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Medicare Supplement Insurance and Claim Cost Trends Report to NCOIL American Academy of Actuaries Medicare Supplement Insurance Work Group Mike Abroe, Chairperson AMERICAN ACADEMY of ACTUARIES


Medicare 65+ Market Share 10%

31%

19%

10%

30%

Medicaid

Medicare HMO

Medicare Supplement

Medicare Only

Employer

As of 1998 – CMS Reports AMERICAN ACADEMY of ACTUARIES


Medicare Risk HMO Enrollees Year

Enrollees

Change

1995 1996 1997 1998 1999 2000 2001

3,089,259 4,115,293 5,211,339 6,055,546 6,347,434 6,260,549 5,480,899

820,895 1,026,034 1,096,046 844,207 291,888 -86,885 -779,650

Source: Medicare Managed Care Contract Reports, CMS

AMERICAN ACADEMY of ACTUARIES


Medicare Supplement Lives By Plan 40.0% 30.0% 20.0% 10.0% 0.0%

A

B

C

D

E

F

G

H

I

J

ALL

Source: 1998 NAIC

AMERICAN ACADEMY of ACTUARIES


Medicare Supplement Update Benefit Plans A-J Plan A Basic Benefits

Plan B Basic Benefits

Plan C Basic Benefits Skilled Nursing Coinsurance Part A Deductible Part B Deductible

Plan D Basic Benefits Skilled Nursing Coinsurance Part A Deductible

Plan E Basic Benefits Skilled Nursing Coinsurance Part A Deductible

Plan F Basic Benefits Skilled Nursing Coinsurance Part A Part A Deductible Deductible Part B Deductible Part B Excess 100% Foreign Travel Foreign Travel Foreign Travel Foreign Travel Emergency Emergency Emergency Emergency At-Home Recovery

Plan G Basic Benefits Skilled Nursing Coinsurance Part A Deductible

Plan I Basic Benefits Skilled Nursing Coinsurance Part A Deductible

Part B Excess Part B Excess 80% 100% Foreign Travel Foreign Travel Foreign Travel Emergency Emergency Emergency At-Home At-Home Recovery Recovery Basic Drugs Basic Drugs $1,250 Limit $1,250 Limit

Preventive Care Basic Benefits: Part A and B

Plan H Basic Benefits Skilled Nursing Coinsurance Part A Deductible

Plan J Basic Benefits Skilled Nursing Coinsurance Part A Deductible Part B Deductible Part B Deductible Foreign Travel Emergency At-Home Recovery Extended Drugs $3,000 Limit Preventive Care

Co-insurance AMERICAN ACADEMY of ACTUARIES


Nationwide Annual Claim Trend 1996 Through 1998 Reasons For Higher Medicare Supplement Trends • • • • •

Hospital outpatient Disableds/ESRD M+C Enrollment Demographics/Aging Population Rx Costs AMERICAN ACADEMY of ACTUARIES


Medicare Supplement Claim Trends – 1996 to 1998 Prescription Drug Experience

Plan

Rx Benefits Only

Non-Rx Benefits

All Benefits

Plans H,I

14.9%

10.5%

11.4%

Plan J

14.2%

5.2%

7.8%

Plans H,I,J Mass. Product

15.0% 25.1%

8.7% 10.5%

10.3% 16.5%

AMERICAN ACADEMY of ACTUARIES


Nationwide Annual Claim Trend 1996 Through 1998 Plan A Plan C Plan F Plans BDEG Plans ABCDEFG

17.6% 10.9% 9.0% 12.8% 11.2%

Source: AAA Study Dated June 8, 2000

AMERICAN ACADEMY of ACTUARIES


96/98 Medicare Fee-for-service Trend Versus Medicare Supplement Trend 15.0% 11.9%

12.0%

11.2%

9.0% 6.0%

7.2% 3.6%

6.9%

5.9%

3.9%

3.0%

1.1%

0.0% -0.5%

-3.0%

Part A

Part B

Medicare Program

Parts A&B

Medicare Beneficiary

Sources: AAA Study/HCFA

Supplement AMERICAN ACADEMY of ACTUARIES


Claim Trends – Hospital Outpatient One Carrier’s Plan F Experience 1996-1997

1997-1998

Average 1996-1998

Outpatient Hospital

18.4%

15.3%

18.2%

Total Plan F

8.8%

9.0%

7.7%

The excess trend applied since 1992, the first year of standardization, implies aggregate claims costs 20% lower if Hospital outpatient inflated at the same rate as all other benefits combined. AMERICAN ACADEMY of ACTUARIES


Medicare’s New Prospective Payment Methodology for Outpatient Services • One-time reduction in aggregate coinsurance costs nationwide • HCFA estimates a 12% initial reduction in Hospital Outpatient Benefits – or 3.1% of all beneficiary claim obligations • Lowered Trend Thereafter • But, Full Implementation up to 40 years, and AMERICAN ACADEMY of ACTUARIES


Ratio of Disabled to Aged Annual Claim Cost Plan Plan A Plan C Plan F Plans B,D,E,G All Plans A-G

Ratio 3.83 2.48 1.35 1.55 1.78 AMERICAN ACADEMY of ACTUARIES


Claim Trends by Region 1998/96 14.0%

13.9% 10.7%

12.0% 10.0%

11.2% 9.7%

9.4%

8.0% 6.0% 4.0% 2.0% 0.0%

Northeast

Midwest

South

West

All AMERICAN ACADEMY of ACTUARIES

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American Academy of Actuaries Medicare Supplement Insurance Work Group Report to NCOIL Mike Abroe, Chairperson AMERICAN ACADEMY of ACTUARIES...

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