What to know about Medicare -- now

The Medicare Prescription Drug Plan Finder can help you compare total costs for your medications under each plan available in your area. Click on "Find & Compare Plans" and then "Begin General Search."

You can lower costs significantly by switching to generic drugs, says Jim Yocum, the executive vice president of DestinationRx, whose company developed the Plan Finder tool for Medicare. Before you pick a plan, ask your doctor about substituting a generic for your brand-name medication. The plan with the best deal for brand-name drugs may not offer the best deal for the generic equivalents.

All-in-one plans

Instead of paying separately for Medicare Part B, a Medicare supplement policy and a Part D drug plan, you could sign up for a Medicare Advantage plan, which combines all of that coverage in one policy.

Medicare Advantage plans, which are sold by private insurance companies, come in three varieties. Medicare health maintenance organizations, or HMOs, typically offer the lowest premiums but have the tightest restrictions on the doctors and hospitals you can visit. Regional preferred provider organizations, or PPOs tend to cost a bit more, but they include a network of providers that usually spans several states.

Private fee-for-service plans usually cost the most, but you can use any provider who agrees to the plan's terms (ask your doctors if they participate). In addition to prescription-drug coverage, Medicare Advantage plans often offer extra benefits, such as eye exams, hearing aids and dental benefits.

You can sign up for a Medicare Advantage plan when you first become eligible for Medicare or during open-enrollment season in late fall. If you already have a Medicare Advantage plan, you can switch to another Medicare Advantage plan or back to Medicare plus a Part D plan between Jan. 1 and March 31.

To find good deals, use the Medicare comparison tool by selecting your state under "Learn More About Plans in Your Area."

Some Medicare Advantage plans have very low premiums, and some charge nothing beyond your Part B premium because of rich government subsidies to insurers. But you need to look carefully at the co-payments and limitations.

"If someone has a history of frequent hospitalizations, Medigap coverage may be safer than a Medicare Advantage plan that has limits on the coverage for hospitalizations," says Alan Mittermaier, the president of HealthMetrix Research. Some Medicare Advantage plans don't cover the first 20 days in a skilled-nursing facility (which traditional Medicare covers); some charge higher co-payments for important services, such as chemotherapy; and some provide limited coverage when you travel out of state.

Mittermaier's company produces an annual Cost Share Report, which provides out-of-pocket cost estimates for Medicare HMOs and PPOs that include prescription-drug coverage. You can look up the best value in your area in three health categories: good, fair and poor. Even if you're in good health now, it's important to see what a plan would offer if your health deteriorates during the year.

The Gammarinos started searching for ways to fill in the Medicare gaps about three months before Art turned 65 in February. They went to a lunchtime seminar and started to learn about the difference between Medicare Advantage and Medigap policies.

Because they don't have any pre-existing medical problems, they discovered that a Medicare HMO would cost a lot less than their other options, and they were particularly interested in a Humana plan that would cost each of them about $62 per month. "We've been blessed with good health at this point, and it worked for us. It was so affordable compared to what we were paying," says Sue.

But before signing up for the plan, they made sure their primary-care physician was in the network, and they talked with friends who already had the same Humana plan but had a lot of health issues -- and had plenty of opportunities to see the coverage in action. "We figured if it's good enough for them, then it's good enough for us," Sue says.

This article was reported and written by Kimberly Lankford for Kiplinger's Personal Finance Magazine.

Published Oct. 30, 2008

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