My Thanksgiving ritual each year consists of heaps of turkey, corn casserole and apple pie – as well as quiet time devoted to helping relatives choose Medicare prescription drug plans for the following year.
Most people partake in similar gorging, but not enough spend the time to compare health plans for their relatives. My experience this past weekend is a particularly instructive example of how costly it can be to do nothing.
With open enrollment for 2014 drawing to a close this Saturday, there’s little time for delay. (The process of picking a drug plan in Medicare is totally different from using healthcare.gov, the federal health insurance exchange for people under age 65 who are not in Medicare.)
Unlike Medicare’s hospital and doctor benefits, which are managed by the federal government, seniors and disabled people needing drug coverage must choose a subsidized, privately run plan under contract with Medicare. The 36 million enrollees in the program usually have dozens of choices that offer an array of monthly premiums, deductibles and copayments. The plans have different preferred drugs and different requirements for prior approval for expensive generics.
Depending on the drugs each person takes, some plans are much cheaper than others.
Sounds good so far, but there’s a giant catch: Once a person signs up for a plan, his or her enrollment continues from year to year if the person does nothing – even if the plan raises its prices and tightens its requirements. It’s up to enrollees to determine if there’s a better choice, and they can switch plans once a year (during open enrollment).
Consider my in-laws, who live near Dallas.
Last year, I helped them pick a pretty awesome plan that cost each of them $31.10 per month. It has no drug deductible, meaning they didn’t have to pay out of their pockets before their drug coverage began. And generic drugs cost them nothing. Both only take generic drugs – several of them, mind you – and their annual drug costs were less than $375.
But if they had chosen to stay with their plan for next year, prices would have exploded. Their monthly premium would have increased to $47.10 and they would have had drug co-pays of at least $3 per prescription. When you add it all up, my mother-in-law’s annual costs would have more than tripled, to $1,146, and my father-in-law’s would have increased to $1,086.
That’s a steep price for doing nothing.
By shopping around, my father-in-law was able to select a plan that will cost him $415 (assuming his drugs remain the same.) My mother-in-law’s costs will increase to $691. Even though both will see their costs rise, by changing their plans, they cut their tab in half from what it would have been.
Comparison shopping sounds like a no-brainer, but for many reasons, it’s not. It is time consuming and eye glazing even for a health-care journalist to enter in drugs and review the resulting options. A study commissioned by the Kaiser Family Foundation in October found that only 13 percent of Part D enrollees, on average, switched plans each year between 2006 and 2010. Seven out of 10 people continuously enrolled in plans from 2006 to 2010 never switched.
(The analysis only looked at stand-alone drug plans, not Medicare Advantage plans in which drugs are offered in HMOs. It also excluded low-income beneficiaries, whose costs are heavily subsidized.)
“Only a small fraction of enrollees, however, are enrolled in the lowest-cost Part D plan available to them, based on the specific drugs they take,” the report said. “Therefore, many Part D enrollees incur higher out-of-pocket costs than would be the case with a different plan selection.”
“Part D enrollees often have difficulty with the plan selection process and find the decision-making complicated, especially because of the large number of available plans.”
What the study found, essentially, is that older people and the disabled may be lulled in by lower monthly premiums, only to find that their actual drug prices are much higher.
So why don’t people switch more regularly? The authors offer a few theories:
In one view, enrollment stability could be a sign of enrollees’ satisfaction with their plans. Another view is that beneficiaries avoid “rocking the boat,” by staying in their current plans, preferring the status quo (even at a higher cost) over the unknowns of a new plan. Alternatively, the low rate of switching plans could indicate that Medicare beneficiaries are not fully engaged in the Part D program’s choice-based system and that the task of reviewing and comparing plans in the face of many different options may be too difficult or may not seem worth the effort. This view is supported by some qualitative evidence from polls and focus groups, where beneficiaries have reported that they would prefer less choice and a simpler system.
Based on my experience helping my family members, I find the last explanation the most plausible.
Either way, whether you are a Medicare enrollee or you are friends or relatives with one, compare options. Open enrollment for 2014 ends Saturday, Dec. 7.
Plenty of help is available from Medicare and others. Here’s one place to start: