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Compare options for Medicare enrollment

Research on premiums, co-payments and covered drugs can help prevent making costly mistakes when choosing among numerous private plans.

November 24, 2012|By Kristen Gerencher, Marketwatch

If you have Medicare coverage or you help someone who does, it's time for your annual homework assignment: comparing your options during open enrollment to see if you can do better.

It can be intimidating, but the payoff for your effort is potential savings of hundreds to thousands of dollars.

Through Dec. 7, Americans enrolled in Medicare, the federal health insurance program for people age 65 and older and the disabled, can make changes in how they receive their benefits. Those changes will take effect Jan. 1.

"What is daunting to Medicare beneficiaries is the sheer number of private plan options out there," said Fred Riccardi, director of programs and outreach for the Medicare Rights Center, a nonprofit group in New York. "They all have different premiums and co-payments and different covered drugs and restrictions on drugs."

Here are five of the costliest mistakes beneficiaries often make during open enrollment, according to experts:

Mistake No. 1: Not bothering to give your current coverage a checkup.

The first step is to take stock of what you have. Even if you like your drug coverage, make sure you review your plan's annual notice of change, a letter from the companies that Part D enrollees should have received by now, Riccardi said.

"It should say whether a drug that they're taking is no longer covered," he said. "It should specify how their premium is changing or if a pharmacy is leaving the network."

Mistake No. 2: Failing to shop around or only considering premium costs if you do.

If you pass on seeing what's out there, you run the risk of overpaying for your drugs next year by default.

"You really have to look to see that the drugs [you take] are covered at the best possible price," said Katy Votava, founder and president of, a consulting service focused on Medicare and healthcare costs. At a minimum, beneficiaries should compare drug plans every two years because costs often creep up, she said. "People assume drug coverage is more standardized than it is."

In fact, drug plans, which you can compare at, are all over the map in terms of how they structure premiums, deductibles, co-payments and tiers of coverage.

"You could have a $10-a-month co-pay vs. a $40-a-month co-pay. You could have one medication covered for $30 a month and the other not covered at all," Votava said, noting it's possible to save $2,000 to $4,000 just by being in the right plan.

In addition to making sure the drugs you need are on the formulary, or list of covered drugs, and that your pharmacy is in the network, see whether plans impose prior authorization, step therapy, quantity limits or other restrictions, Riccardi said.

Mistake No. 3: Failing to account for out-of-pocket maximums.

This is the number that tells you how much you could pay in a year before the plan kicks in to cover what's considered catastrophic costs. Read the fine print to understand what the plan does and doesn't count toward its out-of-pocket maximum. Factoring in worst-case scenarios could save you thousands of dollars if you develop a condition that requires extensive health services or a pricey prescription drug. Then compare plans and do the math.

Mistake No. 4: Choosing a Medicare Advantage plan without first checking if your doctors are in network.

About 1 in 4 Medicare beneficiaries chooses a Medicare Advantage plan, which sometimes offers benefits beyond what's included in traditional Medicare. If you're considering a Medicare Advantage plan, remember that this model means seeing out-of-network providers can quickly become a costly proposition for you. Before signing up for this option, call your preferred doctors, specialists and hospitals to verify that they participate in the plan's network.

Mistake No. 5: Assuming retiree health coverage from a former employer is automatically the best deal or misunderstanding how it interacts with Medicare's various parts.

Retirees are often loyal to their old employers, Votava said, but their retiree plan may not be the gold standard in terms of value for their money. In some cases, retirees could get better coverage at a lower cost by going with original Medicare and a Medigap plan or a Medicare Advantage plan. A basic rule of thumb is if seniors are spending more than $250 to $300 a month for their retiree coverage, they should shop around, Votava said. "Even people who are paying $200 could be paying $125."

If you need help weighing your options or enrolling in a Medicare plan, there are several free resources you can consult. has a Plan Finder tool that works by ZIP Code. Counselors also can assist you at (800) 633-4227.

States also run help centers through

AARP has Medicare enrollment guides in English and Spanish on its website,

Kristen Gerencher writes for

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