Many of us are creatures of habit. We find a restaurant we like, and we eat there often. We discover a vacation spot we enjoy, and we travel there year after year. We find a dentist or doctor we trust, and we're reluctant to change. Habits reduce the need for making decisions. Through habits, life can be simpler. What could be wrong with that?
For all their good points, habits can also induce a certain degree of inertia which may prove costly. If circumstances change, simply doing what you've always done may end up costing you money.
Recently, health care experts confirmed this phenomenon by looking at participant behavior in Medicare Part D prescription drug plans. Medicare-eligible individuals in traditional Medicare Parts A and B have the option of enrolling in a Medicare Part D plan to obtain prescription drug coverage. Private insurance companies offer these plans, priced based on service areas and plan features. They generally charge a monthly premium of perhaps $20 to $60. They may have an annual deductible which the participant pays before the insurance element of the plan kicks in. There's likely a relatively small co-payment that's required for each prescription.
Many participants don't recognize that plans can change their costs, their networks, and their drug formularies each year. But few people switch plans. Habits strike again!
According to the experts, only 13% of participants change Part D plans each year though more than 75% of them are paying too much for their prescription drugs!
How do you avoid paying too much for your prescription drugs? Compare plans during Medicare's annual Open Enrollment, which runs from October 15 through December 7 each year.
How to compare plans? Check out the Medicare Plan Finder that's available at https://www.medicare.gov/find-a-plan/questions/home.aspx. On this site, you can educate yourself by viewing the Plan Finder Multimedia, and then create a personalized search in which you can list the prescription drugs you take. The site will show you how many prescription drug plans are available in your area and key features of each plan.
In one suburban Houston area, 23 Medicare Part D prescription drug plans were available, with premiums ranging from $17.00 to $170.50 per month. If you enter your data, the site also provides estimated 2017 drug costs (including monthly premium, annual deductible, co-payments/co-insurance and drug costs not covered by insurance). In one case, for mail order receipt of two common generic drugs to control hypertension and high cholesterol, estimated costs ranged from $268 to $2,166 per year. That wide variation suggests some plans take advantage of participants' tendency towards inertia.
Spend some time now during open enrollment (before December 7) on the site, determining whether you are over-paying for your prescription drugs. If you're not particularly computer-savvy, you can also call 800-MEDICARE for personal assistance from a Medicare representative. And you may also want to put a memory jogger on your calendar for this time next year. Make a habit out of checking prescription drug plan prices.
Source: See "3 Steps to Helping Clients Manage Health Care Costs in Retirement" by David Armes, CFP®, Journal of Financial Planning, October 2016.
Disclaimer: The information provided here is general and intended as educational in nature. It is not intended nor should it be considered as tax, accounting, or legal advice. Investec Wealth Strategies and its advisors do not provide tax, accounting, or legal advice. We recommend you seek the counsel of your attorney, accountant or other qualified tax advisor concerning your situation.