Why Retirees Don't Switch Medicare Part D Plans, But Should

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Why Retirees Don't Switch Medicare Part D Plans, But Should
Getty ImagesMedications included on most Medicare Part D plans change yearly, which is one reason participants should consider exploring other plans.
By Emily Brandon

Medicare Part D prescription drug plans are allowed to change their premiums, covered medications and preferred pharmacies each year, and many plans do. Plan participants are invited to switch plans once a year during the open enrollment period, but few Medicare beneficiaries actually pick a new plan. Here's why retirees are reluctant to change Medicare Part D plans and what might motivate them to do it.

The cost of the plan. Most Medicare beneficiaries consider the premiums and deductibles when initially selecting a Part D plan, but they don't continue to shop around for the lowest cost plan each year, according to recent findings from a series of focus groups with Medicare beneficiaries in Baltimore, Seattle, Memphis, Tennessee, and Tampa, Florida, conducted by the Kaiser Family Foundation and PerryUndem Research and Communication. Seniors in the focus groups said they tolerated and expected their premiums and copays to rise and would only start looking for a new plan if the price increase reached around $75 more a month. "People sign up for their plan maybe when they first come on Medicare, and they stay on their plan unless premiums really jump through the roof," says Tricia Neuman, senior vice president of the Kaiser Family Foundation. "It takes a big deal for people to make a change and insurers know that, so they can kind of raise their premiums, but not so much, if they want to keep people in their plan."

Covered medications. Medicare Part D plans have lists of covered medications called the formulary, which are tweaked from year to year. Seniors who need medications that aren't on their plan's formulary are often willing to try a number of workarounds including an alternative drug or a generic version that is covered, medication samples from a doctor's office, applying for discounts from drug manufacturers, appealing the insurer's decision not to cover the drug and ordering medications online, KFF found. However, some seniors say they would be motivated to change insurers if their plan stops covering a necessary drug, significantly increases the out-of-pocket cost or makes it difficult to obtain the medication due to preauthorization requirements or other restrictions.

Resisting change. Changing Part D plans can disrupt your health care routine. Many seniors don't want to risk upsetting their established method of getting medication and fear they could be even worse off with a new plan. Some seniors choose a Part D plan with the same insurance company that provided their employer-sponsored insurance before signing up for Medicare.

Access to specific pharmacies. Many retirees say it is important to them to have access to a pharmacy familiar to them or close to home. Some seniors also have a relationship with a specific pharmacist they don't want to give up.

The plan's brand name. A prescription drug plan's brand name matters to some Medicare beneficiaries. Retirees told KFF they felt reluctant to select a Part D plan from a company they had never heard of, even if that plan offered better benefits at a lower cost. Many retirees had both good and bad associations with large organizations, including AARP, Blue Cross Blue Shield, United Healthcare and Aetna, that influenced their plan choices.

Personal service. Many seniors said good customer service, especially in person, would make them more likely to choose a specific insurance provider​​, while poor customer service early on would make them more likely to switch. "Many seniors relied upon insurance agents to help them pick a plan, and the idea of having this in-person help was so appealing to seniors that oftentimes after the focus groups we would find that seniors were providing their insurance agent's contact information to other seniors that wanted it," says Gretchen Jacobson, associate director of the Program on Medicare Policy at the Kaiser Family Foundation.

Coordinating with a spouse. Married beneficiaries often prefer to have the same Part D plan or same insurer as their spouse. Retirees said it was more convenient to keep track of the rules for a single plan instead of two, even when separate plans might better cater to their individual health needs. "One woman in our focus group explained that it's much easier for her if her husband is in the same Part D plan because when she went to the pharmacy to pick up their medications she knew what her plan covered and how much it would cost for medications," Jacobson says. "She just could not imagine having two sets of rules for two different plans."

Star ratings. Medicare ranks its prescription drug plans based on quality, with five stars being the best possible rating. But most seniors admitted that they didn't know about the quality ratings. "Seniors said that their own experience with the plan was more important to them than the plan's quality rating," Jacobson says. You can check out the star ratings of plans in your area using Medicare.gov's plan finder tool.

%VIRTUAL-article-sponsoredlinks%Too many choices. Retirees claim to want a variety of Part D plan choices, but they also seem overwhelmed by the number of options they need to sort through. "People make worse decisions when there are lots of options, and this is especially true when the things people are deciding about are multidimensional and complicated, as for example, choice of a prescription drug plan or a health insurance plan," says Barry Schwartz, a psychology professor at Swarthmore College and author of "The Paradox of Choice." "People made suboptimal choices of prescription drug plans, and the more plans they were given to choose among, the more likely it was that they were going to choose a suboptimal plan."

Repetitive research. Many retirees spent a significant amount of time initially choosing a Medicare Part D plan, and they are reluctant to invest that much time again. Medicare beneficiaries said they would need to be significantly frustrated with their current plan in order to put in the effort to switch. "Seniors said that they found it very difficult to change plans and to choose plans," Jacobson says. "They liked having many options, but the process of choosing plans they found frustrating, confusing and exhausting."

Emily Brandon is the senior editor for Retirement at U.S. News. You can contact her on Twitter @aiming2retire, circle her on Google Plus or email her at ebrandon@usnews.com.

11 PHOTOS
10 Cities Your Financial Adviser Is Begging You Not To Retire To
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Why Retirees Don't Switch Medicare Part D Plans, But Should
  • Cost of living -- 114.1
  • State tax burden -- 8.4 percent
  • Median house price -- $377,625, per Zillow.com
  • Climate -- 69/39 January, 105/75 July
  • Traffic congestion -- Didn't make the Forbes list
Scottsdale is a retirement mecca, with a reasonable cost of living, state and local taxes well below the national average, a great quality of life and plenty of amenities. But housing costs are nearly double the national average. Winters are warm, but summers are sizzling hot. Peak temperatures can reach close to 120 degrees -- after all, it's in the desert. The locals will dismiss it as "dry heat," but that kind of heat will still send your electric bill for air conditioning soaring, and can necessitate you buying new cars more frequently than you'd like.
  • Cost of living -- 130.0
  • State tax burden -- 9.3 percent
  • Median house price -- $417,600, per Zillow.com
  • Climate -- 74/64 January, 89/80 July
  • Traffic congestion -- Didn't make the Forbes list

Key West offers Caribbean weather in the U.S., an attribute that makes it a natural choice for retirees. And who could resist the Jimmy Buffett-Parrot Head thing, especially once you're living a life of leisure? 

You might be better off if you resist. The cost of living is 30 percent higher than the U.S. average, and housing costs at least twice as much. Travel is another issue. Key West is the most remote location in the continental U.S. The only road off the 6-square-mile island is the Overseas Highway, a 127.5-mile causeway that is largely one lane in each direction.

Hurricanes -- all too common in Florida -- are rare in Key West  -- though Wilma did hit it in 2005. But when they do impact the island, though, it's worth noting that the city has the Atlantic Ocean on one side and the Gulf of Mexico on the other, and there's no part of it that's more than 18 feet above sea level. So homeowners must pay several thousand dollars a year for hurricane insurance.

  • Cost of living -- 132.3
  • State tax burden -- 11.2 percent
  • Median house price -- $482,000
  • Climate -- 66/50 January, 77/67 August
  • Traffic congestion -- Didn't make the Forbes list
As big California cities go, San Diego is a bargain. But compared to the rest of the country, San Diego is certified high-cost. Yes, the weather is near perfect year-round. But the cost of living is one-third higher than the rest of the country, and house prices are nearly 2½ times the national average. Add in California's high state and local tax rates and the earthquake issue, and San Diego should be crossed off your list of potential retirement cities.
  • Cost of living -- 165.7
  • State tax burden -- 10.2 percent
  • Median house price -- $680,000
  • Climate -- 80/66 January, 88/75 July
  • Traffic congestion -- Second worst gridlock in U.S.
Can you imagine a more idyllic place to retire than Honolulu? Probably not. But as beautiful as it is, it shares many of the financial strains common to other cities on this list, plus a few more.

The overall cost of living is second only to New York City. After all, most of the goods people need have to be shipped across thousands of miles of ocean. The state tax burden is only slightly higher than the national average, but the median house price is triple the national average.

Finally, as far as cost of living is concerned, Honolulu has an unusual financial issue: travel expenses. Sooner or later, you'll want to get away from Hawaii. And there's no cheap way to escape from this paradise.
  • Cost of living -- 164.0
  • State tax burden -- 11.2 percent
  • Median house price -- $860,000
  • Climate -- 57/46 January, 70/55 September
  • Traffic congestion -- Third worst gridlock in U.S.
San Francisco frequently makes those "favorite cities in America" lists and for good reason. Situated on a peninsula between the Pacific Ocean and the San Francisco Bay, it is one of the most scenic cities in the world. Mild weather year-round, world class cuisine, charming neighborhoods and an eclectic population make it one of the most desirable places to live anywhere in the world.

But it has the highest median house prices in the country, which should scare off retirees. Its cost of living trails only New York City and Honolulu. And like the rest of California, its state and local tax burden is second only to New York.

One other reason people might avoid living in San Francisco is that it's prone to earthquakes. While that's certainly a concern for personal safety, few people from non-earthquake prone areas realize how it increases your cost of living. Homeowners need to pay several thousand dollars per year for earthquake insurance.
  • Cost of living -- 140.1
  • State/district tax burden -- 4.0 percent on first $10,000 and up to 8.95 percent on income greater than $350,000 in D.C., 10.2 percent in Maryland, 9.3 percent in Virginia
  • Median house price -- $395,000
  • Climate -- 43/29 January, 88/71 July
  • Traffic congestion -- 10th worst gridlock in U.S.
Washington is centrally located, is filled with historic attractions and has some of the most beautiful neighborhoods in the country. It also has one of the highest effective local income tax rates in the country. The district taxes the first $10,000 of income at 4 percent, then 6 percent to $40,000, then 8.5 percent on all income over $40,000 (you can exempt up to $3,000 in retirement income).

Like other cities on this list, Washington sports a high cost of living and some of the highest housing prices in the country. The area also has its share of toll roads, and traffic is a recurring problem. This is especially troublesome during the holidays and summer months. Interstate 95 -- which bisects the metro area -- is the principal travel corridor between the Northeast and Florida. Making traffic matters worse: the near-permanent road construction projects.
  • Cost of living -- 136.4
  • State tax burden -- 11.2 percent
  • Median house price -- $456,000
  • Climate -- 68/48 January, 83/64 July
  • Traffic congestion -- Worst gridlock in U.S.
As recently as the 1970s, Los Angeles was widely viewed as the city that all America was looking to move to -- or at least to imitate. Perfect weather, endless beaches, palm tree-lined streets, plentiful housing, a powerhouse economy and the lure of rubbing elbows with a celebrity or two. Today, about the only things L.A. has going for it are near-perfect weather and In-N-Out Burger. The rest is mostly a faded memory. The city's success was, in fact, a key contributor to its decline: The near-doubling of the metro population since the 1970s has created East Coast levels of human congestion.

Property values are higher than New York's and nearly twice those of Chicago. The state and local tax burden in California is second only to New York, and the overall cost of living in L.A. is more than one-third higher than the national average. California's unfunded pension liabilities are nearly as high as those in Illinois, threatening serious tax increases that could squeeze retirees. Nagging quality of life issues include the worst traffic congestion in the nation and smog that could lead to higher medical costs.
  • Cost of living -- 132.5
  • State tax burden -- 10.4 percent
  • Median house price -- $370,000
  • Climate -- 36/22 January, 81/65 July
  • Traffic congestion -- Ninth worst gridlock in U.S.
Boston is the quaintest large city in America, sporting centuries-old but impeccably maintained architecture, neighborhoods and surrounding communities that just ooze with charm and close access to the beaches of Cape Cod and the mountains of Vermont and New Hampshire. If Boston were a less expensive place to live, it could well be an popular and smart retirement destination.

But it isn't. The high cost of living and high housing prices are the main reasons cited by former residents for leaving the state. The state tax burden is higher than the national average; the cost of living is about one-third higher than the national average; and house prices are nearly double the U.S. median. Translation: a large chunk of your retirement income would be spent just covering basic living expenses.
  • Cost of living -- 116.9
  • State tax burden - 10.2 percent
  • Median house price -- $247,000
  • Climate -- 32/18 January, 84/68 July
  • Traffic congestion -- Didn't make the Forbes list
Based on the numbers, Chicago wouldn't seem to be the retirement financial disaster that other cities on this list are. The state tax burden is only slightly higher than the national average; the cost of living is tolerably higher than the U.S. average; and house prices -- while higher than the nation in general -- are downright affordable compared to the coastal cities.

However, in addition to being a generally more expensive place to live than the nation at large, the area faces burgeoning problems just over the horizon. Illinois faces the highest unfunded pension obligations of any other state in the country, at around $100 billion. Chicago faces a nation-leading $20 billion unfunded pension liability. Such deficits scream out for higher taxes across the board. We can only speculate as to which taxes will be raised (or created).
  • Cost of living -- 216.7 Manhattan, 145.7 Nassau County
  • State tax burden -- 12.8 percent
  • Median house price -- $972,000 Manhattan, $440,000 Nassau County
  • Climate -- 38/27 January, 84/69 July
  • Traffic congestion -- Fifth worst gridlock in U.S.
The area has fantastic amenities -– theater, music, concerts, festivals, ethnic foods, diverse and quaint neighborhoods and close access to beaches and mountains. It also has probably the most comprehensive public transportation system in the U.S. But it breaks down spectacularly when it comes to the costs. The area has close to the highest cost of living in the country, which gets markedly worse the closer you are to Manhattan. House prices are out of sight, particularly in the more desirable communities and neighborhoods. New York State has the highest state and local tax burden in the country. New Jersey has the highest real estate tax burden in the country. And nearby Connecticut isn't much better.

Weather runs from winter-time deep freezes to protracted summer heat waves. The preponderance of bridges, tunnels and their tolls -- as well as antiquated roads running through quaint town centers -- makes congestion a constant problem, even on the weekends.
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