Medicare Too Complex for Many Seniors

As another open enrollment season unfolds, surveys find many seniors simply don’t understand Medicare.

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Medicare is playing a starring role in the presidential election. The 1965 law providing guaranteed healthcare to older Americans has become a battleground for the issue of whether Obamacare is good for the country and, more broadly, how the nation should rein in its soaring healthcare costs.

The federal government will implement health insurance exchanges in the 25 states that are not moving forward, helping the uninsured gain coverage.
Health care providers are working together to deliver better, less expensive care.

While Medicare may be starring in this political drama, it is in many ways a misunderstood actor on the national stage. The program that exists today is far different than it was in 1965, when former President Harry Truman became the nation's first Medicare enrollee. And the pace of change has only accelerated in recent years, due not only to the health reform law itself but also to the explosion of new informational and medical technologies.

Already, many consumers are overwhelmed by the number of available Medicare insurance plans, the complexities within those plans, and the arduous homework needed to determine their prescription drug choices and out-of-pocket costs. Health reform supporters say the new law will eventually make it easier for consumers to understand Medicare and make sensible healthcare choices. But that goal is at least several years away. Until then, Medicare will become more complicated, not less.

Basic Medicare has Part A for hospital services and Part B for physician and outpatient expenses. Part C of Medicare came along in 1997 and provided a managed-care version of the program that was first called "Medicare+Choice." It had a rocky history and evolved into today's Medicare Advantage program. In 2006, a new prescription drug program took effect and became Part D of the program.

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Consumers buy private insurance policies to participate in these various programs. Private insurers also offer so-called Medigap or Medicare Supplement insurance policies to plug some of the holes in basic Medicare coverage. While consumers use private policies, the rules of those policies largely are set by Medicare officials and the insurance companies must agree to abide by them when they participate in the program.

Extensive research surveys regularly find that consumers do not well understand these different pieces of Medicare or how they can be combined to produce the coverage most suited to an individual's needs.

Health reform is making many improvements to Medicare, but they are slow to catch on with seniors. These include an expanded set of free preventive health services, a government system that rates the quality of private Medicare insurance plans, new tools to encourage hospitals and physicians to improve the quality of their care, and the first-ever public reporting system that will require all insurance plans to describe their features in the same ways, providing consumers with the ability to accurately compare different plans.

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Every year, the complexity of Medicare is put on display when seniors choose their Medicare plans for the following year. This year's open enrollment period for 2013 plans began October 15 and extends to December 7. The Kaiser Family Foundation polled seniors over the summer and recently issued a report on their understanding of Medicare.

As with most other studies of consumer understanding of different topics, Kaiser found that the nation's neediest people are also the most likely to lack sufficient knowledge about Medicare. More than a third of low-income seniors, for example, said they didn't even know there was an open enrollment period for Medicare. By contrast, only 11 percent of higher-income seniors lacked such awareness.

Across racial lines, 42 percent of black seniors and 49 percent of Hispanic seniors were unaware of open enrollment, compared with 18 percent of white people age 65 and older. Among seniors with less than a high school education, 48 percent were unaware of open enrollment versus only 16 percent of seniors with college degrees. And among seniors with functional impairments or in fair or poor health, 40 percent did not know about open enrollment—twice the level of seniors without functional impairments.

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Even among Medicare-eligible people who knew they could change plan choices each year, only 60 percent said they reviewed their coverage options each year. "While seniors might have reasons for not comparing plans on an annual basis, our finding does not seem to be primarily attributable to lack of awareness," the Kaiser report said, "as 66 percent of those who rarely or never compare plans say they are aware of the open enrollment period."

Among those who review plans each year, nearly 60 percent reported that it was easy to review and compare coverage options, and 35 percent said it was hard. Kaiser said this response was an encouraging improvement from several years ago, when the Part D drug benefit was introduced.