MEDICARE ADVANTAGE SURVIVES, EVEN THRIVES, POST-ACA reimbursement rate have the higher MA fee-for-service adjustment, at 107.5 or 115 percent. The fourth rate is 100 percent. Even though insurers are paid less, companies are apparently able to increase efficiency and pay medical service providers enough for them to stay in the plans, Jacobson said. Carriers attract clients interested by not only offering enticing extras, such as paid gym membership, but also by capping seniors’ out-of-pocket expenses, as required of MA plans but not of traditional Medicare. Shifting demographics are giving MA a boost, said Alan Mittermaier, president of HealthMetrix Research in Columbus, Ohio. “I think probably a good bit of steady growth can be attributed to boomers aging into Medicare, many of whom have had their employer or personal insurance provided through a managed care organization as opposed to indemnity commercial insurance, which has certainly been on the demise,” Mittermaier said. “I think there’s a pretty broad acceptance and understanding of how the managed care plans work.” The HMO model also helps insurers bring efficiency to Medicare, not only driving down cost but also improving care, which was the initial attraction of, and arguments for, the MA idea. “The impetus was that managed care would give a bigger bang for the buck for Medicare beneficiaries and for the federal government by being able to coordinate care and really be able to connect all of the various providers and services that a beneficiary would need,” Mittermaier said. “It was particularly helpful for those who have chronic disease and see half a dozen specialists, get 12 prescriptions – trying to coordinate that and make sure that physicians seeing the same patient are kind of working off the same page.” The higher fees paid to MA were in part an acknowledgment that applying the HMO model to Medicare was an experiment. “The Medicare population was generally less healthy, obviously, as people age and their health deteriorates,” Mittermaier said. “But there is also the end of life issue and the concentration of expenditure for services in the last six months or a year of someone’s life. So, it presents a challenge to managed care plans versus the other healthier, younger population that
Total Medicare Private Health Plan Enrollment, 1999-2012 9.7
IN MILLIONS
6.9 6.8
10.5
11.1
HEALTH
11.9
13.1
8.4 6.2
5.6
5.3
5.3
5.6
6.8
’99 ’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10
’11
’12
18% 17% 15% 14% 13% 13% 13% 16% 19% 22% 23% 24% 25% 27% % OF MEDICARE BENEFICIARIES NOTE: Includes cost and demonstration plans, and enrollees in Special Needs Plans as well as other Medicare Advantage plans. SOURCE: MPR/Kaiser Family Foundation analysis of CMS Medicare Advantage enrollment files, 2008-2012, and MPR, “Tracking Medicare Health and Prescription Drug Plans Monthly Report,” 2001-2007; enrollment numbers from March of the respective year, with the exception of 2006, which is from April.
they’ve traditionally served in the commercial insurance market. That was part of the reasoning for having a 15 percent payment over and above per capita fee for service Medicare expenditures.” MAs are bringing another feature of the private insurance market – mergers and acquisitions, which has accelerated since ACA was passed. “The larger Medicare players, Anthem, Aetna, United Healthcare and Humana, have been acquiring regional and local plans that have a substantial Medicare book of business,” Mittermaier said. “I think that’s probably the evidence that some of the smaller players realize they’re not going to have the same advantage in economy of scale and being able to hold down costs, both on the medical loss ratio in terms of outlays for medical expenses, as well as on the general services cost overhead programs and plans.” The acquisitions might reduce the market to a few large players nationally – with all their positive and negative consequences. Although consumer choice would be reduced, the larger companies will be able to keep the market viable by spreading risk across a larger pool and increasing their leverage with providers. Although the greater leverage might sound like carriers would play hardball with doctors over rates, the bargaining power is most useful with hospitals and organized health-care groups. In fact, doctors might win out if MA plans continue to grow. That’s because Medicare fees
for service have been the same for several years and might even drop if Congress gets around to cutting reimbursement rates as required by the Balanced Budget Act of 1997. That makes MAs look a whole lot better to doctors because HMOs tend to pay higher fees to medical providers, Mittermaier said. What does it all mean for advisors? The product won’t be sold in exchanges and will probably become more of a component of an overall financial plan provided by advisors. “Certainly I would think that becomes an extremely valuable resource for anyone planning their retirement,” Mittermaier said. “Whether it’s a certified health insurance advisor or certified financial planner, that’s an extremely important consideration as part of planning,” Mittermaier’s own experience might be an indicator of how MAs will fit into the retirement market: “I’m 63 and in the next couple of years I will be doing retirement planning with my wife and considering Medicare Advantage – once we get an opinion from a trusted advisor.” Steven A. Morelli is editor-in-chief for InsuranceNewsNet. He has more than 25 years of experience as a reporter and editor for newspapers, magazines and insurance periodicals. He was also vice president of communications for an insurance agent’s association. Steve can be reached at smorelli@insurancenewsnet.com.
November 2012 » InsuranceNewsNet Magazine
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