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The Future of Medicare
And 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.
Sales Trends Vary Greatly by State
Source: Kaiser Family Foundation, Medigap: Spotlight on Enrollment, Premiums and Recent Trends, Medicare
Policy. www.kff.org/medicare/8412.cfm, April 2013.
© 2011, National Association of Health Underwriters • www.nahu.org
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.
© 2011, National Association of Health Underwriters • www.nahu.org
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.
© 2011, National Association of Health Underwriters • www.nahu.org
* Disproportionate Share Hospital, meaning payments that go to hospitals that serve
a large number o flow-income patients.
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/medicareadvantage-cuts>
© 2011, National Association of Health Underwriters • www.nahu.org
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
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Persuading lawmakers of a grand bargain cutting entitlements and raising
revenue will be difficult; Distrust of IRS a major political issue
Source: * http://nyti.ms/161LB6C 3/28/2013
**Mary Agnes Carey, Kaiser Health News 4/18/2013
© 2011, National Association of Health Underwriters • www.nahu.org
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 incomerelated 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
© 2011, National Association of Health Underwriters • www.nahu.org
CMS Regulations for MA
Carrot and Stick Approach
• 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
© 2011, National Association of Health Underwriters • www.nahu.org
Major Issues facing Medicare
A Complex Environment
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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”
© 2011, National Association of Health Underwriters • www.nahu.org
Medicare Advantage Consolidation
Recent MA Acquisitions/Mergers
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Humana/Arcadian
UnitedHealthcare/Care Improvement Plus
Aetna/Coventry
Cigna/HealthSpring
© 2011, National Association of Health Underwriters • www.nahu.org
Medicare Supplement Carriers
Newer Entrants
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AFLAC
Equitable Life & Casualty
Manhattan Life
Everence Insurance Company
Omaha Insurance Company
Carriers making Acquisitions
© 2011, National Association of Health Underwriters • www.nahu.org
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
© 2011, National Association of Health Underwriters • www.nahu.org
The Senior Segment is the Fastest
Growing Demographic
U.S. Population by Age Group
1950-2050
450,000
400,000
350,000
300,000
250,000
200,000
65-65+
150,000
20-64
0-19
100,000
50,000
0
1950
1975
2000
2025
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.
© 2011, National Association of Health Underwriters • www.nahu.org
The Senior Segment will Account for
20% of the U.S. Population by 2050
Percent of U.S. Population
by Age Group 1950-2050
70
60
Percent
50
40
0-19
20-64
30
65-65+
20
10
0
1950
1975
2000
2025
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.
© 2011, National Association of Health Underwriters • www.nahu.org
Sources of Supplemental Coverage
Among Medicare Beneficiaries, 2009
No Supplemental Coverage
12%
Multiple Sources of
Coverage (without
Medigap)
10%
Other
Public/Private
Coverage
only
1%
Medigap
24%
EmployerSponsored
only 25%
Medicare
Advantage
only 14%
Medicaid
only 14%
Total Medicare Beneficiaries, 2009 = 47.2 Million
Source: Kaiser Family Foundation, Medigap: Spotlight on Enrollment, Premiums and Recent Trends, Medicare
Policy. www.kff.org/medicare/8412.cfm, April 2013.
© 2011, National Association of Health Underwriters • www.nahu.org
So What Does it all Mean?
Change is Guaranteed Due to:
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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
© 2011, National Association of Health Underwriters • www.nahu.org
How does an Agent Survive in a
Changing Environment?
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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™
© 2011, National Association of Health Underwriters • www.nahu.org