“Medicare in the New Millennium”
Ft Worth Association of Health Underwriters
www.fwahu.com
August 8, 2013
Agenda
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Future of Med Sups
Future of Medicare Advantage
Retiree plans: huge market coming to you
Actively at work and eligible for Medicare
Employer Group Waiver Plans
– “Egg Whips” or “EGWP’s”
• COBRA issues
• ACO’s – Accountable Care Organizations
(Agenda continued next slide)
Agenda
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Star ratings
Lack of sufficient providers
Future eligibility age
IRMAA
– Income Related Monthly Adjustment Amounts
• SGR – Sustainable Growth Rate
• Role of the agent
Future Growth in Medicare
Year
Total Medicare Beneficiaries
Increase by year
2012
50,695,000
10,000 per day x 365=
2013
54,345,000
3,650,000
2014
57,995,000
3,650,000
2015
61,645,000
3,650,000
2016
65,295,000
3,650,000
2017
68,945,000
3,650,000
2018
72,595,000
3,650,000
2019
76,245,000
3,650,000
2020
79,895,000
3,650,000
Medicare Supplement Growth
• 9.6M Med Sups in force
• Baby Boomer impact
• Medicare Advantage market is slowing*
– This is not proving to be the case!
• Funding reductions in Medicare Advantage
• Employers:
– Removing Medicare aged retirees from their
health plan
*Source: CSG Actuarial Research Paper, 2012
Future of Medicare Advantage
• “I thought these plans were going away?”
– 99.7% of all beneficiaries have access to a MA Plan
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Medicaid coordination will increase
More mergers & acquisitions
Emergence of Accountable Care Organizations
Pay for performance
– Star ratings
Medicare Advantage Spotlight
• Enrollment grew by 10% in 2012
14.6M enrollees nationwide
• 27% of overall Medicare enrollment
18% of these are via group retiree plans
• Enrollment has doubled since 2005
• 65% are enrolled in HMO plans (9.5M)
• 87% are located in urban counties
Medicare Advantage Spotlight
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About 65% of all MA enrollees are in 6 firms
1 in 3 are enrolled in either UHC or Humana
56% are enrolled in a $0 premium plan
Group plan members account for:
– 68% of Aetna’s share; 42% for Kaiser’s share
• Growth opportunity remains strong
– Baby boomers
– Retirees losing health coverage
Medicare Advantage “SNPs”
• Special Needs Plans = 1.8M enrollees
• SNP Dual Eligible (Medicare and Medicaid)
– Account for about 10% of all Dual Eligible
– Huge growth opportunity
• SNP Chronic
– 80/20 Rule: 80% of claims come from 20% of
beneficiaries
– CHF, cardiovascular disease, diabetes
• SNP Institutional Plans
Part C Revenue Cuts
• According to UHC:
 -12% MA revenue cuts to fund ACA
• Phasing in 2012-2017
 -3.3% non-tax deductible fee on insurers to fund
the ACA in 2014+
 -2.5% cut in rev for plans with 3-3.5 stars in 2015+
 -2.0% cut in rev for sequestration in 2013
– Total 19.8% in decreased funding
Impact of MA Payment reductions
ACA reduces Medicare’s payment rates by
$716,000,000,000
$ 260B
$ 66B
$ 39B
$ 17B
$ 156B
$ 25B
$ 114B
$ 39B
hospital services
home health services
skilled nursing services
hospice services
MA program
Disproportionate Share Hospital
Independent Pymt Advisory Board
Other
Social Security & Medicare Taxes
• Funded by FICA taxes at 15.3% of “wages”
– Paid 50/50 by employees and employers
• ACA increased FICA taxes by 0.9% (1-1-13)
– On high-income taxpayers & on unearned income
– Single filers $200,000+
– Joint filers $250,000+
– Value of non-cash fringe benefits included in wages
• Wages include deferred comp
Retiree Plans
• 1 in 4 Medicare beneficiaries are currently
enrolled in a retiree plan
• FASB issues tie up cash flow
• Elimination of Retiree Drug Subsidy Deduction
• Agent competition
– Competing with large organizations and other direct to
consumer marketing organizations like:
• ExtendHealth.com
• gobloomhealth.com
• eHealthInsurance.com
Actively at Work Employees
• More people age 65+ cannot retire
• Some do not want to retire
• 2-19 life groups
• remove the 65 year old workers off the group
health plan
• Gain group health premium savings by using
Medicare related products
• Convert the savings to other insurance and
financial products
“Egg Whips”
• Employer Group Waiver Plan
– Series 800 (EGWP)
– Series 900 (Prescription Drug Plan or Part D)
• EGWP is creditable Part D coverage
• Annual Enrollment Period (AEP)
– October 15-Dec 7
• EGWP Trust Open Enrollment Period
– Year round sales, no “lock-in”
What makes an EGWP different?
• Different rules apply to an EGWP:
– Enroll first of any month throughout the year
– Options for changes during the year
– No “Scope of Appointment” necessary
– No certification is required
COBRA
• When a person leaves a group health plan,
many things could go wrong
• When should they enroll in Part B?
– Beware of the 8 month rule!
• Open Enrollment Period mistakes
– Don’t let March 31st slip by!
• Part B penalty for late enrollment
• Don’t overlook the dependents!
ACO’s
• What is an accountable care organization?
– Coordination of care between all providers
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Objective: lower costs by improving quality
Accountability through a network of relationships
Disease management & care coordination
Transition from FFS to value based payments
Currently over 200+ ACO Medicare Demonstration
Projects in place
ACO’s
Goal is to improve all aspects of care:
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More patient safety
More patient centered
Timely & more efficient care
Monitor nutrition
Increased activity
Reduce wasteful spending
More preventive care
Market Value Based Purchasing
• ACA designed this concept to pay hospitals differently
based on their performance of federal quality
measures
• Has not proven effective in demonstration programs*
– Results so far suggest this concept has produced less high
quality care
– Providers focusing on more care that is financially
rewarding than on the patient’s needs
*Heritage Foundation, July 27, 2012
CMS Star Ratings
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★ = poor performance
★ ★ = below average performance
★ ★ ★ = average performance
★ ★ ★★ = above average performance
★ ★ ★★★ = excellent performance
CMS Star Ratings
Derived from four sources of data
1. CMS Administration data on plan quality and
member satisfaction
(See next slide for the nine measuring points)
2. CAHPS - Consumer Assessment of Healthcare
Providers and Systems
3. HEDIS - Healthcare Effectiveness Data & Info Set
4. HOS - Health Outcome Surveys
Star Ratings
Nine individual quality measures
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Staying healthy: screenings, tests, & vaccines
Managing chronic (long term) conditions
Drug plan customer service
Ratings of health plans responsiveness and care
Health plan member complaints and appeals
Drug pricing and patient safety
Health plan telephone customer service
Drug plan member complaints, members who choose to
leave, & Medicare audit findings
9. Member experience with drug plan
Star ratings
• MA plans
– 91% have 3+ stars and will receive a bonus
• Only 12 five star plans of 446 plans in 2011
– Plan memberships range from 5,349 to 797,669
– 5 star plans may sell year round
• Higher ratings = higher reimbursement levels
– changes the terms of the market competition
• Performance bonus by under star ratings
– Projected $3.1 Billion in 2012
Star rating bonus
Total bonus payments, 2012 = $3.1 Billion
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UHC
BCBS
Kaiser
Humana
Wellpoint
HealthSpring
Aetna
Health Net
Coventry
Others
18%
13%
12%
12%
5%
3%
3%
2%
2%
30%
CMS's performance data files are available at
http://www.cms.gov/PrescriptionDrugCovGenIn/06_PerformanceData.asp
Lack of Sufficient Providers
• Aging population
• Will be twice as many people age 65 by 2030
•Increased demand for health care
• Greater number of insured
• PCP’s are paid less than Specialists
• Lifetime earnings for Specialists $3.5 million more
• Funding cuts to teaching hospitals
•limits number of residency programs
• Electronic Medical Records
• Up to $50,000 per office to become compliant
Lack of Providers
• CMS said 9,539 providers opted out in 2012
– Up from 3,700 in 2009
• 685,000 docs are enrolled as participating
Medicare providers
• Fewer family docs accepting Medicaid patients
• But: docs get a raise in 2014
– Medicaid rates move up to Medicare rates
Lack of Sufficient Providers
Lack of Sufficient Providers
Raise Medicare Eligibility Age?
• 1965 Medicare was introduced
• Talk of raising Medicare eligible age to 67
• Aging population
– Will be twice as many people age 65 by 2030
• Life expectancy increase since 1965
– Female: 1965 = 73.8
– Male: 1965 = 66.8
US Census Bureau 2012 Statistical Abstract
2010 = 80.8 (+5.1 yrs)
2010 = 75.7 (+8.9 yrs)
Raise the Cost Sharing
• Part A - Hospital Insurance Inpatient Deductible
1966-68 = $40.00
2013
= $1,184.00
• Part B - Medical Insurance Annual Deductible
• 1966 - 1972 = $50.00
• 2013
= $147.00
• Part D – Drug Coverage
• 2013 = $325
• 2014 = $310
Income Related Monthly Adjustment Amounts
• “IRMAA”
• 2013 Standard Part B premium
$104.90
+ $42.00
+ $104.90
+ $167.80
+ $230.80
<$85,000 Gross Income in 2011
($170,000-$214,000)
($214,000 - $320,000)
($320,000-$428,000)
($428,000+)
Income Related Monthly Adjustment Amounts
• “IRMAA”
• 2013 Part D plan premium plus:
$11.60
$29.90
$48.30
$66.60
($170,000-$214,000)
($214,000 - $320,000)
($320,000-$428,000)
($428,000+)
Sustainable Growth Rate
• Used to determine payment for physician
services in Medicare
• Per CMS, Physician cuts scheduled by up to
24.4% on January 1, 2014
• Bipartisan Medicare Physician Payment
Innovation Act
– introduced to repeal the SGR from the
reimbursement formula
Hospital Readmissions
• Starting in fiscal year 2013, lower
reimbursement under the ACA begin for
readmissions
• Medicare Payment Advisory Commission:
– 2/3rds of all readmits are avoidable
– Average $7,200 per readmit; $15B per year problem
• CMS to withhold a % of payment
– 1% in 2013
– 2% in 2014
– 3% in 2015 and thereafter
Role of the Agent
• As more changes take place, life becomes more
complicated, increasing the need for advice
• Agents, brokers, & private companies to sell
coverage on the exchange to individuals and
employers through privately-run websites
• MA plans are a good example of what the agent’s
role may be in health insurance exchanges
• Be prepared: adapt, survive and thrive
Questions?
Thanks for attending!