A public service announcement about Medicare

Here’s some information senior folks may find useful, if not discouraging. Remember this is what happens to us now; if Obama gets his way we will be even worse off than under the present diminishing coverage and higher costs for less.

Higher Medicare Advantage costs.

If you're one of more than 10 million subscribers to Medicare Advantage plans, expect to pay more for coverage next year. The U.S. Centers for Medicare and Medicaid Services cut 2010 subsidies to private Medicare Advantage plans by 4% to 4.5%. Big private insurers offering the plans will be figuring out how to adjust to the reductions, but you can expect to see a combination of higher rates and drug costs along with reduced coverage.

The plans were created by the Bush administration as a private-sector alternative to traditional Medicare plans. But Medicare Advantage costs the government about 14% more per person than regular Medicare and thus became a target for expense cuts that could be used to help pay for the Obama administration's health-reform plan.

What to know about Medicare -- now

Get the most out of your health coverage. Here's how to sign up, avoid penalties and pick the plan that fits you best (it might not be last year's).By Kiplinger's Personal Finance MagazineThough you may not look forward to turning 65, Uncle Sam has a nice present for you when you do: government-subsidized health insurance.But Medicare won't cover all your health care expenses, so you'll still need to make some key decisions about how to fill in the gaps. Making the right choices could save you hundreds or even thousands of dollars a year in premiums and out-of-pocket expenses.

Even if you are already eligible for Medicare, it pays to check out your choices each year during the annual open-enrollment period that runs from Nov. 15 to Dec. 31, when you can switch plans. Several new options appear every year, and the prices and coverage can vary greatly. The plan you picked in the past may no longer be your best option.

Here's what you need to know to get the most out of your Medicare coverage:

Sign up on time

You are eligible for Medicare at 65, even if your normal retirement age for full Social Security benefits is later. The initial enrollment period for Medicare Part B, which covers doctors' visits and outpatient services, runs for seven months, starting three months before your birthday month. To make sure your Medicare enrollment runs smoothly, you should contact the Social Security Administration (1-800-772-1213) three months before you turn 65.

If you miss the initial seven-month sign-up window, you'll have to wait until the next general-enrollment period, which runs from Jan. 1 to March 31 each year, for benefits beginning the following July 1.

For each year you wait beyond your initial enrollment period, you'll also incur a 10% penalty, which will be added to your monthly Part B premium (Part B premiums are deducted from your Social Security checks). You can sign up for premium-free Part A, which covers hospital services, at any time.

Special enrollment rules apply if you're eligible for Medicare and still on the job. If you have health insurance through your employer or your spouse's employer, you aren't subject to the 10% late-enrollment penalty if you sign up for Part B within eight months of losing that coverage. Similarly, if you have employer-provided prescription-drug coverage, you can avoid the late-enrollment penalty for the Medicare Part D drug plan. If you miss the initial seven-month enrollment period, you can sign up for prescription-drug coverage during the last six weeks of any year, for benefits beginning the following Jan. 1.

Review your choices

When it comes to filling the gaps in your health care coverage, you may have several choices.

Employer-provided retiree health insurance has traditionally been the best option. But don't assume that's still the case. Many employers have been cutting back on retiree coverage. Even if your employer provides retiree health insurance, you may be able to save money by switching to another plan, especially if your premiums have risen and your coverage has been scaled back over the past few years. Look at the big picture, and compare coverage for medical care and prescription drugs, as well as out-of-pocket costs and any restrictions on health care providers.

Medicare supplement plans, also known as Medigap policies, pay for many of the co-payments, deductibles and other expenses that Medicare doesn't cover. If you buy a policy within six months of signing up for Medicare Part B, insurers can't reject you or charge higher rates because of your health (see "The ABCs of picking a Medigap policy"). Medigap policies generally don't cover prescription-drug costs (and the old Medigap plans that do offer drug coverage are no longer a good deal). Instead, you'll need a Medicare prescription-drug plan, known as Part D.

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New pricing and options for Part D for the following year are unveiled each fall, and you have from Nov. 15 to Dec. 31 to switch policies. Premiums rose an average of 13.6% for the largest plans from 2007 to 2008 -- to $25 a month, according to the Centers for Medicare and Medicaid Services. Beneficiaries in the most-popular plans faced the biggest monthly increases. For example, the average monthly cost of Humana's standard plan jumped nearly 69%, from $15.34 in 2007 to $25.88 in 2008. Because of major changes like these, it's a good idea to investigate your options during the open-enrollment season every year, even if you've been happy with your plan.

Premiums are only one cost to consider. You'll also need to calculate total out-of-pocket costs for the medicines you take. When you add up premiums, deductibles and co-payments, a higher-premium plan could end up costing less than a lower-premium plan that has hefty co-payments.

Continued: All-in-one plans

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."

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 plansInstead 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. 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.

Take a look at the 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.Before signing up learn about the difference between Medicare Advantage and Medigap policies.

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