Health care exchanges aren’t meant for retirees

The new health insurance exchanges have dominated headlines in recent weeks, with tales ranging from computer glitches that have prevented millions of uninsured Americans from signing up for coverage to a federal government shutdown triggered by congressional Republicans’ opposition to the Affordable Care Act.

Adding to the confusion is that the sign-up period for the health ex-changes, which began Oct. 1, overlaps with the annual open-enrollment period for Medicare, which runs from Oct. 15 through Dec. 7, for coverage beginning Jan. 1.

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The new exchanges, also known as health insurance marketplaces, aren’t meant for those with Medicare.

I bet a lot of clients could use some guidance during this critical Medicare open-enrollment period, particularly if their health care costs have increased or their medications have changed over the past year.

A few tips from their financial advisers about smart shopping for a new Medicare plan could help clients stretch their health care dollars and slow the drain of higher health care costs on their retirement income portfolios.

Fall open-enrollment season is the time when retirees can change their Medicare coverage.

They can do this by joining a new all-inclusive Medicare Advantage plan or by signing up for a new stand-alone prescription drug plan. Those enrolled in Medicare Advantage plans can also switch back to original Medicare during open-enrollment season, but they will also have to buy a supplemental Medigap plan and prescription drug coverage if they do.

Even if clients are satisfied with their Medicare coverage, they should review their annual notice-of-change statement from their provider. Plans can change the details of their coverage each year, including pharmacy and provider networks, costs, and drugs covered by the plan’s formulary.

A new analysis by the Kaiser Family Foundation shows that relatively few Medicare beneficiaries have used the annual open-enrollment period to switch Part D prescription drugs voluntarily even though those who do switch often lower their out-of-pocket costs as a result of changing plans.

Sane Part D plan

The vast majority — 87% on average during the four annual enrollment periods between 2006 and 2010 — stayed in the same Part D plan even though the plans could changes premiums, deductibles, cost-sharing amounts and their list of covered drugs each year, according to the Kaiser report.

A second Kaiser Family Foundation analysis noted that more Part D plans are using preferred-pharmacy networks and adopting a growing number of cost-sharing tiers for different drugs during the upcoming 2014 coverage year.

Both changes could affect beneficiaries’ out-of-pocket costs, depending on where they fill their prescriptions and the type of drugs they take.

Taking the initiative

Even though health care costs are one of the largest expenditures during retirement, few clients discuss it with their advisers, said Mary Dale Waters, senior vice president of Allsup Medicare Advisor, a Medicare plan selection service for seniors and advisers.

She recommends that advisers take the initiative by introducing the topic of health care expenses and encourage clients to evaluate Medicare plan choices as part of a review of their retirement finances.

“Paying a lot of money in premiums — just in case or in lieu of an on-point review and assessment of health care needs — is not an effective financial planning strategy,” Ms. Walters said.

The Allsup Medicare Advisor can provide financial professionals with a financial adviser client summary that outlines their clients’ Medicare decisions and their estimated annual health care insurance costs.

“Financial advisers need to learn about Medicare,” said Kathryn Votava, president of Goodcare.com, a health care consulting firm that works with individuals and advisers to select Medicare options, plan for health care costs during retirement or manage care for an elder.

Switching to a lower-cost Medicare option could save clients hundreds or even thousands of dollars per year and go a long way toward stretching their retirement budget, she said.

When clients are thinking about switching Medicare plans, Ms. Votava suggests that they start with their care providers.

By asking their doctors which Medigap plans they accept or in which Medicare Advantage plans they participate, clients can narrow their choices and streamline the process of selecting a new plan that meets their needs.

“Retiree health benefits are going away fast and furious, prompting fear and anxiety,” Ms. Votava said. “If clients feel their financial plan doesn’t address their health care expenses, it could threaten their relationship with their adviser and they could leave.”