Q. I had a letter from my Medicare plan saying it will not be available in 2012. Is this the result of the new health reform law? What should I do?
A. Don't panic. Your Medicare benefits are not being taken away and you will still have choices. And no, your plan wasn't a victim of the new health care law. But you will need to make some decisions — depending on whether the "plan" you're talking about is a Medicare Advantage health plan, a "stand-alone" Medicare prescription drug plan, or a Medicare supplemental insurance policy, also known as medigap.
Medicare Advantage health plans
These plans — mainly HMO and PPO managed care plans — are offered by private insurers as an alternative to the traditional government-run Medicare program. (To see the differences between the two, see this previous Q&A.) Since these plans began more than a decade ago, some have pulled out of Medicare and new ones have joined. All plans are free to make this business decision each calendar year. Medicare officials say that 185 Medicare Advantage plans that were offered in 2011 will not be available in some areas in 2012. However, nearly all beneficiaries will have access to health plans.
Since 2004, Medicare Advantage plans have received subsidies from the government that, on average, cost Medicare about 12 percent more for plan enrollees than if they had been receiving services in the traditional program. Citing the extra cost to the taxpayer — amounting to about $136 billion over 10 years — and the fact that this helps drive up the Part B premium for everybody on Medicare, the new health care law will gradually phase out the plan subsidies, starting in 2012. Contrary to fears that this would destroy the program or push up premiums, the average cost of premiums nationwide has fallen slightly and benefits remain "robust," according to Medicare officials, at lease in 2012.
However, private fee-for-service (PFFS) plans — a non-managed-care type of Medicare Advantage plan — did change in 2011 under a different law passed in 2008. For the first time, most of these plans were required to establish contracts with doctors, hospitals and other providers (as HMOs and PPOs have always been obliged to do) so that enrollees can be sure which providers will accept their plan. As a result, many PFFS plans chose to withdraw from Medicare in certain areas. Nationwide, the number of PFFS plans dropped from 435 to 239 in 2011 and will rise to 266 in 2012.
What you can do: If your current Medicare Advantage plan won't be available in 2012, you will still be able to choose from many other plans almost anywhere you live. (The exceptions are 28 rural counties in Colorado and one in Utah and one in Idaho, where plans have pulled out, leaving no other plan options.)
Switching to another Medicare Advantage plan: You can use the health plan finder on Medicare's website to see what other plans are available to you and compare their costs and benefits. Or you can call the Medicare help line at 1-800-633-4227 for the same information. You can join a new plan during open enrollment, which runs from October 15 to December 7, with coverage beginning Jan. 1. Coverage under your current plan will remain unchanged until Dec. 31. If you do not actively enroll in a new Medicare Advantage plan, you will automatically be covered under traditional Medicare in 2011.
Switching to traditional Medicare: This option is available to anybody on Medicare. But remember that if you change to the traditional program, you will also need to join a "stand-alone" Part D plan (see below) during open enrollment in order to get prescription drug coverage. If your current Medicare Advantage plan is going out of business or withdrawing from your area, you also have the option of buying medigap supplemental insurance that covers some or most of the out-of-pocket costs of traditional Medicare, depending on the type of policy you purchase. Provided that you are age 65 or older and apply for a medigap policy within 63 days of your health plan's coverage ending, you will have full federal guarantees and protections — meaning you cannot be denied coverage or pay more because of health problems. If you are under 65, different rules apply.
Part D prescription drug plans
Whatever state you live in, you'll still have plenty of choices in 2012 among these private "stand-alone" plans, which provide prescription drug coverage to people enrolled in traditional Medicare. The options range from 25 plans in Hawaii and Alaska to 36 in Pennsylvania and West Virginia. But some plans will be unavailable next year.
What you can do: Compare plans that are available in your state using the online drug plan finder on the Medicare website. If you enter your ZIP code and the names of the prescription drugs you take, plus their dosages and how often you take them, the plan finder automatically does the math to find the plan that covers all your drugs at the lowest out-of-pocket cost. Or call the Medicare help-line at 1-800-633-4227 for the same information.
Even if your current plan will still be available next year, making this comparison is still very worthwhile. Every year, most Part D plans change their premiums, deductibles and copayments. In 2012, premiums will slightly fall on average nationwide, but some plans will charge substantially lower premiums and others much higher ones than this year. You can compare plans and, if you want, switch to another during open enrollment, between October 15 and December 7. Coverage in the new plan starts Jan. 1.
Can you lose your drug coverage if you take no action? It depends on the circumstances:
• You will not lose coverage if your current Part D plan is still offered for 2012. Unless you actively switch to another plan, your current coverage will automatically continue next year in the plan you have now.
• You will not lose coverage if your current plan is disappearing but the insurance company that provides it offers another plan. You will be automatically switched to this other plan for 2012, unless you take steps to enroll in different plan from another insurer.
• You will lose coverage if the insurance company that provides your current plan withdraws from the Medicare Part D program in your area for 2012 and you do not enroll in another plan from a different insurer for next year. In this case, if you take no action, you will not be able to join another plan until open enrollment at the end of 2012. You will also receive a late penalty for the 12 months you were without drug coverage, in the form of a surcharge permanently added to your Part D premiums.
How will you know which category applies to you? If you fall into one of the last two groups above, you should have received a letter from your plan by October 1 saying that your current plan will not exist next year and explaining your options. If you fall into the first group, you should have received an Annual Notice of Change in September explaining all changes in costs and benefits for next year. If you can’t remember receiving a letter, or can’t find it, call your plan at the customer service number provided on your plan membership card.
Medicare Supplemental Insurance (Medigap)
It doesn't happen often, but from time to time medigap insurers go out of business or stop selling medigap policies in some areas. This is a cause of considerable anxiety to people who hold these policies because many believe that if they have to buy a new policy, they will lose the federal guarantees and protections they had before. But that's not true.
What you can do: If you lose medigap coverage through no fault of your own, you still have the right to buy policies A, B, C, F, K or L from any medigap insurer in your state with full federal protections. This means that an insurer cannot deny you coverage or require you to pay a higher premium based on your health status or preexisting medical conditions. But to receive those guarantees, you must apply for a new policy within 63 days of the end of your old coverage. To be on the safe side, it's best to apply before your current coverage runs out.
To compare Medigap policies available to you, and for contact information of insurers that sell them, go to the Medicare website, click on "Compare Medigap Policies" and enter your zip code. For more information, see the official publication "Choosing a Medigap Policy."
Patricia Barry is a senior editor at the AARP Bulletin.