For many retired Americans, Social Security is probably the most important social program. It's not hard to imagine why, either. It provides a guaranteed monthly stipend for more than three out of five retired workers. But Medicare is coming up fast in the rearview mirror.
According to the Urban Institute, a median income 65-year-old is expected to receive more in lifetime benefits from Medicare than Social Security by 2055. That's less than four decades away, and it's a function of medical care expenses rising at a quicker pace than Social Security's annual cost-of-living adjustment. In other words, not only are seniors trying to maximize their lifetime benefit from Social Security, but they need to also ensure that their Medicare plan is offering them the best possible value.
The costly Medicare gaffe that could cost seniors thousands in 2018
Unfortunately, there's a really good chance that a majority of elderly Medicare beneficiaries may not be enrolled in the best plan for them in 2018, according to a new survey commissioned by WellCare Health Plans (NYSE:WCG), a provider of government-sponsored managed care services.
WellCare's report, entitled "The Cost of Complacency," surveyed more than 1,000 seniors aged 65 and up across the U.S. in order to gauge their level of engagement with Medicare. It found that 62% of elderly enrollees (roughly five out of six Medicare enrollees are 65 or older) don't review their plan annually to ensure that they're getting the best deal. Instead, they're just choosing to reenroll in the same plan from one year to the next.
Why's that a big deal, you ask? Sure, it's extremely convenient to just reenroll, but private insurance companies that contract with the federal government to provide Medicare plans often change what's covered, as well as the premiums for those plans, on a yearly basis. What was once the best value for you in one year could turn out to be not such a great deal the next, especially if your most commonly prescribed drugs are no longer covered. And if you aren't enrolled in the plan that's best for your health needs, it could easily cost you thousands of dollars extra in the upcoming year.
What's really mind-boggling about this analysis is that the seniors surveyed overwhelmingly chose healthcare expenses as their most burdensome cost. They also noted a willingness to search for deals when it comes to groceries, homeowners insurance, and even gas for their car. But when it came to shopping around for Medicare, most seniors shunned the idea. In fact, almost a quarter of the respondents suggested that price-comparing Medicare plans ranked among the two most unpleasant things they do, right up there with going to the dentist, doing their taxes, renewing their driver's license, and, yes, getting a colonoscopy.
Consider your options
Despite its unpopularity, shopping around for the Medicare plan that's the best value for you is the smart thing to do. It could save you a lot of money, which for a retired worker isn't something to overlook considering the steady decline in Social Security's purchasing power since 2000.
You'll also note my use of the term "best value" as opposed to "lowest-priced" plan. Since coverage options and premiums change from year to year, there's simply no guarantee that the cheapest Medicare plan is going to offer you the best value from one year to the next. What you want to look for is the plan that meets your health and financial needs. This means a plan that caters to any chronic and costly conditions you may have, as well as a prescription drug plan that covers your mostly commonly prescribed medicines. Even if a plan that meets your needs best is nowhere near the cheapest, it could still wind up saving you money by reducing your out-of-pocket expenses compared to a cheaper plan that didn't meet your health needs.
By a similar token, don't feel constrained to solely comparing traditional Medicare plans. The percentage of eligible beneficiaries who've enrolled in Medicare Advantage plans (also known as Part C) has more than doubled since 2005. Medicare Advantage plans have a couple of alluring features, including an annual out-of-pocket limit on traditional Part A (hospital insurance) and Part B (outpatient services) costs, and the ability to roll dental, vision, and hearing coverage into one simple plan. By comparison, Medicare doesn't offer traditional hearing, dental, or vision coverage, and there is no out-of-pocket maximum on Part A and B costs, unless you were to purchase a separate Medigap plan that can help lower your out-of-pocket costs.
Are Medicare Advantage plans perfect? Not exactly. You'll have to jump through more hoops if you need specialized care (i.e., you'll need a referral), and your network of doctors could be considerably narrower than under traditional Medicare. But for about one in three Medicare enrollees, Medicare Advantage has been a more attractive choice. You, too, should give Medicare Advantage plans a look when making price and coverage comparisons.
It all comes down to this: Saving money when enrolling in Medicare is possible, but you have to be proactive about it.