Understanding Your 2012 Medicare Enrollment Statements

Notice of change and evidence of coverage statements are comprehensive but confusing.

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Every year, existing Medicare beneficiaries receive massive statements from their insurers setting forth the terms of next year's coverage, including premiums, coverage details, and any changes from the current year's Medicare. The statements aim to prepare consumers to make informed decisions during Medicare's annual enrollment period.

Never let it be said that the government has failed to include all details in these statements, which are known as the annual notice of change (ANOC) and the evidence of coverage (EOC). While private insurers send out the statements, they must be prepared according to government rules. A template for a combined ANOC-EOC statement provided to U.S. News by the Centers for Medicare & Medicaid Services (CMS) was 255 pages long.

[See 10 Ways to Boost Your Social Security Checks.]

Given that there are roughly 48 million people on Medicare, these annual statements are instant bestsellers. They're also likely to be unread and to a large extent, not well understood. Like the federal tax system, Medicare has become so complicated that consumers often must turn to outside professionals to help them with coverage choices. There are enormous Medicare enrollment assistance programs, including free government services and increasingly, private fee-based consultants who may charge hundreds of dollars for Medicare enrollment services.

This year's 2012 Medicare enrollment period is much earlier than in the past, and begins October 15 and extends through December 7. As a result, the annual statements to Medicare beneficiaries were supposed to be in their hands by the end of September. By carefully wading through these documents, millions of consumers could easily save hundreds, if not thousands, of dollars by making smarter Medicare coverage choices. (New Medicare beneficiaries apply for their initial coverage through Social Security. Once approved, they are then free to apply for coverage plans from private insurers.)

[See Get Ready for 2012 Social Security, Medicare Changes.]

However, many experts say the topic is so complicated that existing beneficiaries tend to stick with their current insurance, even when it has ceased to be the best policy for them. Consumers, meanwhile, tend to like their Medicare coverage and think there is little benefit in shopping for new policies. Yet they also confess to not understanding the program very well.

Here are key findings from a recent poll by Gfk Roper of 500 people ages 60 to 64, and 500 people age 65 and older. It was sponsored by the National Council on Aging and the large insurer United Healthcare.

1. Medicare is understood by 46 percent, while 35 percent find it confusing, and 16 percent doesn't understand it at all.

2. Only 33 percent could correctly identify Medicare Part A as the hospital insurance component of the program, and only 23 percent could correctly identify Medicare Part B as the part that covers doctor visits; 68 percent did not even venture a guess about what Part C entails, and about the same proportion (64 percent) do not know whether Medicare Part C and Medicare Advantage are synonymous or refer to different types of coverage.

3. About three-fourths of baby boomers and seniors understand that they can make changes to their Medicare coverage only during the annual enrollment period, but the exact dates are unclear to most of them.

[See Medicare Drug Premiums Won't Rise in 2012.]

4. Nearly half of all seniors have never shopped around for the best Medicare coverage for themselves; about 60 percent of those who have never shopped or who haven't shopped around in the last three years cite satisfaction with their current coverage as the major reason for staying put.

Jan Berger is chief medical officer of Silverlink Communications, which works with many health insurers on their consumer communications programs. "Many people overlook the importance of the ANOC," she says, "but they need to open it."

Berger breaks down the Medicare coverage decision into five steps, all of which are addressed in the annual statement:

1. What are the primary financial implications of your plan for 2012, including the premium, annual deductible, and co-pays?

2. How well does the plan accommodate your preferred medical providers? Are your doctors participating in the plan? Your preferred hospital?

3. What are the costs and availability of your medications in the plan?

4. How convenient is the plan in geographic terms? Are the participating doctors, medical facilities, and pharmacies nearby and easy for you to get to?

5. What is the star rating of your health plan, and how does it compare with other plans offered in your service area? Quality ratings of health plans ranging from one star (worst) to five stars (best) are relatively new. Medicare has been emphasizing them, and the health reform law has provisions that will penalize plans for substandard rankings. The current star rating process will go live on Medicare's website on October 12, an agency spokesman says.

"Today, 75 percent of covered beneficiaries are in plans with fewer than four stars," Berger says, and many local service areas have no plans with four or five stars.

Two other important pieces of information that may affect Medicare enrollments are still not available. The first is the agency's announcement of the 2012 premium increase for Part B of Medicare. This covers insurance for physicians and other out-patient services. Medicare rules do not permit increases in Part B premiums in excess of increases in the annual cost of living adjustment (COLA) for Social Security. Low rates of inflation have meant there has been no Social Security COLA in 2010 and 2011, so Part B premiums have been frozen as well for existing beneficiaries. However, a Part B increase is expected this year, and should be announced soon, the agency says.

The actual size of any 2012 Social Security COLA will not be announced until the third week of October. Because Medicare premiums are commonly deducted from Social Security payments, the 2012 COLA will affect the effective out-of-pocket costs of 2012 Medicare coverage for beneficiaries.

"You need to have all the pieces of the puzzle in place before you can make an informed decision," Berger says. "The thing that is so very important for people to understand is that this decision does not just affect their pocketbook or their health. It affects both."

Twitter: @PhilMoeller