Changes to the Medicare Advantage Plan

Starting in 2011, Medicare Advantage plans will be prohibited from charging more for some benefits that are covered by traditional Medicare.

What changes can I expect to see to in my Medicare Advantage plan during open enrollment this year? My plan’s co-payments and deductibles have increased a lot over the past few years, and my premiums have, too.

Expect those trends to continue for 2011, as Medicare Advantage plans boost out-of-pocket expenses for consumers to make up for new coverage requirements and frozen government subsidies.

Starting in 2011, Medicare Advantage plans will be prohibited from charging more for some benefits that are covered by traditional Medicare. In the past, some Medicare Advantage plans charged higher co-pays than Medicare did for services such as chemotherapy and didn’t cover the first 20 days in a skilled-nursing facility (which is covered by Medicare). Plans will have to boost coverage in these areas to to the level of traditional Medicare.

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But the bigger news is that the health-reform law gradually reduces government subsidies to private Medicare Advantage plans. Subsidies for 2011 are frozen at 2010 levels, and subsidies start to shrink beginning in 2012. Many of these all-inclusive plans are raising premiums and increasing cost-sharing to make up for rising costs and reduced revenues. And some are dropping coverage for extras, such as gym memberships and vision care, although fewer plans than was originally anticipated. “A lot of the supplemental benefits were largely left alone because they’re so popular,” says John Gorman, CEO of Gorman Health Group, a consulting firm in Washington, D.C.

Gorman points out that some Medicare Advantage plans are making less-obvious changes that could have an impact on your out-of-pocket costs – such as changing the formulary for some of the most-popular drugs. The plan may continue to charge the same co-payments for various tiers of drugs, say $5 for some drugs and $20 or more for others. But if the drugs you take are moved to a higher-cost tier, your out-of-pocket costs could rise significantly.

“If you’re taking a lot of drugs, take a look at where the plan put those drugs on the formulary,” Gorman advises. “You could end up paying more out-of-pocket with a $0 premium plan than you would with a plan that charges premiums of $25 per month.” You can compare all of the options available in your area using Medicare’s newly improved Plan Finder tool , which lets you input your drugs and dosages and shows your estimated annual costs – premiums, deductibles and co-pays – for all Medicare Health Plans (Medicare Advantage) and Part D prescription-drug plans available in your area, as well as coverage details and quality ratings. You have from November 15 to December 31 to sign up for a new Medicare Advantage or Part D plan for 2011.

Some Medicare Advantage plans will be leaving the business this year – primarily private fee-for-service plans that let you use any doctor or hospital and are subject to new network requirements. You’ll receive a notice before October 31 if your plan is dropping out, and your coverage will automatically be shifted to traditional Medicare. If this happens to you, it’s important to review your options. You could elect to get coverage through another Medicare Advantage plan or decide to fill in the gaps in traditional Medicare with a medigap plan and a separate Part D prescription-drug plan. Just remember that enrollment in those supplemental plans is not automatic; you have to sign up for them yourself.

Kimberly Lankford
Contributing Editor, Kiplinger's Personal Finance

As the "Ask Kim" columnist for Kiplinger's Personal Finance, Lankford receives hundreds of personal finance questions from readers every month. She is the author of Rescue Your Financial Life (McGraw-Hill, 2003), The Insurance Maze: How You Can Save Money on Insurance -- and Still Get the Coverage You Need (Kaplan, 2006), Kiplinger's Ask Kim for Money Smart Solutions (Kaplan, 2007) and The Kiplinger/BBB Personal Finance Guide for Military Families. She is frequently featured as a financial expert on television and radio, including NBC's Today Show, CNN, CNBC and National Public Radio.