Medicare’s open enrollment period that began early this year and is well underway, but you still have until December 7 to choose a plan that works best for you.

If you’re a bit confused as to what that plan would be, given the many changes Medicare recipients can expect to see in 2012, don’t feel badly – you’re in the solid majority.

Medicare is a fantastically complex system, to the point that academicians and professional analysts can spend their entire professional careers trying to figure it out. Adding to the complexity is that each tweak and change to the program is formulated not only for its effectiveness, but also for its political palatability.

“Part of the difficultly with Medicare is a fundamental difficulty with the whole system,” says Dr. Robert Moffit, senior fellow at the Center for Policy Innovation at the Heritage Foundation in Washington D.C. “What you have are providers – including pharmacies, doctors groups and druggists – all engaged in these intense fights over content, over Medicare services. Oftentimes, what they’ll do is promote changes that will actually increase their bottom line and scale back coverage. Any time you talk about changing benefits, you unleash a frenzied lobby on these issues.”

Frenzied lobbying, politics and the Patient Protection and Affordable Care Act of 2010 have resulted in a broad array of changes to each of the four parts of the Medicare system. Some will take effect in 2012, while others kick in later. Some are relatively minor tweaks – others hugely significant. Some will affect Medicare enrollees directly, while others are mostly aimed at providers.

Whether any of the changes represent a net gain for the average Medicare enrollee often really depends on who you ask.

Part D

Take, for example, one of the more publicized Medicare changes brought about by new healthcare reform legislation: the narrowing and eventual closure of the Part D coverage gap, or the “doughnut hole.” Part D covers 75 percent of the cost of prescription drugs until recipients reach an Initial Coverage Limit (in 2009, the limit was $2,700). Beyond that threshold, recipients pay 100 percent of their drug costs, unless and until they reach the Catastrophic Coverage threshold, which in 2009 was $6,153.75. After that, Medicare Part D covers 95 percent of the cost.

Last year’s healthcare reform legislation sought to close the gap through a series of steps. In 2010, recipients within the doughnut hole qualified for a $250 rebate sent within three months of reaching the gap. This year, they received a 50-percent discount on brand-name drugs and seven-percent discount on generic drugs listed on their plan’s formulary. In 2012, Part D recipients will continue to receive the 50-percent discount, the generic discount will increase to 14 percent and the Initial Coverage Limit will rise to $2,930.

Additional year-over-year measures should continue to narrow the doughnut hole until it is eliminated by 2020, proponents of the Affordable Care Act say.

Henry J. Aaron, a senior fellow at the Brookings Institution in Washington D.C., says that while he “wouldn’t exaggerate” the benefits of the change, he sees the narrowing of the doughnut hole as “a positive, desirable development.”

“The virtue of it is that the original design of Part D was sort of weird from an insurance design perspective,” Aaron says. “The government had to supply something for everybody, something that was politically appealing. They had to have a bottom benefit range and they had to take care of catastrophic coverage – after that, the money was gone. This change corrects a design flaw from that one perspective – the doughnut hole.”

Moffit says the changes affecting the Part D coverage gap brings to mind an adage: “The government giveth, and the government taketh away.”

“By 2020, the doughnut hole should be eliminated, but that also means premiums will be much higher,” he says. “Rain falls only one way.”

While Part D beneficiaries will see their Initial Coverage Limit increase by $90 in 2012, they’ll also see the Catastrophic Coverage threshold rise – by $210. They’ll see their Part D deductible increase by $10 as well.

Fortunately, says Eugene Scanzera, vice president of Medicare for the UPMC Health Plan, seniors should save money big-time when the patents expire on several popular brand-name drugs – including the cholesterol pill Lipitor – this November.

Medicare Advantage (Part C)

Among several significant 2012 changes for Medicare Advantage is a provision barring Advantage plans from charging enrollees for preventative-care services provided free to Medicare Part A or B enrollees. The new rule will not apply to enrollees seeking such services outside their network.

The federal government will also decrease its payments to Medicare Advantage insurers next year, to the tune of about 0.16-percent per patient. Whether the cuts will increase in 2013 – and whether Advantage plans will immediately pass the cost on to enrollees – remains to be seen.

Also beginning next year, Medicare enrollees will be allowed a one-time-per-year Special Enrollment Period to choose a Medicare Advantage or Part D plan with a five-star rating. Enrollees can start the period at any time during the year, but will be allowed to make exactly one change.

Conversely, Medicare Advantage enrollees will have a new Disenrollment Period in 2012. From Jan. 1 to Feb. 14, those dissatisfied with their Advantage plan can switch to Original Medicare and – if they choose, add a Medicare prescription drug plan. The Disenrollment Period works only one way – Medicare Advantage enrollees can’t use the period to switch to another Advantage plan.

Part B

While the Special Enrollment Period represents a relatively modest gain for Original Medicare enrollees, it is part of a series of changes – scheduled to kick in over the next five years – that will have a sizable impact on Medicare Part B service providers.

Under federal legislating dating back to 2006, Medicare doctors are asked to submit to the Department of Health and Human Services (DHHS) data about the quality of care they provided enrollees. The department uses this data to rate Medicare plans on a one-to-five scale. Currently, physicians provide the information on a voluntary basis, incentivized to do so this year by a one-percent bonus on their service payments for reporting the data to DHHS. Starting in 2012 and continuing for two years after, they’ll receive a ½-percent annual bonus for coughing up the data.

But beginning in 2015, Medicare doctors must provide the information or face a 1.5-percent payment cut. The penalty increases to two percent in 2016 and stays at that rate for subsequent years. Under 2010 healthcare reform legislation, the public will be able to access the information on a Medicare website beginning in January

2013.

Original Medicare (Parts A and B)

America’s federal leaders spent much of 2010 furiously debating and ultimately passing sweeping healthcare reform legislation. Included in that legislation are provisions that, over time, will fundamentally alter how the government pays Original Medicare providers.

One of these involves a service delivery and payment system in which hospitals, physicians and other medical professionals would form Accountable Care Organizations (ACOs) and contract with Medicare. Accountable Care Organizations are just that – organizations that are accountable to their patients and a third party – in this case, the federal government – to provide medical care of a specified level of quality and reduce overall costs. Medicare patients would presumably receive better, more efficient care, and the cost savings would be shared between the ACOs and the government.

The ACO system was supposed to be implemented on a wide basis beginning January 2012, but resistance to the plan by the healthcare industry resulted in the secretary of DHHS deciding to employ it on a demonstration project basis. Pilot programs using the ACO model are underway in several states, including Colorado, New Jersey and Vermont.

Beyond 2012

One of the more controversial changes to the Medicare system called for under the Patient Protection and Affordable Care Act has yet to occur – the formation of an Independent Payment Advisory Board. The panel would be composed of 15 members, each appointed by the president and confirmed by the Senate. As of press time, President Obama has not appointed anyone to the board.

Once in place, the board’s job will be to achieve spending reductions to the Medicare system based on an inflation formula involving a blend of the Consumer Price Index and the medical care Consumer Price Index (a combination of the cost of medical-care commodities such as drugs and equipment and medical-care services). By 2018, Medicare spending must be tied to the growth of the economy based on the GDP plus one percent.

Beginning Sept. 1, 2013, the board is required to make recommendations to the DHHS Secretary on how to achieve those fixed-cost goals, should actual Medicare costs go above them. The board must make a separate proposal to Congress the following Jan. 15. Congress has the authority to implement its own cost-saving measures to achieve the targets, but if it fails to do so, the Secretary is authorized to enforce the board’s recommendations.

The medical community has largely opposed the formation of the board from its conception. The measure has also run into significant opposition from conservative corners, where it is felt the board will have too much power, and from progressive corners, which worry it won’t have enough.

“The law says that the recommendations must be detailed and specific to meet the spending targets,” says the conservative Heritage Foundation’s Moffit. “How do they do that? The board is explicitly forbidden to ration care. It can’t say, ‘Mrs. Smith can’t have an MRI.’ It can’t increase taxes or change benefits. The only thing the board can do is recommend payment cuts to doctors and other professionals. The [DHSS] Secretary’s actions are not subject to administrative review, and neither is the board.

“Hopefully, the appointees will have some knowledge of medical issues,” he adds. “But this independent board makes a lot of medical professionals, and doctors in particular, very nervous.”

Over at the left-of-center think tank, the Brookings Institution, Aaron sees the board very differently.

“Rather than give the board a lot of authority, legislation severely restricts what it can do – excessively, in my view,” he says. “According to the Congressional Budget Office, Medicare will very likely meet its reduction targets and not trigger actions by the advisory board. Also, the Congress – which has meddled with and micromanaged Medicare – is free to act independently of the board to achieve those targets. It’s in the position of the serial killer who sends a note to police saying, ‘Stop me before I kill again.’”

For more information on Medicare, click on www.medicare.gov. You can also find valuable help and have your questions answered by calling the Medicare Rights Center at 800-MEDICARE or by contacting Medi-Lady, a one-stop for questions about Medicare. The Medi-Lady will answer all your Medicare questions for free. You can ask simple questions like, who is eligible for Medicare or why do I need a Medicare supplement plan? As well as more complex questions like, what is the best Medicare plan for a person who has a disability, or how will the Affordable Care Act affect my Medicare coverage? Medi-Lady helps you examine which insurance plan is best for you based on your specific health care needs. For more information on this valuable service, click on www.medilady.com or call (877) 633-4523.

David Silva is an award-winning freelance journalist and former editor for the Los Angeles Times Community News Division.