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Determining Your Elderly Clients' Best Fit in Medicare Plans

Determining Your Elderly Clients' Best Fit in Medicare Plans

What's the best move you can make on behalf of older clients this month? Hint: It has nothing to do with the money you manage for them.

But you may be able to help senior clients save thousands of dollars in out-of-pocket health care costs by encouraging them to comparison shop for Medicare prescription drug and managed care options during the program's annual fall enrollment season.

It's unfortunate, but all seniors on Medicare should do a rigorous comparison shopping exercise each year — especially for Medicare D drug plans. Insurance companies often change their offerings year to year in ways that can effect out-of-pocket drug costs or make it more difficult to get certain drugs. At the same time, your clients' drug needs may have changed since the last plan selection period in ways that make a given plan less beneficial.

This year, the shopping chore comes a bit earlier. The 2010 health reform law moved up the annual enrollment period by several weeks; enrollment will be open from Oct. 15 to Dec. 7. “Enrollment used to end on Dec. 31, right in the holiday rush,” says Joe Baker, president of the Medicare Rights Center (MRC), a non-profit advocacy group that provides Medicare counseling to seniors. “Moving it away from the holidays will give folks a better time period to make these decisions.”

The enrollment period provides seniors an annual opportunity to change their Medicare coverage. The two basic options include:

  • Traditional, fee-for-service Medicare alongside a standalone Part D prescription drug plan; or,
  • A privately-managed Medicare Advantage all-in-one option (including hospitalization, outpatient services and prescription drugs).

Seniors can make as many changes as they like before Dec. 7; the changes take effect on Jan. 1. There's also a dis-enrollment period that runs from Jan. 1 to Feb. 14, which can be used by seniors who pick an Advantage plan but want to change their minds. During that period, it's possible to switch back to traditional Medicare, but not to a different Advantage plan. Seniors who do leave Advantage can add a standalone drug plan during that period.

The new health care reform law is reshaping certain parts of the Medicare marketplace — for the most part, in ways that benefit seniors. Avalere Health, a health care research and consulting firm, projects that enhanced competition is pushing down average premiums for both prescription drug and Advantage plans by 4 percent for 2012.

That doesn't mean prices are coming down across the board. Although some of the top 10 drug plans — which cover 77 percent of enrollees — are cutting premium prices, six are raising average prices. “Each plan tries to price for profitability on its own book of business, the population they are serving, and how generous their offering will be,” says Dan Mendelson, Avalere Health's CEO. “This is a year of change.”

Perhaps most important, the projections on average premiums are just a broad guideline on trends. Determining the best-fit plan depends on a senior's specific drug needs and how they match up to a plan's formulary rules — the list of drugs that a plan will cover, and under what circumstances.

Prescription Drug Plans

Picking a Medicare D plan really boils down to two critical considerations:

  1. Formularies

    It's important to look closely at plan formularies to understand if a drug is covered, at what cost, and the co-pays and deductibles involved. Formularies may also feature drug coverage restrictions, such as requiring direct prior authorization from a physician that can slow the process, or quantity limits. Some may also require “step therapy,” a situation where a doctor prescribes a drug, but the plan requires trying a less expensive option first.

  2. Pharmacy options

    Medicare D plans don't work with all pharmacies, and vice versa. Be sure the pharmacy you use is a preferred network pharmacy — or that a different delivery option is acceptable. Mail-order drug delivery is less expensive with some plans, but not always.

The health care reform law gradually closes the notorious “donut hole.” That's the coverage gap that — for 2012 — starts when a beneficiary's annual drug spending exceeds $2,930; coverage resumes at the “catastrophic” level of $4,700. This year, the law requires pharmaceutical companies to provide a 50 percent discount on brand-name drugs to low- and middle-income beneficiaries who find themselves in the donut hole, and a 14 percent discount on generic drugs.

Medicare Advantage Plans

Insurance companies view Advantage as an attractive market opportunity, and they are competing hard for business. Providers interviewed for a recent Kaiser Family Foundation study expressed optimism about the program's future and new bonus payment systems that reward quality improvements, although some think the shakeout isn't finished.

The number of plans offered is holding fairly steady in most regions of the country. Premiums will drop 4 percent on average next year, according to Avalere; enrollments are rising. And the insurance companies are working hard to meet the health reform's new quality standards, which qualify them to receive bonus payments.

Seniors can opt for Advantage over traditional Medicare. Most Advantage plans are managed care programs, such as HMOs or PPOs. When a senior opts for an Advantage plan, Medicare provides a fixed payment to the plan to cover Medicare Part A (hospital) and Medicare Part B (medical insurance) coverage. There are usually additional co-payments and deductibles, depending on the type of plan you join

Starting this year, Advantage plans won't be allowed to charge cost-sharing, such as coinsurances, co-pays or deductibles, for certain preventive services that don't have cost-sharing under traditional Medicare, including the initial preventive care visit, annual wellness visits and screening procedures.

Although an Advantage plan will save money for some seniors, it's important to review the plan's network of doctors to make sure yours are in the plan. Also pay close attention to the plan's co-pays, co-insurance and deductibles for in-network and out-of-network care.

Shopping Tips

If your client is comfortable using the Internet and is a do-it-yourselfer, I recommend shopping using the free Medi-care Plan Finder at the Medicare website. This also can work well for clients who may not want to use the web but have adult children willing to help out.

After plugging in a Medicare number and list of drugs, the finder displays possible plans; their estimated cost, premiums and deductibles; which drugs are covered; and customer-satisfaction ratings. The finder also will give you advice about drug use and restrictions.

Another useful feature of the Plan Finder is the plan quality rating system, which uses federal government data to measure whether patients received appropriate procedures, and patient satisfaction feedback.

Although it's possible to sign up online via the Plan Finder, the Medicare Rights Center recommends that enrollees confirm coverage information by phone with a plan representative, and keep a written record of that conversation. The center also recommends enrolling by calling Medicare's enrollment hotline (800-MEDICARE), rather than talking directly with the plan.

“If you get erroneous information from the government, that's a reason to let you out of a plan later if necessary,” says Baker. “If a plan rep gives you wrong information, you're out of luck.”

Several fee-based services will help shop and select plans for a few hundred dollars. This can be a useful option for adult children of older clients looking for a long-distance assist. For example, Allsup Medicare Advisor (866-521-7655) assigns an adviser who will provide a written personalized plan analysis and offer phone consultations.


Mark Miller is a journalist and author who writes about trends in retirement and aging. Mark edits and publishes, which has been recognized by Money magazine. He also writes “Retire Smart,” a syndicated weekly newspaper column, and contributes weekly to He is the author of The Hard Times Guide to Retirement Security: Practical Strategies for Money, Work and Living (John Wiley & Sons, 2010).

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