Save Money on Medicare

If you have a Medicare Part D prescription-drug plan or a Medicare Advantage plan (which combines medical and drug coverage), you have an opportunity to switch plans every year during open enrollment, which runs from October 15 to December 7.

Many people put their Medicare Advantage and Part D plans on autopilot, although the choice of plans, costs and coverage, as well as your health care needs, can change from year to year. Sticking with the status quo could be a costly mistake in the coming year, because there have been major changes in benefits and coverage.

"Individuals are going to have to be much more conscious about their health care needs when they choose a plan for 2019," says Tatiana Fassieux, of California Health Advocates, which runs the state's Medicare counseling program. More insurers are offering plans with low premiums, but there are trade-offs, such as higher co-payments for drugs or smaller provider networks. If you're healthy, these plans could save you money. But a low-premium plan could end up costing you more if you have expensive medications or a lot of health care needs.

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Cut the cost of Part D

The average premium for Part D plans is decreasing by $1 per month in 2019, to $32.50, according to the Centers for Medicare and Medicaid Services. New plans are entering the market (such as those from Mutual of Omaha, which offers popular Medicare supplemental insurance, or "medigap," plans), and more insurers are introducing prescription-drug plans with lower premiums.

But a drug plan with low premiums could actually be more costly if it charges high co-payments. Many plans have four pricing tiers: preferred and nonpreferred generics (with typical co-payments of $0 to $20 per month) and preferred and nonpreferred brand-name drugs (you may pay 20% to 40% of the cost). Even if your premiums stay the same, your costs could go up if your drugs are switched to a different tier.

The "doughnut hole"—the coverage gap during which you pay a larger portion of the costs—is closing in 2019, one year earlier than originally scheduled. Even though the doughnut hole is vanishing, you'll still need to pick up part of the tab. After the total cost of your drugs reaches $3,820, you'll pay up to 25% of the cost of brand-name drugs (or 37% of the cost of generics) until you spend $5,100 on drugs, says Tricia Neuman, director of the Kaiser Family Foundation's program on Medicare policy. After that you pay 5% of the drug costs, with no cap.

Fortunately, the Medicare Plan Finder (www.medicare.gov/find-a-plan; available after October 1 for 2019 plans) helps you work through these calculations and see how much you'll pay for your drugs. Type in your zip code, medicines and dosages, and you'll see the total costs—premiums plus cost sharing—for your drugs under each plan available to you.

Find out whether you need to use a preferred pharmacy to get the lowest co-payments. The Humana Walmart plan, for example, has the lowest co-payments if you buy your drugs at Walmart, at Sam's Club or through Humana's mail-order pharmacy. You can also get help choosing a plan from your State Health Insurance Assistance Program (go to www.shiptacenter.org or call Medicare at 800-633-4227 for local contacts).

Medicare Advantage changes

If you have Medicare Advantage coverage, it's particularly important to compare your options this year—even if you've been happy with your current plan. You may have new insurers to choose from, more options with lower premiums (but higher out-of-pocket costs), and even some extra benefits. "We're seeing more supplemental benefits, such as dental coverage and over-the-counter drug coverage, as well as new types of benefits, such as transportation and meals," says Diane Hollie of Gorman Health Group, a health care consulting firm.

Hollie says the biggest growth is among plans with low premiums (some charge nothing beyond the Medicare Part B premium). But those plans may not end up being the least expensive for your situation. "Some have smaller provider networks, or they might have higher co-pays for the hospital or for specialists," says Hollie.Some plans offer more than one version with the same set of benefits but a different combination of premiums and co-payments, says Agnes Strandberg, senior vice president of Kaiser Permanente Medicare health plans.

To compare Medicare Advantage plans on the Medicare Plan Finder, type in your zip code, drugs and dosages, and your general health condition. Then click on "Medicare health plans." Look at the "estimated annual health and drug costs" column for the total cost of premiums and co-payments, and click on "compare plans" for details. Find out how each plan covers care you typically use, as well as each plan's out-of-pocket maximum, which is the most you can spend during the year (not counting prescription drugs). You'll also see each plan's quality ratings, which assess coverage and customer service. Few plans receive the top, five-star rating, but you can find many good plans with four or four and a half stars.

Then check whether the doctors and hospitals you'd like to use are in the plan's provider network. Plans can change networks from year to year, so don't assume your doctors will still be covered next year. Call your doctor or the insurer for this information. Be sure to ask about the specific plan name, because some insurers offer several plans in the same area with different networks.

Find out what happens if you go out of network. Some plans let you use out-of-network providers but charge higher co-payments, deductibles and out-of-pocket maximums. But other plans cover out-of-network providers only in emergencies.

See if the plan you're interested in provides extra benefits. Most offer vision and hearing care and fitness memberships, and some include dental care or charge about $20 extra per month for the coverage, says Alan Mittermaier of Health Metrix Research, which analyzes Medicare Advantage plans (see www.medicarenewswatch.com). The Centers for Medicare and Medicaid Services recently made it easier for plans to offer more supplemental benefits, such as transportation to the doctor's office.

Another change for 2019 is a new opportunity to change plans after open enrollment. You have from January 1 to March 31 to switch to a different Medicare Advantage plan. You can also switch into a plan with a five-star rating anytime, if one is available in your area.

Pick the best medigap policy

There is no annual open-enrollment period for Medicare supplemental insurance, but this is a good time to think about that coverage, too. Also called medigap policies, the plans come in 10 standardized versions, each with its own letter designation: A through D; F; G; and K through N. Even though all plans with the same letter designation provide the same coverage, prices vary by company. For example, premiums for a 65-year-old man in Dallas range from $132 to $388 per month for a Plan F policy, according to the American Association for Medicare Supplement Insurance.

You can choose any medigap plan within six months of enrolling in Medicare Part B. But if you try to buy a new policy or change insurers after that—or if you've had a Medicare Advantage plan for more than a year and want to switch to traditional Medicare and a medigap policy—medigap insurers in most states can reject you or charge more because of preexisting conditions. "The decision someone makes when they first go on Medicare may be irrevocable," Neuman says.

However, you may be able to change plans even if you have health issues. Connecticut, Massachusetts and New York residents may switch plans regardless of preexisting conditions. Other states let you switch plans at certain times. For example, Californians may switch to a plan with the same or fewer benefits up to 30 days after their birthday each year. For more information, go to www.naic.org/map for a link to your state insurance department. In all states, you may switch to a medigap policy if you move out of your Medicare Advantage plan's service area or change your mind within 12 months of signing up for Medicare Advantage at age 65.

Avoid a spike in premiums

Most people pay $134 per month for Medicare Part B medical insurance in 2018. But if your adjusted gross income (plus tax-exempt interest income) is more than $85,000 if you're single or $170,000 if you're married filing jointly, you have to pay more—from $187.50 to $428.60 per month in 2018. (The 2019 premiums should be announced by November.) You'll also have to pay an extra $13 to $74.80 each month for Part D prescription-drug coverage.

Even if you've retired, your income can easily cross the threshold if you have a taxable pension or withdraw money from tax-deferred retirement accounts. And the income levels to reach the middle surcharge level—raising premiums to $348.30 per month—decreased in 2018.

Minimize the hit. You may be able to reduce your income and minimize the surcharge; you can also contest it. The surcharge is generally based on your last tax return on file, meaning your 2017 income is used to determine the 2019 surcharge. But if you've experienced certain life-changing events since then—such as retirement, divorce or the death of a spouse—you can ask the Social Security Administration to use your more-recent income when calculating any surcharge for the year. Submit Form SSA-44 to the Social Security Administration with evidence (such as a statement from your employer with the date of your retirement) that you experienced an eligible life-changing event, plus an estimate of your reduced income for the year.

You can't request the reduction until after the life-changing event has occurred, but it's a good idea to submit the paperwork as soon as possible, says Darren Lutz, a spokesman for the Social Security Administration. If you have to pay the surcharge for a few months while the request is being processed, your extra premiums will eventually be refunded. (For more information, see "Medicare Premiums: Rules for Higher-Income Beneficiaries," at www.ssa.gov/medicare.)

Preventive medicine. The income that triggers the surcharge is not adjusted for inflation under the current law, so even more people are likely to get hit in the future. Start planning in advance to help reduce your adjusted gross income in retirement and minimize the surcharge. "It's really important to look at how you're invested ahead of time," says Ron Mastrogiovanni, CEO of HealthView, which focuses on health care costs.

He recommends contributing to a Roth 401(k) or Roth IRA. Money from those accounts can be withdrawn tax-free in retirement and is not included in the surcharge calculation. (But be careful about converting money from a traditional IRA to a Roth within two years of signing up for Part B because that will increase your income for the year.)

You can also contribute to a health savings account before you enroll in Medicare. You can use money from an HSA tax-free for Medicare premiums and other medical expenses, and it isn't included in the surcharge calculation. After age 70½, you can transfer up to $100,000 from a traditional IRA to charity each year, which counts as your required minimum distribution but isn't included in your adjusted gross income.