Here is a link the the 300+ page report which MedPAC provided to Congress last month.
MedPAC is a non-political Congressional Agency which reports on the status of the Medicare system and which makes recommendations to Congress for ways to improve the Medicare system.
Much of the volume of the report focuses on Medicare’s dealings with providers (chapters 3 through 11), but this report provides some insights into areas which may be of concern to insurance agents who work in the Medicare space (Medicare Supplement, Medicare Advantage, Medicare Part D).
There are 3 areas I would focus on:
1. On page 21, under the topic, “Reasons for Growth in Healthcare Spending”, look at the “Health Insurance.” Here MedPAC is arguing that the existence of Supplemental Insurance (like Medigap) has an inflationary effect on Medicare spending. (I’ll blog more on this later.)
2. On page 319, look at table 12-3. This is the cost of the Medicare advantage program relative to the original Medicare fee for service spending. The projection for 2012 is that Medicare advantage spending will be 107% of original Medicare FFS spending. This is down from the 110% MedPAC projected last year. The primary reason is the shift into HMO type Medicare advantage plans which have one of the lowest costs (106% for Medicare Advantage HMO’s). Also, the “bid” for Medicare Part A and B services was 95% of Original Medicare for HMO’s and 98% for all types of Medicare advantage plans combined. This is the first time I can recall in awhile that Medicare advantage was bidding less for A&B services than 100% of FFS Medicare for A&B services. The difference between the 98% overall bid and the 107% overall payment is used for “Extra Benefits” above and beyond what Original Medicare does (examples would be an out of pocket maximum and “Value Added” benefits like Dental, Vision, Hearing, Transportation, Gym memberships, etc.).
3. On page 330, MedPAC detailed the difference in payments to Medicare advantage which resulted from the CMS “Demonstration Project” which allowed for bonus payments for plans with as little as 3.0 stars. The PPACA law only allowed for bonuses for plans with 4.0 stars or greater. In 2011, only 22% of Medicare beneficiaries where in plans of 4.0 stars or greater, but almost 80% of Medicare beneficiaries are in plans of 3.0 stars of greater. Thus, but lowering the threshold from 4.0 stars to 3.0 stars, CMS almost quadrupled the number of beneficiaries in plans with “Star bonuses”. MedPAC estimates that this increased the amount of payments from a projected $200 million (based on PPACA guidelines) to a projected $2.8 billion (based on PPACA PLUS the CMS Demonstration project). This projected 14-fold increase in bonus payments explains some of the reasons why Medicare advantage has enjoyed strong growth in 2011 and 2012.
