Senior healthcare will face big changes and challenges in 2011. The health reform law will usher in free preventive health services for all Medicare users and significant reductions in drug expenses for millions of seniors. Private insurance plans that supplement basic Medicare are expected to continue shrinking in number and, in some cases, covered benefits. Medicare also is introducing shifts in the timing for annual Medicare enrollment, and experts are concerned that many consumers may be unaware of these rule changes in time to make the best Medicare coverage decisions.
The Medicare system next year must begin accommodating the mass movement of baby boomers into their retirement years. For most people, Medicare eligibility begins at the age of 65. According to U.S. Census Bureau projections, an average of more than 7,500 people a day will turn 65 next year. This age wave will rise each year until finally cresting in 2025, when a projected 11,700 people a day will celebrate their 65th birthdays.
In terms of enrolling for Medicare, 2011 has already begun, notes Paul Gada, personal financial planning director for Allsup, a fee-based provider of Medicare help to consumers. That's because the enrollment period for 2011 Medicare insurance for existing beneficiaries has been shortened, and now extends only from November 15 to December 31. Also, in past years, consumers could make major changes in their coverage elections during the first three months of the following year. Now, that adjustment period has been halved to the first six weeks of 2011, and consumer changes have been sharply narrowed as well.
The first six weeks of 2011 will now be known as a disenrollment period, Gada explains. Under the more restrictive rules, people only can switch from Medicare Advantage plans into traditional Medicare, a Medicare spokesman says. They can't choose another Medicare Advantage plan and Medicare beneficiaries may not shift into Medicare Advantage.
The second big timing shift for Medicare enrollments will happen later in 2011 and involves 2012 coverage decisions. The enrollment period is being moved a month earlier in the year, and next year will extend from October 15 to December 7. This earlier shift is applauded by consumer advocates, who say it will ensure that Medicare beneficiaries have new insurance cards and other plan details before 2012 actually begins. It also means that consumers will not have to make Medicare decisions during the hectic holiday period. "Traditionally, that's just the worst time of the year for people to be thinking of that," Gada says. "People's minds are just not on Medicare."
Beyond the enrollment process, the biggest 2011 changes for most Medicare beneficiaries involve drug prices and health reform mandates.
About four million Medicare recipients spend enough on prescription drugs each year to be victimized by a lapse in coverage called the doughnut hole—a gap in insurance coverage for drugs. In 2011, the doughnut hole is triggered when prescription expenses have hit $2,840. Full insurance protection doesn't kick in again until total out-of-pocket costs have exceeded $4,550. Over time, the health reform law will close the doughnut hole. In 2011, the government will pay 50 percent of the price for brand-name prescription drugs to consumers in the doughnut hole. It also will pay 7 percent of the cost of generic prescription drugs.
Although consumers will not be paying the full price of prescription drugs while they're in the doughnut hole, they will be able to apply the full cost of the drugs to their out-of-pocket drug costs, says Joe Baker, president of the Medicare Rights Center. "Consumers need to make sure that when they get their statement from their drug plan that the appropriate amounts are credited to their account, so that they get through the doughnut hole as quickly as possible," he says.
A second major change is that Medicare users will get a range of free wellness services next year, including an annual physical. These services will be entirely paid by Medicare and there will be no co-pay or deductible requirement. "They will get a five- to 10-year calendar of covered preventive tests from their physicians," Baker says. "Some of these tests were covered before but Medicare only paid 80 percent of the expense ... Because these items are 100-percent covered, you should make your [doctor's] appointment as soon as you can."
"With regard to private insurance plans" that supplement Medicare, Baker says price pressures and other changes in Medicare rules will continue to reduce the number of plans offered to consumers. He says consumers still will have a wide selection of plans. "We think this is an appropriate narrowing of choice," he says. "Let's make it easier for consumers to shop."
The other thing that will affect Medicare Advantage plans in 2011 is the resumption of cutbacks in government subsidies for the plans. "Next year is the first scheduled decrease in the government subsidy to Medicare Advantage plans," Baker says. "There have been forecasts of turmoil in the market" as private insurers raise rates or reduce product features. "But that's not what we're hearing. We think plans will stay in the market and that a lot of plans feel it might be an opportunity for them to pick up market share."
A recent study by the Employee Benefit Research Institute (EBRI) found that health reform would reduce some retiree health costs but that typical employees will continue to need substantial savings to pay for their retirement healthcare expenses.
"A man with median drug expenditures would need $65,000 in savings and a woman would need $93,000 if they want an average (50 percent) chance of having enough money to cover health care expenses in retirement," EBRI concluded. "For a higher (90 percent) chance of having enough, a man would need $124,000 and a woman $152,000." (Women spend more on retirement healthcare primarily because they live longer than men.)
"Another risk associated with retirement is predicting longevity," the EBRI report said. "It has been estimated that the average husband and wife will need about $250,000 in savings to cover what is not covered by Medicare. However, individuals cannot simply assume to be average: 50 percent of men turning age 65 in 2010 will live to age 81, and 50 percent of women will live to age 84. Furthermore, 25 percent can be expected to live until ages 87 and 90, respectively, and 1 in 10 men can expect to live until 91, while 1 in 10 women can expect to live to 95."
Beyond changes that are already known, the Republican landslide in House elections has been accompanied by pledges to repeal the health reform law. And there are roughly two dozen court cases challenging the law. Few observers expect major changes as early as 2011 from these efforts. But it's possible.
Also, Medicare changes are included in the flurry of deficit-reduction proposals that have been issued in recent weeks. The Kaiser Family Foundation has prepared a side-by-side comparison of the Medicare components of these proposals. "People with Medicare really need to inform themselves about these deficit-reduction proposals," Baker says.