Open enrollment season for retirees is underway, and shopping around for a new Medicare plan for 2016 could save you money. Enrolling and changing plans can be such a daunting task, some seniors may be tempted to just sign up quickly or stick with what they have without doing their homework. That could be very costly, especially next year.
In 2016, there will be no cost-of-living adjustment for Social Security retirement benefits. As a result, millions of new Medicare enrollees, those collecting Social Security for the first time and higher-income retirees could see a large increase in out-of-pocket health-care costs.
That is why it is important to cut costs where you can. Take these steps before the Dec. 7 deadline for Medicare open enrollment:
In evaluating your options, consider your current health-care needs and whether you anticipate any significant lifestyle or health changes in the future. Are there specific doctors that you want to keep seeing? "What's your doctor's favorite plan? "The plan that is best for you is the one that provides coverage for the doctors that you need," said financial advisor and physician Carolyn McClanahan, founder of Life Planning Partners in Jacksonville, Florida.
According to Fidelity, increasing prescription drug costs account for much of the rise in overall retiree health-care expenses. For the Medicare Part D drug plan, the average premium is expected to remain stable at $32.50 a month next year. However, the lowest premium in most states is expected to be $18.40 a month, according to Patricia Barry, senior editor of the AARP Bulletin and author of "Medicare for Dummies." The highest premium is a plan in Florida that will charge $174.70.
But your out-of-pocket costs could increase significantly if your drugs are not included in the plan this year. So make sure the prescription drugs that you need have not been dropped. And check to see if you can switch to a cheaper, generic version of the medication. Go to the Medicare.gov website to compare Part D plans' premiums and copays, based on the drugs that you take, to get an estimate of your costs. You can also contact your state health insurance assistance program for free consultation. To further cut costs, you can use a prescription drug pricing service, like the One Rx mobile app, to compare prices for medications. OneRx will also let you know if there are coupons or discounts available for your medications.
Don't pick a plan based on the premium alone. Estimate your likely overall costs, including premiums, copayments and deductibles. Always consider the out-of-pocket maximum to get an idea of the worst-case scenario. "Look at how much you go to doctor every year. If you go a lot, most likely you'll hit the out-of-pocket maximum," McClanahan said. "If you never go, it's probably better to go with cheaper plan, but put money aside [for out-of-pocket costs] just in case you get sick." Compare premiums and total out-of-pocket costs using the government's Medicare Plan Finder.
If you have supplemental insurance with your Medicare Part B plan, you may be able to save money by reevaluating your Medigap policy. If you are relatively healthy, you can consider to switching to a plan with lower premiums in return for some cost sharing. Compare prices for plans in your area using the Medigap search tool at Medicare.gov or on your state insurance department web site. Medigap insurance companies are generally allowed to use medical underwriting to decide whether to accept your application and how much to charge you for the Medigap policy. Depending on your answers to various medical questions, the price for your Medigap plan may be affected, warns Tina Maldonado with Aon Retiree Health Exchange. Medigap is not subject to the typical open enrollment period.
Retirees may also want to explore getting coverage through a private Medicare Advantage plan. Enrollment is expected to be at an all-time high next year for these plans, which provide both medical and drug coverage. The federal government estimates that the average Medicare Advantage monthly premium will decrease slightly to $32.60 in 2016. However, there is a downside. These plans may have more out-of-pocket costs than other plans as well as limited provider networks. Make sure you have access to the doctors you want to see and the drugs and the pharmacies that you usually use before signing up.
Finally, it is important to shop around every year. "What may be the best plan for you this year may not be the best plan next year, in terms of plan and in terms of costs," said the AARP's Barry.