As it currently stands, provisions of the PPACA will make Medicare selections more transparent.  As a general statement, this is true. In addition, there will apparently be limits to the out-of-pocket expenses under Medicare.  Overall, these are positives for the Medicare beneficiary.  Now for the flip side of that coin.

Transparency will appear in the form of “tiers,” i.e. there will be Platinum, Gold, Silver and Bronze.  Alternatives will be categorized by using a notion which can be thought of covering a particular % (let’s call it X%) of a person’s total medical costs.  The most important concept here is that it this “X%” is ON AVERAGE.  What does this mean?  It means that your specific situation may be covered by less than average, and that your out-of-pocket expenses may exceed projections.  It is a virtual guarantee that beneficiaries misunderstand this concept today, and will do so in the future.  Please note: this is the case now with Medicare Advantage plans, i.e. the specific benefits that you receive under your Medicare Advantage plan can be, in fact, worse than original Medicare under your very specific situation.  That is because the Medicare Advantage plan has, overall, been ruled by the CMS as being at least as good as original Medicare.  This is a subtle, but important, concept.

Lowering out-of-pocket maximums is generally a good idea. However, it will also have two effects.  First, the average price of a plan, with a lower out-of-pocket maximum, will almost certainly be higher. This should be self-evident.  Second, this limits the flexibility of those that want to, or need to, intentionally choose less-comprehensive coverage.  Let’s take a simple example.  Let’s say that a person is very financially challenged for some reason (pays for grandchild’s clothing), and is 65 years old in excellent health with no medications.  The extra premium could have been diverted for another purpose.  In other words, there are circumstances in which a person is choosing to accept more risk, with a lower price.  It can reasonably be expected that this flexibility will decline for those persons that are intentionally making that choice.  If this is you, then you should probably find an adviser to help you in 2014.

Second, the price for out-of-network services for Medicare Plans that are PPOs can be expected to be much higher.  As those of you that have Medicare Advantage PPOs, you already know this to be the case.  This situation will most likely get worse, in order to keep costs for the insurer lower.

Prices have not been released yet for 2014 Medicare Advantage or Medigap plans. That will occur on October 1 this year.  In addition, certain provisions of the PPACA have only recently been released (such as the limitations on out-of-pocket maximums). That means that the 2014 landscape is still unknown.  However, the statements above will almost certainly have to occur, given the backdrop of increasing demographic and fiscal pressure on the Medicare and healthcare system as a whole.

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