Medicare in the New Millennium Ft Worth Association of Health Underwriters August 8, 2013.

“Medicare in the New Millennium”

Ft Worth Association of Health Underwriters

www.fwahu.comAugust 8, 2013

Agenda

• 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

• 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 MedicareYear 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

• 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 201214.6M enrollees nationwide

• 27% of overall Medicare enrollment18% 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

• 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 hospital services $ 66B home health services $ 39B skilled nursing services $ 17B hospice services $ 156B MA program $ 25B Disproportionate Share Hospital $ 114B Independent Pymt Advisory Board $ 39B 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

• 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’sGoal is to improve all aspects of care:

• 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

• ★ = poor performance• ★★ = below average performance• ★★★ = average performance• ★★★★ = above average performance• ★★★★★ = excellent performance

CMS Star Ratings

Derived from four sources of data1. 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 Set4. HOS - Health Outcome Surveys

Star RatingsNine individual quality measures

1. Staying healthy: screenings, tests, & vaccines2. Managing chronic (long term) conditions3. Drug plan customer service4. Ratings of health plans responsiveness and care5. Health plan member complaints and appeals6. Drug pricing and patient safety7. Health plan telephone customer service8. Drug plan member complaints, members who choose to

leave, & Medicare audit findings9. 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 bonusTotal bonus payments, 2012 = $3.1 Billion

UHC 18% BCBS 13%

Kaiser 12% Humana 12%

Wellpoint 5% HealthSpring 3%

Aetna 3% Health Net 2% Coventry 2%

Others 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 2010 = 80.8 (+5.1 yrs)– Male: 1965 = 66.8 2010 = 75.7 (+8.9 yrs)

US Census Bureau 2012 Statistical Abstract

Raise the Cost Sharing

• Part A - Hospital Insurance Inpatient Deductible1966-68 = $40.002013 = $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 <$85,000 Gross Income in 2011 + $42.00 ($170,000-$214,000) + $104.90 ($214,000 - $320,000) + $167.80 ($320,000-$428,000) + $230.80 ($428,000+)

Income Related Monthly Adjustment Amounts

• “IRMAA”• 2013 Part D plan premium plus:

$11.60 ($170,000-$214,000)$29.90 ($214,000 - $320,000)$48.30 ($320,000-$428,000)$66.60 ($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!