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Sift Through Your Medicare Choices

EDITOR'S NOTE: This article was originally published in the October 2012 issue of Kiplinger's Retirement Report. To subscribe, click here.

It's that time of year -- pumpkins, goblins and, of course, Medicare open enrollment. As you sort through your cool-weather clothes, take some time to sort through your options for a Part D prescription-drug plan or a private Medicare Advantage plan.

SEE ALSO: Special Report on Navigating Medicare

You have from October 15 to December 7 to choose a plan for 2013. If you don't take any action, you will be automatically reenrolled in your current plan.


Even if you're happy with your current plan, check out your options -- and look beyond the premiums. The average Part D premium will remain about $30 a month, but many plans are making changes to co-payments and coverage that could boost your out-of-pocket costs. A study by PlanPrescriber, a division of broker eHealth Inc., found that the average enrollee in Part D could have saved $654 in 2012 by switching to a plan that covered the same drugs at the lowest cost.

There are few big changes to Medicare for 2013. But in the holiday spirit, Uncle Sam still has some treats for you. As part of the health care law approved in 2010, the dreaded Part D "doughnut hole," which is the period during which you must pay out-of-pocket for your drugs, continues to shrink. The discount on brand-name drugs in the coverage gap will rise to 52.5%, from 50%, in 2013. And the federal subsidy for generics will rise to 21%, from 14%.

Also, people can now change Medicare Advantage plans outside of open enrollment if they switch into a plan with a five-star quality rating. This relatively new government system assesses the quality of Advantage plans. Only 12 plans qualified in 2012, but more are expected to make the cut in 2013. Here are guidelines on making a Medicare choice.

Selecting a Part D plan. You'll choose a Part D plan if you are going with traditional Medicare coverage. Even if you expect to take the same medications as you do now, review your plan's "annual notice of change," which you should have received by the end of September. The notice will let you know if your plan will increase premiums, boost co-payments and change pricing tiers. For instance, the plan may continue to charge $30 for preferred brand-name drugs and $50 for nonpreferred brand-name drugs -- but your costs will rise if any of your medications are bumped from the preferred to the nonpreferred tier.

Then see how your plan compares with your other options. Look up the costs for Part D plans in your area using's Plan Finder ( Your choices for 2013 will become available in the database on October 1.

First, type in your zip code. Then type in the name of each drug; a prompt will give you choices on dosages and frequency. Once you're done, you'll see a list of all your plan choices. Only consider the plans that have your drugs on their formulary, which is the approved drug list. You will see each plan's premium, deductible and co-payments. The most important column is "estimated annual drug costs," which is a projection of your total out-of-pocket costs for the year. Your costs may be lower if you choose a mail-order pharmacy.

It's especially important this year to look at your plan's preferred pharmacies. An increasing number of plans are making deals with networks of certain pharmacies to offer better rates, says Ross Blair, president of, a Web site that helps people compare and find information about Medicare plans. Beneficiaries should "see if their pharmacy is included in the preferred network," he says. If not, he says, it may be worthwhile to "switch pharmacies to get the network."

In 2012, for example, the Humana Walmart-Preferred Rx plan charges premiums of $15.10 a month, co-payments as low as $1 for preferred generic drugs and $5 for other generics at Walmart and Sam's Club, and no co-payment for generic drugs at RightSourceRx mail-order pharmacy. You have to pay 20% of the cost of preferred brand-name drugs at preferred pharmacies, compared with 37% at nonpreferred pharmacies. Because you get the best deals with generic drugs, ask your doctor if you can safely switch from brand-name medications.

Review your options if you've been prescribed any new medications or if any of your regular drugs, such as blockbusters Lipitor and Plavix, have gone generic over the past year. The plan that offers the best deal for the brand-name drugs may be different from the plan that offers the best deal for generics.

Also, make sure you don't have to first get prior authorization, which means your doctor must prove certain clinical criteria before the plan will approve the drug, says Cindy Polich, president of United Healthcare's Medicare and Retirement product division. Some plans also require step therapy, which will not cover a drug unless you try another drug first or your doctor shows why you can't take that other drug. If beneficiaries can't pass these hurdles, "their drugs may not be covered under the plan and they may have to pay for them out of pocket," says Polich.

Choosing a Medicare Advantage plan. The calculation becomes a bit more complicated if you're searching for an Advantage plan, which covers both drugs and medical expenses. As with Part D, look at your "annual notice of change" for information about premiums and co-payments. After typing in your zip code, go to the "Medicare Health Plan" section of the Plan Finder for cost information for plans in your area. The tool will allow you to compare premiums as well as co-payments for your drugs and medical expenses based on your health status.

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