The enrollment period for 2012 Medicare plans began October 15 but will get more attention from Medicare users following this week's welcome announcement that 2012 consumer insurance premiums for a key part of the program are barely rising for most participants, and they'll actually decline for people who began Medicare in 2010 and 2011.
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Nearly all Medicare beneficiaries receive Part A service for covered hospital care at no charge. However, Part B premiums for covered physician and out-patient services are a major expense for seniors using basic Medicare (Parts A and B) and are also included in premiums for Medicare Advantage plans.
For most existing beneficiaries in 2012, the monthly Part B premium will increase only $3.50, to $99.90 from $96.40. Some more recent beneficiaries have already been paying either $115.40 or $110.50 a month, so their premiums will actually decline in 2012. In addition, the annual deductible for Part B expenses is being lowered by $22 next year, to $140 from $162.
Higher-earning beneficiaries (above $170,000 for married couples and $85,000 for individuals) pay larger premiums based on their modified adjusted gross incomes. Here, too, however, 2012 will bring lower premiums.
The increase in Part B premiums was preceded by last week's announcement that Social Security benefits will rise by 3.6 percent in 2012 due to its annual cost of living adjustment (COLA). Low rates of inflation meant there was no COLA in either 2010 or 2011. Under the government's "hold harmless" rules, that meant Part B premiums could not rise for existing beneficiaries. However, the premiums did increase for new beneficiaries in 2010 and 2011, and also for higher-income beneficiaries. Now, with a COLA increase in 2012, Part B premiums were permitted to rise as well, and most observers had expected larger increases than those announced. Because the premiums are paid out of monthly Social Security payments, the good news about Part B premiums is that seniors will keep most, if not all, of the 2012 COLA.
Part B premiums from consumers pay only about 25 percent of the bill for Medicare's covered physician and out-patient expenses. Last year, consumer premiums totaled $52 billion, with about five-sixths coming from participants age 65 and older. The other sixth was paid by disabled workers under age 65, who were also covered by Medicare. Total program expenses, however, were nearly $213 billion. The $161 billion gap between premiums and expenses was paid for out of general federal funds.
In approaching the annual enrollment process, Medicare beneficiaries overwhelmingly say they are satisfied with their health plans and have no plans to switch. Medicare experts, from think tanks to health insurers to Medicare officials, say that better and often cheaper coverage plans are available if only seniors would shop for them.
Medicare experts and surveys of Medicare participants find that the strongest reason seniors stay with their plan is that they are overwhelmed by the complexity of Medicare. There are dozens of plans to choose from, each having several components with their own range of choices. "Differentiating among the different coverages and plans is very difficult, says Paul Gada, an expert with Allsup Medicare Advisor, a fee-based provider of Medicare plan selection services. "People get mind-numbed, and they tune out."
"People coming into Medicare are often shifting from an employer healthcare insurance model" that is very simple by comparison, Gada adds. Employer plans have few options and it's relatively easy to pick one, he says. "Then you get into the field of Medicare, where there are dozens of options, and now every piece of that plan coverage is extremely important."
This year, another major reason for concern is that Medicare's annual open enrollment period began earlier than normal and also ends earlier—on December 7 instead of at the end of the year. By the time people get around to focusing on 2012 Medicare plans, they may be too late to make informed choices.
"Many families sat around the table at Christmas time and decided what they wanted to do" about the next year's Medicare coverage, says Jan Berger, chief medical officer at Silverlink Communications, a healthcare advisory firm. Because this year's enrollment period ends December 7, that will be too late. "I jokingly say to people that they have to push the holiday back by one, and do this at the Thanksgiving table and not the Christmas table."
Finding the right doctors is the most important part of Medicare coverage, according to a poll of Medicare participants sponsored by Allsup. And fear of losing access to doctors is a top reason people don't want to leave their current Medicare plan. In reality, most doctors accept Medicare, and those that do accept all common Medicare insurance policies. The primary exception would be Medicare Advantage plans that have a tight network of accepted providers like a health maintenance organization (HMO).
Other top issues for seniors, Allsup says, are the levels of co-pays and out-of-pocket expenses, that specific prescription drugs are covered by a plan, and monthly premium costs. Its survey found that 82 percent of Medicare beneficiaries have never changed their plan, while only 11 percent have changed plans once, and 7 percent more than once.
This year, Medicare has improved its quality ratings of Medicare Advantage and prescription drug plans, and hopes that the ratings (from one to five stars) will help people easily identify higher-quality plans. However, there are relatively few five-star plans and it may be hard for the typical Medicare user to access or understand the wealth of plan information that Medicare has posted online.