As trusted advisers, CPAs can proactively work with clients, with their best interests in mind, to make changes to their Medicare coverage when warranted. In some cases, the change can both improve clients' coverage and save them money.
We are now in the new Medicare Advantage Open Enrollment Period (MA OEP), which runs through March 31. The 21st Century Cures Act, P.L. 114-255, added the MA OEP beginning in 2019. It replaces the old Medicare disenrollment period that ran from Jan. 1 through Feb. 14.
Under the old disenrollment period, Medicare Advantage (MA) participants could only disenroll from their MA plans and change back to original Medicare with a Part D prescription drug plan. During the new MA OEP, Medicare beneficiaries can now disenroll from their MA plans, change to different MA plans, or, if they are enrolled in original Medicare, start a Part D plan. Therefore, the MA OEP is a good opportunity to review your clients' MA elections.
However, a positive change made by the 21st Century Cures Act may have the unintended effect of making clients less aware of the MA OEP than they have been in previous years. During the new MA OEP, insurance agents are prohibited from knowingly targeting or sending unsolicited marketing materials concerning the MA OEP to any Medicare Advantage Prescription Drug Plan, MA, or Part D enrollee. (Agents may still respond to beneficiaries making a proactive request for information.)
These new rules were put in place to protect senior citizens from frequent sales calls and pressure to change plans. However, the restrictions also mean that Medicare beneficiaries may not be as aware of the MA OEP and their ability to make a coverage change during the first three months of the year. That's why it can be helpful for CPA financial planners to reach out to clients to be sure they know about the opportunity to review their Medicare coverage and make recommended changes.
How the new MA OEP helped one client
Let's look at an example. Most, but not all, MA plans come with a prescription drug benefit. Those that do are referred to as MAPD plans. Plans without a prescription drug benefit attached are referred to as MA plans.
Gregory, age 70, was enrolled in an MAPD. The MAPD is a preferred provider organization (PPO). If Gregory went outside the network for health care services, he would have to pay more in co-payments and co-insurance than he would if he were to stay in the network.
The MAPD premium is $40 per month. The $40 includes $26 for the health plan and $14 for prescription drug coverage. Note that the Part D plan included with Gregory's plan has separate deductibles, co-payments, and co-insurance amounts.
In 2019 the plan has a $3,900 out-of-pocket annual limitation for in-network Medicare Part A (hospitalization) and Part B (doctor's office visits) health care expenses. For out-of-network covered services the out-of-pocket maximum is $6,700.
Gregory received a prostate cancer diagnosis a few days after the close of the 2018 Medicare Annual Enrollment Period (AEP) that ran from Oct. 15 through Dec. 7. During the AEP, Medicare beneficiaries can switch their Part D coverage, enroll in a MA plan, change to another MA plan, or drop their current MA plan and change to traditional Medicare. Having missed the AEP, Gregory could not use it to evaluate his MAPD coverage and make any changes.
Gregory's doctor prescribed a series of radiation treatments for early in 2019. The treatments are outpatient treatments and so are considered a Part B expense. Gregory's preference was to use an out-of-network provider with an excellent reputation located much closer to his home. While the provider did not participate in the PPO network, it did accept Medicare patients.
Gregory had not understood before his diagnosis that under the terms of his current MAPD he would be responsible for 40% of the Medicare-approved cost of the treatments at an out-of-network facility. The total cost of his radiation treatments would exceed $16,750. This meant that in 2019 Gregory would have to meet his annual out-of-pocket maximum based on his radiation treatments (40% of $16,750 or $6,700).
Under the old MA disenrollment period of Jan. 1 to Feb. 14, Gregory's only option would have been to discontinue his MAPD plan and return to original Medicare (OM). The new MA OEP, however, has given Gregory more options. He can:
- Move to a new MA or MAPD plan; or
- Move back to OM with a Medicare Supplement plan and a stand-alone Part D plan.
Any change made during the new MA OEP will be effective the first day of the following month.
Gregory has a few options. Let's analyze how each would impact him (see the table below for the calculations):
- Staying in the current MAPD.
- Moving to OM with a Medicare Supplement plan and a stand-alone prescription drug plan. In the state in which Gregory lives, he has only limited options for enrolling in a Medicare Supplement plan. Given his pre-existing health problems, only one insurance company would enroll him in its Medicare Supplement Plan F. The plan would cost $200 per month or $2,400 per year. In addition, his stand-alone Part D plan would cost approximately $500 per year including the monthly premiums, estimated co-payments, and co-insurance based on his current prescription drug needs. Medicare Part B would pay 80% of the cost of his radiation treatments. The balance of 20% would be paid for by the Medicare Supplement plan.
- Moving from the current MAPD plan to another MAPD or MA plan. There is another MAPD plan that is available to Gregory with an annual out-of-pocket limitation of $2,750. It is a zero-premium plan meaning he would pay no monthly premium for either the health coverage provided by the plan or the prescription drug coverage. It has a co-insurance of 20% of the approved Medicare cost of the radiation treatments. This plan is a health maintenance organization (HMO) and requires that he stay in-network for the cost to be paid by the plan. The health care provider Gregory would prefer is a part of the HMO's network.
Gregory would continue to pay his $135.50 Part B monthly premium regardless of which option he chose.
Gregory decided to move to the MAPD HMO. The radiation facility was in network as were most (but not all) of his current doctors. The overall cost of the HMO was almost the same as OM. Gregory also preferred remaining in a managed care plan that would provide better-coordinated care.
Assisting clients with Medicare planning can be a value-added service that involves helping clients make better health care coverage choices. Thanks to the new MA OEP, there is increased opportunity to serve your clients by putting their best interest first.
For more information on retirement planning, access the AICPA PFP Section's retirement resources, including The Adviser's Guide to Retirement and Elder Planning.
James Sullivan, CPA/PFS, is a financial planner in Wheaton, Ill. He specializes in working with clients, and the families of clients, suffering from chronic illness. To comment on this article or to suggest an idea for another article, contact senior editor Courtney Vien at Courtney.Vien@aicpa-cima.com.