Seniors don't like change. But that reluctance to change could be costing them hundreds of dollars each year because they don't take the time each year to research the best drug plan. In fact, according to the Centers for Medicare and Medicaid Services, only about 7% of the 17 million seniors on Medicare drug plans switch plans each year.
Why is it so critical to at least research the best option each year? Insurers know seniors are reluctant to switch. Many started their plans with teaser rates the first year or two of the Medicare Part D plans (that's the drug coverage portion of Medicare) and then quickly jacked up the prices. For example, the most popular plan, with 17.8% of Medicare recipients enrolled, is AARP's Medicare Rx Preferred, which raised its average monthly premiums 50% from $26.31 in 2006, the first year, to a monthly premium of $39.39 in 2010.Seniors who chose Humana that first year and then decided they didn't want to switch are paying 182% more per month in premiums for Medicare Part D. Humana is the second largest Medicare Part D provider and serves about 9.6% of seniors. In 2006, its average monthly premiums were just $14.43, but in 2010 the monthly premium is $41.53.
And monthly premiums don't tell the entire story. Each year each plan changes its formulary, which is the list of drugs that the plan covers. They also also set tiers for these drugs. Generics are usually tier 1. Preferred brands are tier 2. Brands that are not preferred but covered are tier 3 and the most expensive brands are tier 4. Some drugs are not covered at all. Drugs in tier 1 are the cheapest and tier 4 the most expensive. But each insurer ranks the drugs differently. One insurer might rank your brand-name drugs in tier 2 and another may put it in tier 4. So the key to the game is finding the insurer that offers the highest level of coverage for the drugs you are actually taking.
That may sound confusing, but Medicare developed a very helpful tool online at Medicare.gov. If you take the time to input your drugs into the tool, it can determine which plans will give you the lowest annual cost. Remember it's not only the premium that counts. You might also have an annual deductible, which can range from $0 to $350 in 2010. In addition, you will likely have to lay out money when you pick up the drugs -- called a co-pay. Some insurers have a $0 co-pay for generics, so you can save a lot of money picking the right insurer. In my new book, The Pocket Idiot's Guide to Medicare Part D, I include screen by screen instruction about how to use this tool.
The biggest problem for all is whether or not you will make it to the doughnut hole. That's when seniors lose all coverage until their drug use becomes catastrophic. In 2010, once your total drug costs top $2,830 (that includes both co-pays and the amount the insurance company pays), you have no coverage until you have spent $4,550 out-of-pocket. There are a few plans that offer coverage in the doughnut hole, but even those plans only offer coverage for generics.
Seniors must take the time each year to research the best plan for themselves. Since formularies change, even if the premium doesn't, you could find that you have no coverage for a drug you've been taking. Always look for the plan that will give you the lowest annual cost, even if you don't recognize the name of the insurer. You can check with your pharmacist to be sure he can work with the insurer, but Medicare does back any plan offered, so there is no need to worry if you pick an insurer you have not heard of before. In fact, the lesser-known insurers tend to offer the best prices to get you as a customer.
You have until Dec. 31 to research and change plans. Take the time and do the research. You could save hundreds.
Lita Epstein has written more than 25 books including The Pocket Idiot's Guide to Medicare Part D and The Complete Idiot's Guide to Social Security and Medicare.
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