A New Medicare Study Reveals the Key Healthcare Move 89% of Americans Never Make

By Markets Fool.com


Source: Medicare.gov

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One of the biggest concerns that retirees face is how to deal with their healthcare expenses, and Medicare plays a vital role in helping retirees manage the financial demands of staying healthy. Yet even though more than 55 million Americans will participate in the Medicare program this year, a recent study shows that only a tiny fraction of those participants choose to make a move that in some cases could save them thousands of dollars in healthcare costs.

The study from researchers at the Kaiser Family Foundation focused on the Medicare Advantage program, an alternative to traditional Medicare that utilizes private insurance companies. Although the study, published in Health Affairs, spent a good deal of time analyzing decisions that newly retired enrollees made about Medicare Advantage, it also found that a very small number of people take advantage of their ability to switch between traditional Medicare and the Medicare Advantage program each year.

Source: Medicare.gov

Specifically, from 2006 to 2011, less than 4% of traditional Medicare participants each year switched from their current coverage to receive Medicare Advantage coverage instead. A slightly larger number moved in the other direction, but even that group averaged out to less than 5% of Medicare Advantage participants opting to go back to traditional Medicare. When you look at the entire five-year period, only 11% of Medicare beneficiaries and 10% of Medicare Advantage participants switched.

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Why the Medicare study is troubling
The study's results show how loyal most retirees remain to whichever choice they first make with respect to traditional Medicare and Medicare Advantage. Even though the Medicare rules make switching between the two programs relatively easy on an annual basis, it's apparent that few participants ever make that shift.

Of course, one reason why people might not change their Medicare coverage is that their initial choice remains the best for them. After all, there's no reason to switch between the two programs if you continue to be better off under one Medicare option year in and year out.

But the sad reality is that most retirees find their Medicare options too difficult to understand to make informed decisions that could save them money. Therefore, they stick not only with traditional Medicare or Medicare Advantage but also with the specific plan options they select for items like prescription drug coverage or supplemental insurance plans. As Gretchen Jacobson, associate director of the Program on Medicare Policy at the Kaiser Family Foundation and the lead author on the study, said last year, "People tend to stick with the plan they originally chose. ... Seniors said they don't like to revisit their plan choices and go through that process again because they found it frustrating to begin with."

Source: Medicare.gov

Meanwhile, many Americans never pay attention to the fact that key aspects of their Medicare coverage can change every year. For those who use private insurers for Medicare Advantage, Medigap supplemental insurance, or Part D prescription drug coverage, the specific benefits of their plans can change dramatically from year to year. Premiums can rise and fall, and coverage for certain procedures, services, and prescriptions can become available or unavailable from one year to the next.

Medicare Advantage vs. traditional Medicare
Even the big-picture question of whether to go with traditional Medicare or Medicare Advantage can see the economics change drastically in a year's time. Typical Medicare Advantage policies cover more than traditional Medicare, with many plans incorporating at least some of what you'd find in a Medigap supplemental policy to traditional Medicare. But when you compare the cost of traditional Medicare plus a Medigap policy against the cost of a Medicare Advantage policy, what looks cheaper one year can be more expense the next -- especially if your health status changes dramatically.

For instance, Medicare Advantage providers such as UnitedHealth , Aetna , and Humana receive subsidies that the federal government provides, allowing more than half of all Medicare Advantage plans in 2013 to offer services at no extra cost above the regular Medicare premium. That spurred a big increase in enrollment in Medicare Advantage programs, with the percentage of participants more than doubling over the past decade to about 30% of all Medicare recipients. But this year, industry analysts expect fewer than 20% of Medicare Advantage plans to be cost-free, and that could leave more retirees in a situation where they'd benefit from moving back to traditional Medicare coverage.

Look at all the options

This page on the Medicare website will help you search for plans. Source: Medicare.gov

The Centers for Medicare & Medicaid Services actively encourage people to shop their plans during each annual open enrollment period. With its online Medicare Plan Finder, you can find out all the options available to you and then choose the one that best meets your needs. Although it's too late this year to switch from traditional Medicare to a Medicare Advantage Plan, those who are already in a Medicare Advantage Plan have until Feb. 14 to switch back to traditional Medicare if they want.

Medicare does have some complicated aspects. But with hundreds of thousands of dollars in potential healthcare costs on the line, it's worth it to take the time to make sure you make the most of your Medicare coverage.

The article A New Medicare Study Reveals the Key Healthcare Move 89% of Americans Never Make originally appeared on Fool.com.

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