This week’s newsletter is Sponsored By: VRI
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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 📚 - Medicare Supplement - Where Are the Claim Dollars Going?
Sponsor Snapshot 🚀 - brought to you by VRI
It’s only a 5 minute read, but it will make you 10x smarter.
Here are IMPORTANT LINKS 🔗 for the week:
Restoring Fiscal Sustainability to Federal Health Programs - (link)
Complete Health to pay $14.1M in Medicare Advantage coding misuse allegations settlement - (link)
On the heels of star rating win, Clover Health boosts outlook on strength of MA membership growth in Q2 - (link)
Medicare Hospice Fraud Schemes Expand Across Nation, CRS Says - (link)
The Facts About Medicare Spending - (link)
5.1 Million Retirees Are Paying a Hidden Medicare Surcharge, and That Number Keeps Going Up - (link)
Medicare Could Save Nearly $200 Billion in Drug Costs, AARP Study Finds - (link)
CNO Q2 Deep Dive: Medicare Supplement Momentum and Distribution Model Drive Results - (link)
Medbridge, Patient360 join on Medicare quality reporting - (link)
Jared’s recent LinkedIn posts:
DEEP DIVE 📚
Medicare Supplement - Where Are the Claim Dollars Going?
If you have been an avid reader of Medicare Market Insights, you are well aware that there has been upward pressure on claim experience across the entire Medicare ecosystem.
A recent MMI newsletter included information about how the Medicare Supplement has not been immune from this pressure. As pointed out, Medicare Supplement loss ratios have been increasing industry wide, which has led to higher premium rate increases.
In this week’s deep dive, we’re going to take a look at some of those Medicare Supplement claims that are driving the higher loss ratios.
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Background
Medicare Supplement plans are provided by private insurance companies and are designed to fill in the coverage “gaps” of Original Medicare. These gaps take the form of coinsurance and deductibles. Keep in mind that Medicare Part A provides hospital benefits and Medicare Part B provides outpatient benefits, doctor visits, and other non hospital inpatient services.
Based on industry enrollment statistics, the 3 most popular Medicare Supplement plans are F, G, and N. Let’s see how these plans handle the most common coinsurance and deductibles that impact Medicare beneficiaries:
Medicare Part A
Inpatient Hospital Care
Skilled Nursing Facility Care
Medicare Part B
If a beneficiary receives services from a provider that accepts Medicare assignment, here is how the Medicare Supplement pays benefits:
Plan F pays the annual deductible ($283 in 2026). Plans G and N do not cover this benefit.
Plan pays 20% of the Medicare-approved amount after meeting the deductible
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Paid Claims
With that background on benefits, let’s take a look at a breakdown of the claims paid by Medicare Supplement policies over the past 8 years for a block of business:
It is interesting to note that from 2018-2020, Part A accounted for approximately 11-12% of the claims paid by the Medicare Supplement policies. However, coming out of the COVID-19 pandemic restrictions in 2021, the Part A distribution spiked to over 15% and remained there through 2023.
While the Part A distribution continues to decrease, as of 2025, it is still elevated related to the pre-pandemic distribution.
What was the distribution of the Medicare spend over this same timeframe?
For that answer, we will turn to the 2026 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds (Medicare Trustees Report). For these values, we are using the benefit payments from the Hospital Insurance trust fund (Part A) and the Supplementary Medical Insurance Trust Fund (Part B).
A couple of interesting items to point out here:
Since the 2020 COVID-19 pandemic impact, there has been a noticeable decline in the Part A portion of expenditures. This is a clear indication that there has been a shift in utilization from Part A to Part B. This is likely due to various services/surgeries that used to require hospitalization can now be performed in an outpatient setting.
The distribution of Part A expenditures for Medicare is significantly higher than for Medicare Supplement. This is due to the benefit structure of a Medicare Supplement. The Part A deductible essentially operates as an intermediate cap for the Medicare Supplement with Medicare paying the expenses beyond it. Whereas on the Part B side, there is no limit to the “cap” since the Medicare Supplement is picking up the remaining 20% of Part B services that Medicare does not cover.
Going a little deeper into the Part A claims, let’s take a look at the distribution of Medicare Supplement payments between the main benefits – inpatient hospital care and skilled nursing:
Since 2020, there has a noticeable spike in the portion of Skilled Nursing claim payments. This can be attributable to the fact that the Medicare Supplement is picking up the beneficiary’s cost sharing responsibility for days 21-100.
This indicates that Medicare Supplement policyholders are receiving Skilled Nursing services for longer. Additionally, it is a sign that more Medicare Supplement beneficiaries are triggering their Part A deductible benefit.
Is this distribution consistent with Medicare expenditures? For that answer, we’ll return to the Medicare Trustees report. It should be noted that the following distribution excludes payments made to Medicare Advantage plans.
Unlike the Medicare Supplement distribution, the distribution between Inpatient Hospital Care and Skilled Nursing Facility Care has remained consistent over the past 8 years.
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Final Thoughts
Based on the Medicare expenditures over the past 8 years, there is clear evidence that a shift is underway in benefit utilization.
There is a clear trend that outpatient services (Part B) are being utilized at a higher rate than inpatient services (Part A). While the distribution of paid claims on Medicare Supplement policies have not returned to pre-2020 levels, it is clear that the Part A distribution is trending downward, consistent with the declining utilization demonstrated on the Medicare expenditures.
Are you the owner of a block of Medicare Supplement business? Have you completed a deep dive on your claim experience? If not, Telos Actuarial is able to assist with this type of endeavor. Contact us today!
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