializes in Medicare assistance, emphasizes this point for advisors for every annual election period: Never make a decision based on the advice of a sales agent who represents only one company.
“There is no possible way there is objectivity. Not that there is even if an agent represents 20 companies since no agent represents all companies,” he says.
In fact, he notes that regulations from the Centers for Medicare & Medicaid Services require all third-party marketing communication, written or verbal, to say, “We do not offer every plan available in your area. Any information we provide is limited to those plans we do offer in your area. Please contact Medicare.gov or 1-800-MEDICARE to get more information on all of your options.”
“CMS is getting really tired of beneficiaries not knowing they have choices,” says Smith, who served three years on the board of the Financial Planning Association’s San Diego Chapter and recently relocated to Asheville, N.C. “But I am not sure the 800-number is objective or what the quality of advice is, and if the products recommended are commissionable, who gets the commission.”
Is there a solution to this problem?
“Nope. No more than there is to going to a car dealer who wants you to buy the make they represent,” says Smith.
“The only hope for an advisor is if they don’t sell Medicare products — and if they do, it should be supplements, prescription drug plans, and Advantage plans— is to find an agent they trust who represents perhaps five or more carriers available in their area by county, including supplements, prescription drug plans, and Advantage plans.”
“That agent needs to convince the advisor they are of high integrity, that the sales process — and it is sales — is compatible with how the advisor works with clients, and is not in competition for other lines of business the advisor works with,” says Smith. “That is the biggest challenge advisors have with clients if they aren’t active in the Medicare markets.”
Jerilyn Klein is editorial director of Rethinking65.