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The Dollars Behind Original Medicare: A Deep Dive into Spending Patterns
Original Medicare spending, cost sharing, Medigap claims costs, and more...
Jared Strock & Andrew Ryba
October 05, 2023
This week’s newsletter is Sponsored By: USA Senior Care Network
USA Senior Care Network gives Medicare Supplement carriers the ability to positively impact loss ratios, stabilize rates, lessen the severity of future rate increases, and helps to retain policyholders.
As the Silver Tsunami approaches, Medicare enrollment is going to skyrocket. Are you going to be able to stay competitive in the Medicare Supplement market?
Because all Medicare Supplement carriers provide the same plans and benefits, one of the few ways to differentiate is by providing competitive premium rates. USA Senior Care Network is an exclusive network of hospitals that have agreed to waive all or a portion of the Medicare Part A deductible, currently $1,600.
For an overview of how USA Senior Care Network works, request our two-page handout by emailing [email protected].
Here is what you’ll find in this week’s newsletter!
Important links 🔗 - the best articles we found this week about the Medicare Market along with links to Jared’s recent LinkedIn posts.
Deep Dive 📚 - This week’s deep dive explores Original Medicare spending.
NEW SECTION!! Compliance Chatter 📢 - helpful reminders to keep you compliant.
Sponsor Snapshot 🚀 - brought to you by USA Senior Care Network
Data Visual of the week 📊 - Data Visual highlighting Original Medicare spending concentration.
It’s only a 5 minute read, but it will make you 10x smarter.
Here are Important links 🔗 for the week:
UHC 2024 MA plan info - (link)
Aetna 2024 MA plan info - (link)
Humana 2024 MA plan info - (link)
Cigna 2024 MA plan info - (link)
Elevance 2024 MA plan info - (link)
Alignment co-brands MA plan with Instacart - (link)
Medicare enrollment begins in 2 weeks. Here's what major payers are offering for 2024- (link)
Medicare Supplement Rate Filings – October 2023 - (link)
US judge refuses to block Medicare from negotiating drug prices - (link)
Jared’s recent LinkedIn posts:
Deep Dive 📚
The Dollars Behind Original Medicare: A Deep Dive into Spending Patterns
In 2021, Medicare was the largest purchaser of personal health care in the United States.
Part A and Part B (paid under Original Medicare) accounted for $396 billion of our country’s $3.6 trillion healthcare spending, providing benefits to over 36 million Americans.
(note: Parts A and B paid out another $361 billion through Medicare Advantage in 2021)
In other words… Medicare is a big deal!
Over the past couple of months, we have detailed the history of the Medicare program and provided detailed breakdowns of Part A and Part B of the Original Medicare program.
Today we are going to add another layer of detail by showing you what Original Medicare program spending looks like on a ‘per beneficiary’ basis, how cost sharing is used to manage the overall program costs, and how that cost sharing has translated into Medigap claims.
Make it all the way to the end of this deep dive for a FREE downloadable file that contains some of the key statistics split by state.
What do Original Medicare benefits look like per person?
Over the twelve year period from 2010-2021, the level of Medicare program spending has increased faster than the rate of growth in beneficiaries. This is commonly referred to as ‘medical trend’ or ‘medical inflation’ and is driven by Medicare’s reimbursement rates, changes in benefit utilization patterns and the introduction of new (and usually more expensive) treatments.
The following table shows how some of the key statistics have changed over time. Note that not all beneficiaries enroll in both Part A and Part B. The beneficiary count in the table includes individuals that enroll in Part A or Part B and the “Payments per Beneficiary” data is based on the number reported separately for either Part A or Part B.
Back in 2010, Medicare was spending $9,721 per beneficiary. By 2015, that amount had grown to $10,176 (about 1% per year growth rate) and in 2021 it was at $11,964 (about 2.8% per year growth rate).
The change in the growth rates between the 2010-2015 and 2016-2021 time periods is generally attributed to two main causes:
influx of the baby boomers starting in 2011 slowed the growth in the average age; and
Medicare Advantage plans began attracting more of the ‘healthy lives’ in mid-2010’s
Throughout this deep dive we will be looking at the average amounts per beneficiary. It is important to remember that within the Medicare program about 85% of the expenditures are attributable to 25% of the beneficiaries[2].
How much Cost sharing occurs within Medicare Part A and Part B?
Original Medicare uses a combination of deductibles, copayments, and coinsurance to shift a portion of the cost of care back to the beneficiary. Previous deep dives on Part A and Part B provide details on the level of the cost sharing components and how they have changed over time.
The cost sharing included in the Original Medicare program results in the beneficiaries being responsible for about 15% of their total cost of care.
The following table shows the cost sharing amounts per Beneficiary and how they have changed over time. The combination of the “Payments per Beneficiary” and the “Cost Sharing per Beneficiary” can be thought of as the Total Cost of Care.
As you can see in this table, there is more cost sharing within the Part B program. The bulk of these amounts are from coinsurance on physician services and Part B Outpatient hospital services. The lower cost sharing on Part A makes sense since these are mostly inpatient hospital services and we don’t see as much excess utilization.
How does Original Medicare cost sharing translate to Medigap Claim Costs?
Our best source to look at market wide Medigap claim costs is a dataset available from the National Association of Insurance Commissioners. This data is compiled from the annual statements of insurers that offer the product and can be used to keep tabs on overall market experience.
The following table shows the number of reported Medigap Lives and compares that to the number of Medicare Beneficiaries (with Original Medicare) by year to develop a penetration rate. The table also shows the Beneficiary Cost sharing amounts and the average Claim Cost for Medigap plans.
The two key take-aways from this data are:
Growth in the Medigap market continues to outpace growth in the number of beneficiaries that are enrolled in Original Medicare. We’ll save a comparison of the Medigap and Medicare Advantage growth for another day.
The relationship between Medigap Claim Costs and Beneficiary Cost sharing lines up with what you would expect given the high proportion of first dollar coverage plans in 2010-2015. The ratio decreases over time as new sales transitioned to Plan G and Plan N. These plans cover most but not all of the gaps in Medicare.
We hope that you have enjoyed digging into these historical statistics and experience data on the Medicare and Medigap markets. If you are interested in learning more, you can access additional data on these programs here.
Sources:
CMS Program Statistics: Medicare Part A and Part B Summary, 2010-2021
Health Care Spending and the Medicare Program
CMS Program Statistics: Medicare Part A and Part B Summary, 2010-2021
NAIC Medicare Supplement Insurance Experience Exhibit: 2010-2021
Compliance Chatter 📢:
September 30th – It was the date!
Rule CMS-4201-F was finalized by the Center for Medicare & Medicaid Services with marketing and communication provisions that went into effect September 30, 2023. This rule impacts Medicare Advantage (Part C), Medicare Prescription Drug Benefit (Part D), Medicare cost, and Programs of All-Inclusive Care for the Elderly (PACE) plans and can be viewed here.
As you gear up for AEP, we will be sharing helpful reminders to keep you compliant.
When planning and scheduling your meetings with Medicare beneficiaries to enroll them in a plan, remember:
Arriving unannounced, or without an appointment, to a Medicare beneficiary’s home is prohibited.
A Scope of Appointment (SOA) must be obtained no less than 48 hours prior to meeting with a Medicare beneficiary to review benefits and/or enroll in a plan.
If a Medicare beneficiary initiates an unscheduled in-person meeting, the 48-hour time limit is waived, however, a SOA must still be obtained.
The 48-hour time limit is also waived during the last 4 days of a Medicare beneficiary’s enrollment period, including AEP and OEP.
SOA’s cannot be obtained at an educational event.
Sponsor Snapshot 🚀: Brought to you by USA Senior Care Network
As the US population ages, more than 80 million people will be Medicare eligible by 2030. The number of people who choose traditional Medicare with a Medicare Supplement is also projected to rise to close to 30% of all Medicare Eligible participants, or approximately 24 million.
CMS regulations related to Medicare Supplement plans mean that all carriers offer the same plans, with no differentiation in plan benefits. One of the few ways for a carrier to stand out, is through premium pricing. With premiums being determined primarily by plan costs, controlling Medicare Supplement expenditures is the most effective way to offer competitive rates. The challenge is the limitations on what carriers can do to control these expenditures.
Participating in USA Senior Care Network (USA SCN) offers carriers a powerful way to reduce plan costs with no impact on policyholders’ benefits. USA SCN’s network of hospitals have agreed to waive all or a part of the Part A Deductible for inpatient care. Carriers who participate in the program have seen lower premium increases vs carriers who are not participating.
Here are some current details of USA Senior Care Network:
Over 140 Medicare Supplement carriers are USA SCN clients and realize program savings which allow them to stay competitive.
11 million policyholders currently participate in the program.
This represents more than 75% of all Medicare Supplement Policyholders nationwide.
USA SCN carrier clients have saved more than $800 million by utilizing the program.
Medicare Supplement policyholders that participate in USA SCN are channeled to participating hospitals through a combination of an online hospital directory, US-based Customer Care call center, and carrier communications. With USA Senior Care Network, carriers benefit by reducing costs, hospitals gain new patients and policyholders see lower premium increases.
For an overview of how USA Senior Care Network works, request our two-page handout by emailing [email protected].
Data Visual of the Week 📊
Data Visual of the week comes from MedPac’s “Health Care Spending and the Medicare Program” showing a large portion of Medicare spending comes from a small number of individuals.
If you’re ready, here are some ways we can help you:
Newsletter Sponsorship opportunities: promote your product or services to leaders in the Medicare space. Let’s discuss. (link) Note: 8 slots already taken.
Market Research: Reports that help you wrap your arms around the Senior focused insurance markets. (link)
Consulting: We can help you develop new insurance products for the Medicare market, appraise your books of business, and keep you compliant. Let’s discuss. (link)