The Future of Medicare And How Private Plans are Affected Dwane McFerrin, VP Medicare Solutions...

The Future of MedicareAnd How Private Plans are Affected

Dwane McFerrin, VP Medicare Solutions Senior Market Sales, Inc.

© 2011, National Association of Health Underwriters • www.nahu.org

Source: CSG Actuarial, LLC, Future of Medicare Supplement. www.medicaresupp.org/2012/program/501b.pdf, November 2012.


Source: Kaiser Family Foundation, Medigap: Spotlight on Enrollment, Premiums and Recent Trends, Medicare Policy. www.kff.org/medicare/8412.cfm, April 2013.

Sales Trends Vary Greatly by State


Reimbursement Cuts impact on MA

Congressional Budget Office Projections

Source: The Insurance Barn, Medicare Advantage’s Future Is Bad But Not As Bad As Rumors Would Have You Believe. www.theinsurancebarn.wordpress.com, November 2012.


Projected Federal Spending on Medicare and Medicaid (% GDP)

It is the rate of spending per individual that will have the most impact rather than the quantity/demographics of an aging population.

“Excess cost growth” refers to the extent to which the increase in healthcare spending for an average individual exceeds the growth in per capita GDP.

“Interaction…” refers to the effects of excess cost growth and the aging of the population, which results in greater growth in spending than would result from either factor separately.

“Aging of population” refers to demographic shifts, such as increasing average population age and life expectancy.

Source: Congressional Budget Office via Wikimedia Commons File: Medicare and Medicaid GDP Chart.svg. <http://commons.wikimedia.org/wiki/File:Medicare_and_Medicaid_GDP_Chart.svg> 12 September 2009.


Source: Congressional Budget Office via Fix Health Care Policy. Presidential Debate Prep: Understanding Obamacare’s $716 Billion in Cuts to Medicare. 19 October 2012. <http://fixhealthcarepolicy.com/tag/medicare-advantage-cuts>

* Disproportionate Share Hospital, meaning payments that go to hospitals that serve a large number o flow-income patients.


Medicare Budget Cuts No One Likes

President Obama’s Proposed 2014 Budget

• President open to reform, combining Part A and B to a single deductible*

• Proposed 15% surcharge on new buyers of Med Supp Plan F• Republicans and Democrats with misgivings**

– Pat Roberts R-KS “Lizzie Borden whack” at critical access hospitals

– Democratic Senators Cantwell – WA, Nelson – FL and Menendez – NJ object to cuts in graduate medical education

– Max Baucus D-MT expressed concern about cuts to nursing homes

Persuading lawmakers of a grand bargain cutting entitlements and raising

revenue will be difficult; Distrust of IRS a major political issueSource: * http://nyti.ms/161LB6C 3/28/2013**Mary Agnes Carey, Kaiser Health News 4/18/2013


Deficit Reduction Proposals

Medicare Impact

• Senators Coburn R-OK and Lieberman I-CT (former) “Raise eligibility for Medicare by 2 months every year”* thereby increasing eligibility from 65 to 67 gradually

• The Medicare Payment Advisory Commission (MedPAC) has discussed a 20 percent surcharge on Plan F

• H.Con.Res.25 Means Testing for Medicare Parts B and D and freeze thresholds until 25% of beneficiaries are paying income-related premiums**

• Bowles-Simpson Commission proposed in 2010 to combine Part A and B into a $550 deductible and 20% coinsurance rate with $7,500 out-of-pocket maximum

*Source: http://1.usa.gov/14Mk4uP 4/18/2013** Kaiser Family Foundation, Medicare and the Federal Budget http://bit.ly/ZbKJMN 4/2013


CMS Regulations for MA

• Quality Stars reimbursement

• 5 stars = year-round selling

• Low-Performing Plans – Letters to beneficiaries– Method for agents to get

paid

• CMS threatening to term carriers performing at 2.5 stars

• Expansion plans limited• Medicare Advantage

Disenrollment Period

Carrot and Stick Approach


Major Issues facing Medicare

A Complex Environment

• COBRA• Observation status• Open Enrollment Period begins 10-1 and 10-15• Accountable Care Organizations• Navigators and healthcare exchanges/marketplaces• Medicare Advantage consolidation• Fraud estimated to cost $60-$90 billion annually*• Disclosing provider costs

Source: 5/14/2013 SF Chronicle article by Kelli Kennedy “89 charged in Medicare fraud busts in 8 cities”


Medicare Advantage Consolidation

Recent MA Acquisitions/Mergers

• Humana/Arcadian• UnitedHealthcare/Care Improvement Plus• Aetna/Coventry• Cigna/HealthSpring


Medicare Supplement Carriers

Newer Entrants

• AFLAC• Equitable Life & Casualty• Manhattan Life• Everence Insurance Company• Omaha Insurance Company

Carriers making Acquisitions


Part D Environment

A Competitive Market

• Coverage Gap is narrowing and for the first time, 2014 deductibles and thresholds will go down

• Fierce competition for zero deductible plans• Fierce competition for low premium aging-in buyers• More brand name drugs moving to generic status• Referral programs becoming popular• Pharmacies/Retailers becoming more active• Quoting by vendor for Medicare.gov now commercially

available


The Senior Segment is the Fastest Growing Demographic

Source: CRS computations based on data in the U.S. January 21, 2011 based on the Census Bureau’s December 2010 data release. These data do not include results from the 2010 census.


The Senior Segment will Account for 20% of the U.S. Population by 2050

Source: CRS computations based on data in the U.S. January 21, 2011 based on the Census Bureau’s December 2010 data release. These data do not include results from the 2010 census.


Sources of Supplemental CoverageAmong Medicare Beneficiaries, 2009

Medigap24%

Medicare Advantage only 14%

Medicaidonly 14%

Employer-Sponsored only 25%

Other Public/Private

Coverage only1%

Multiple Sources of Coverage (without

Medigap)10%

No Supplemental Coverage12%

Source: Kaiser Family Foundation, Medigap: Spotlight on Enrollment, Premiums and Recent Trends, Medicare Policy. www.kff.org/medicare/8412.cfm, April 2013.

Total Medicare Beneficiaries, 2009 = 47.2 Million


So What Does it all Mean?

Change is Guaranteed Due to:• Healthcare costs• Demographic changes• Federal deficit• Regulations already underway

Private Insurance will Play a Key Role Due to:• Consumer preferences• Demographic changes• Accountable Care Organizations/cost cutting• Legislation will likely be phased in


How does an Agent Survive in a Changing Environment?

• Study the changes• Educate your clients• Embrace technology• Support NAHU and industry organizations• Know your value proposition

– Your clients want Call, Click, Mail or Meet™

The Future of Medicare And How Private Plans are Affected Dwane McFerrin, VP Medicare Solutions...

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