Welcome to the World of Medicare - My Journey through the Medicare Jungle

I'd like to share my decision process as to how I chose what option I was going to use for medical insurance.  My wife is about a year older than I am, so this decision was actually for her, but I ran through all the “what if’s” for myself as well as I think it prudent for the most part for the both of us to have the same type of coverage.

I’m not going to cover all the various options – the four “Parts” and the several “Plans” that make up the Medicare landscape and the “Tiers” than drugs are classified into.  I’ll only touch on them as it pertains to my own decision process.  There are a number of different publications to give you this background info (which you will be inundated by when you approach the magic age of 65.)

I know that there are a number of brokers who will offer to help you navigate the process of choosing among these many plans, etc.  But many of them are also paid by the plan provider, so they might also be driven by profit and not necessarily your best interest.  Thus I felt it best to examine for myself as I know myself and my wife’s situation the best.

(Note that I wrote this originally back in 2012, so some of this is now in the past, but there are still uncertainties in Obamacare - both an upcoming Supreme Court decision, and a Republican Congress).

One of the bigger decisions is whether to go with Medicare Advantage (a “Part C”) or a Medicare Supplement “Plan”.  I looked at a number of each.  The basic decision came down to a matter of risk – and I’m a relatively risk-averse person, so that’s why I chose a Medicare Supplement Plan.  There are certainly a number of good points to recommend Medicare Advantage – can get more coverage for more things for less money.  The various options all do this by restricting your choice of providers (a PPO), or by requiring you to go through a primary provider (an HMO).  Some even offer everything including drug coverage for not much more than a stand-alone drug plan.  The Capital Blue Cross PPO was a particular attractive option.

 But the biggest single risk is the impact of Obamacare (which is ongoing).  For those who have not seen one of his political maneuvers, here is a link that explains it - http://www.nypost.com/p/news/opinion/opedcolumnists/an_billion_trick_ImTBFfz7MeuZLJY7JzXEIJ.  Essentially, one of the elements of Obamacare is the drastic reduction in the pass thru from your Medicare dollars to the Part C (Medicare Advantage) plans so that the government can use those dollars for the government option.  While there is still much uncertainty in both the Supreme Court decision which is due next month, and in whether this $8 billion “experiment” will go through, there is a not insignificant chance that the Medicare Advantage option could suddenly be much more expensive.  The other part of this puzzle that makes it an issue for right now is that while you can theoretically switch plans in the case that this happens, there is only a fixed 6-month window where you can sign up for a Medicare Supplement Plan without having to go through all sorts of medical evaluation and possibly higher costs.  I’m just not willing to take the risk.  

Having made the decision to go with a Medicare Supplement Plan, the next option was which plan and which provider.  One’s personal situation is a big part of the input.  I narrowed it down to either a Plan “F” or a Plan “N”.  The basic difference is that the Plan F has essentially no deductible and no co-pays (but for a higher cost) than a Plan N which has both.  The difference in cost between an F and an N is about $40/month (from the same supplier), so the F would cost about $480/year more.  The deductible for plan N is $140 and the co-pay is $20/visit.  Since my wife and I usually have only 2-3 doctor visits per year I see the plan N costing about $200/year out of pocket ($140 + $20 x 3), but I’m saving $480 – thus coming out about $280 ahead with the Plan N.

Choosing a provider was a little more complicated – there are a “lot” of different providers.  While all Plan N’s are identical in coverage, the rate differences are based such things as number of people covered, whether the choice of hospital is restricted (Sterling offers a Plan N “Select” which gives a good rate, but requires you to use the Lehigh Valley Health Network – which is fine with me unless I was out of the area when needing services or I got referred to another specialized hospital for something).  As much as I’m not necessarily a fan of AARP, the AARP (United Healthcare) option had the best cost structure as it covers many more people.  I should point out however, that their initial age 65 rate goes up 3%/year through age 75 so don’t get fooled by the $84 rate as that goes to $120 by age 75.  But it’s still pretty good compared to the ~$140 initial rate for many of the other providers.

The final decision (since the Medicare Supplement plans do not cover prescriptions) is a Part D prescription plan.  One has to use your own “formulary” to see what drugs you normally take are covered under which “tier” in that particular plan.  You also have to look at the plan rating – basically how good their customer service is.  The Medicare.Gov website is pretty good at helping with this.  I chose the Medco plan – there are a few that are a little cheaper (for my wife’s medications), but they are not as highly rated (2.5-3 stars v. 4 stars for Medco).  I also have a lot of years of good experience with using Medco through APCI.  For my own medications, Medco is a bit higher than some, but that’s driven by the cost of one particular drug which is currently not available as a generic.  But the generic is slated to be out later this year, so by the time I make the decision for myself, I may have some different/better options available to me.  This is a choice that you can change each year depending on your own particular circumstances, so it's not like the Advantage-Supplement decision that has so many ramifications.

It is certainly easier to work for a company that only gives you one or just a few options.  The complexity of making the choices yourself is due to many factors – your own particular medical situation (what things you may be suffering from, what prescriptions you take), as well as your tolerance of risk and what your outlook might be for future years.  Only the US Government could make things this complicated (but not quite as complicated as the 8000 pages of the US Tax code!)