Here is the press release from MedPac. See the section on the first page called, “Medicare’s Benefit Design”. You can view the entire report here. (See Chapter 1)
MedPac is making several recommendations:
- Placing a deductible on both A & B services of $500.
- Placing a Maximum Out of Pocket on Medicare A & B.
- Replacing Co-Insurance with Co-Payments, depending on the type of service.
- Charge an additional amount for Medicare Beneficiaries who elect to purchase Medigap insurance (5% to 20% of Part B premium).
Most likely, a proposal this sweeping would need to be introduced by a new Congress in 2013, however, there is support from both Democrats and Republicans to fundamentally change Medicare’s benefit structure.
The MedPac Med Supp/Medigap suggested reforms are nothing more than a form of health services rationing by the government. Is “over utilization” by Med Supp members a bad thing if a medical issue is caught early rather than late? Is it a matter perhaps of being poundwise but penny foolish?
Most of the really big medical bills come from treating major illnesses. Through preventive and early treament, some of the major illnesses can be delayed or avoided with earlier treatment For one example, how many type 2 diabetics that live on fixed incomes will defer adequate treatment because they “can’t afford it” under the new MedPac model? Is it more cost efficient to keep blood sugar under control or treat a stroke, heart attack or kidney failure?
I hope medicare supplements do not get messed with by the government. I myself just got into selling the senior side of health insurance and would like to stay here for a while. I cannot wait to see what the supreme court rules on mandatory health insurance next week. What do you guys think of the future of medicare supplements?
Judging by the MedPac suggestion, Medicare will start looking more like Part C plans and by inference, so would Medigap insurance. Despite my concerns for govt. as an inconsistent business “partne,” they are too committed to Medicare to do any more than enact incremental changes for the foreseeable future.
Regarding the Health Care Reform law (PPACA), if upheld, I see Medigap insurers quickly forced into the same minimum loss ratio requirements as the rest of the health insurance industry, along with agent compensation reductions that would surely follow.
My solution: Make hay now while the sun still shines.
To Dale (anonymous June 20 at 8:59)
Thank you…Good points… and we can do that right now because the consumer has choice between MA and Med Supp.. The model you are describing…low premiums and save the difference..can work for many persons…assuming the health is straight-forward.
If the health isn’t straight-forward, then the model you describe doesn’t work well and can actually cost the consumer much more than the Med Supp premiums. MA plans often have an annual $6,700 out-of-pocket maximum. Often 20% co-insurance on Part B expensive drugs…not subject to o-o-p.
MAs have regional networks which some consumers don’t want.
So it is good the choice is there for all.
The thinking in Chapter 1 of the report seems to be that Med Supp causes overuse and MA does not. The truth is probably that some people with perceived high needs self-select to Med Supp and some people with perceived lower needs might self-select to MA…and try to “save the difference.’
So Med Supp itself doesn’t cause higher use and MA itself doesn’t cause lower use.
A good broker will explain to clients exactly what Dale describes ..the idea of going with MA and hopefully saving the difference..maybe looking out over five years of saved premiums with the idea of coming out ahead…..against the idea of going with Med Supp, paying higher premiums, and having a known annual outlay for health costs ( the premiums with Plan F).
The clients then decide which direction they want to go. Key factors in the clients’ decsions include family budget, feelings towards finacial risk, and feelings towrd the nature of insurance.
Two years ago, I talked to a former MedPac member who said that studies of Medicare claims showed that people with Plan F definitely used the system more than others.
As for MA plans, if people use the system less, then Medicare should benefit – not insurance companies. If MA plans jack up co-pays and hurdles to get prior authorization, the insurance company make bigger profits until the 85% MLR is in place. A manager for an MA plan in Tucson (4 stars) bragged last year that their MLR is 70% because they “manage” their members so well. They actually do a lot of managing and do more in-house than other MA plans. Their model is a good one for Medicare – just not the big profits for the insurance company.
I think much of this boils down to the govt. and the public losing confidence in private insurance. Don’t ask why, it doesn’t matter, they just are. Odd, considering what is really happening now is Plan F absorbs all the costs passed onto beneficiaries by changes in Medicare. Why is the govt. complaining? They increase the Part A Deductible, increase co-payments under A, decrease payments under B and all those insurance companies out there writing Plan F absorb the whole thing. The insured doesn’t see this of course, except via an increase in his Plan F premiums. “Gee” he thinks, “there go those greedy insurance companies again wanting more of my money.”
Many of my Med supp clients are actually in great health, but have chosen F or G because they want control over their monthly medical outlays — basically the premium. These clients do not want HMO plans, don’t want referrals, want national choice of docs, etc. MA HMOs often have an annual o-o-p max of $6,700 now and these cllients want to avoid that possiblity.
And they don’t visit a doc any meer than necessary. They simply use Med Supp as a tool to control their total health outlays.
I have many MA HMO clients (Bravo, K65, Aetna), with heavy needs, who clealry would benefit from F, G, or maybe N…but they can’t see past the low monthly premiums with MAs.
I don’t agree with the logic here..
I DO,I WOULD LIKE THE CLIENT KEEP THAT MONEY IN THERE BANK
PAY 215.00 FOR PLAN F,DID NOT SEE A DOC THAT MONTH BUT PAID $215.00.LOW MA PLAN $0-40,COULD BE LIS PAY $0-5.30,THE INSURANCE COMPANY.MA PLANS NEED TO HAVE $5000,00 LIFE INSURANCE BUILD IN FOR OPTIONAL ADD ON. THANK YOU. DALE
Wow…just skim read Chapter 1 and it makes the head spin. The fallacy here is in thinking Med Supp causes costs to be higher. The thinking seems to be that because there is no consumer cost per service (especially with F), then the result is gross over-consumption. Thus the insurance becomes the enemy of Medicare cost savings.
By weakening or destroying the Med Supp insurance, this forces the consumer to carefully rationalize or scrutinze every medical decison/procedure, because the consumer would have an ongoing cost-sharing mechanism.
I think the result here would actually see the consumer paying more vs. the current model, where Med Supp can be effectively integrated. I don’t think the consumer is going to cut back on doc visits here and I would bet this proposal would actually cost Medicare more money than the current system.
Craig,
Hypothetically, if all the suggested changes are implemented, what impact do you think might occur for Med Supp and Medicare Advantage plans and for agents that sell such plans?
I would think they’ve run the numbers, just like insurance companies. With more cost sharing forced on the individual, the individual will seek less care. What a wonderful system for the most powerful country in the world (?)
It seems to me that the future of Medicare will look a lot like Medicare Advantage. I don’t like the idea of $500 deductibles because lots of people will just not get care if they need to fork over that much money – and then still have co-pays up to $5,000. They’ll wait till they get sicker and sicker. MA plans don’t have deductibles, which is a better model.
But if Medicare changes to look like Medicare Advantage plans, will they need the private plans? Of course the answer depends on who is in power and making decisions. Republicans will turn the whole thing over to insurance companies (and let them make unlimited profits). Democrats will try to cut out insurance companies.
I don’t see how placing a cap on Medicare A and B saves the govt. anything. Yet at the same time, these folks think Plan F is too comprehensive. So their solution is to increase govt. benefits while reducing the role of private insurance. Am I the only one reading the tea leaves this way? Someone help me out here, please.