Medicare's annual open enrollment period began Oct. 15 and runs through Dec. 7. During this time, all Medicare beneficiaries can shop around and select new plan. However, many enrollees may face significantly higher premiums in 2016.
Here are eight things to know about open enrollment and the Medicare plans available for 2016.
Current issues regarding Medicare premiums
1. Premiums for certain Medicare plans are expected to dramatically increase. Nearly one-third of Medicare beneficiaries could see record premium hikes in 2016 unless Congress intervenes, according to the New York Times. The Obama administration is urging Congress to moderate or prevent health insurance premium increases, which could raise premiums for some Medicare beneficiaries by 50 percent, the largest increase in the history of Medicare.
2. About 70 percent of Medicare beneficiaries will be protected from higher premiums in 2016. Medicare premiums are closely linked to Social Security benefits, as most Medicare beneficiaries have their premiums deducted from their monthly Social Security checks. To protect enrollees from premium hikes, federal law requires, in most cases, that increases to an individual's Medicare premium cannot exceed the increase in the person's Social Security benefit. However, in 2016, the 60 million people on Social Security will not receive a cost-of-living increase in their benefits, according to NYT. While Social Security usually provides automatic annual cost-of-living adjustments, extremely low inflation in 2015 led to a benefit freeze.
3. The remaining 30 percent of enrollees could take the brunt of the premium increases. By protecting 70 percent of Medicare beneficiaries from the rate increases, the remaining 30 percent — about 15 million people — are exposed to major price shocks. Medicare actuaries predicted in July the standard premium for those beneficiaries would rise to $159 per month in 2016, up from just under $105 per month for most beneficiaries in 2015 — the same rate as 2013 and 2014, according to the report.
4. Without legislative action, the White House must choose between two undesirable options. It could increase premiums for those 15 million, or it could authorize Secretary of HHS Sylvia Matthews Burwell to use money from Medicare's contingency reserve to supply the funds needed. However, the contingency fund is already lower than the Medicare actuaries' recommended level, according to the report. Turmoil in Republican leadership in Congress has inhibited a solution. House Speaker John Boehner (R-Ohio), who plans to retire at the end of this month, has said the cost of legislation to stabilize premiums — estimated at $7.5 billion to $10 billion — should be offset by savings somewhere else in the federal budget, according to the report.
5. Additionally, premiums for many Medicare Part D prescription drug plans will increase at double-digit rates in 2016, according to The Fiscal Times. Premiums for the 10 most popular Medicare Part D plans — which cover 80 percent of enrollees — will increase by an average of 8 percent next year. Five of the top plans will grow their average premiums between 16 and 26 percent.
Enrollee behavior
6. Most beneficiaries don't choose new plans. Only one in 10 Medicare beneficiaries switch plans, despite the fact research shows only 12 percent are currently enrolled in the least expensive plan, according to the University of Buffalo.
7. There are several reasons beneficiaries don't change plans. One common reason is lack of awareness that changing plans is an option. Another reason is enrollees of become overwhelmed and confused by the process, according to University Of Buffalo.
8. Beneficiaries can save an average of 31 percent by switching plans, according to Louanne Bakk, assistant professor and director of the Institute on Innovative Aging Policy and Practice at the University of Buffalo School of Social Work.