Kelly Greene in the Wall Street Journal reminds seniors that Medicare’s open-enrollment period is an opportunity for them to lower their bills by re-evaluating their Medicare coverage. Just as you rebalance an investment portfolio, as seniors’ needs change, they need to make adjustments to see whether they are getting the best price for the same services. Elementary, you say? Here’s the shocking truth. A a recent Allsup survey of 1,000 Medicare beneficiaries 65 or older found:

  • Only 15% said they had changed their Medicare plans in the past year or plan to do so in the next 12 months.

The A B Cs of Medicare Coverage

A and B – The Basics: Each year, Medicare recipients have to choose their coverage. Traditional Medicare is comprised of parts A (hospitalization) and Part B (outpatient care, including doctor visits.) With Part D (prescription drugs) seniors have to choose a private drug plan.
Supplemental Policies: Recipients can also choose to buy a separate Medigap policy to help insure costs that otherwise aren’t covered.
C – Medicare Advantage: Instead of using parts B and D, recipients can choose a Medicare Advantage plan (Part C) from a private provider. This can also cover additional benefits not available through traditional Medicare such as drugs, dental work and eye appointments.

Step 1: Take a Fresh Look Each Year

With all these options, consumers need to take a fresh look at their choices each year. The recipient needs to read the details about their plan costs and benefits in your Annual Notice of Change, which should arrive in September. The reason is that coverage and costs can change. For instance, drug plans can make changes to the specific medications they cover. And the costs that private insurers charge for premiums, copays and deductibles are constantly changing:
  • Seven of the top 10 drug plans will have double-digit premium increases next year, according to Avalere Health, a health-care consulting firm.
  • Some Medicare Advantage Plans are raising their out-of-pocket costs for 2013, such as the costs that must be paid for the first six days of hospitalization, or for premiums and deductibles.

Step 2: Know How Medicare Premium Rates Are Set

Medicare premiums are based on the recipient’s modified adjusted gross income from two years earlier. The income brackets have been frozen through 2019. For a chart listing the brackets and premiums, see the Social Security Administration publication “Medicare Premiums: Rules for Higher-Income Beneficiaries” at ssa.gov. Here are some facts about how the premium is determined
  • While the standard Part B premium is $99.90, Those with 2010 incomes above $85,000 (or $170,000 for married couples filing a joint tax return) pay more than the standard Part B premium, and higher Part D (drug program) premiums.
  • Higher-income people can take advantage of a special adjustment that can reduce premiums if their incomes have fallen due to “life changing” events, such as the death of a spouse, divorce or work stoppage (this is called  an “Income Related Monthly Adjustment Amount redetermination.”)
  • Social Security won’t recognize some other events that temporarily boost a person’s income, including capital gains and converting a traditional individual retirement account to a Roth IRA.

Step 3: Consult a Planner

Some Medicare beneficiaries and their children consult professionals for help. Advisory firms like Allsup can charge a small monthly fee to help people choose their Medicare coverage and manage it on an ongoing basis, or an affordable lump sum to assess all a person’s Medicare options. It can make a difference. For example, life changes can knock a new recipient into a higher premium category, but with proper planning, recipients may avoid this by timing income-producing investment moves to piggyback on other life events, such as retirement. And, recipients may get a reprieve under certain circumstances, that can reduce their premium. Here’s an example:

  • If a recipient works past 65 in a job that provides health coverage, and signs up for Medicare a few months before retiring, his income from two years before can puts him over the threshold for larger premiums – even though his retirement income is significantly less. This can be avoided.

There are also free resources for independent counseling, including: the Medicare Rights Center, and your State Health Insurance Assistance Program.

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