Filed Under:Health Insurance, Medicare

The End of Medicare Advantage?

Some major changes are coming to the Medicare Advantage program, thanks to the Patient Protection and Affordable Care Act (PPACA).

These changes, which include a shorter selling season, plan adjustments, and cuts to physician and plan reimbursements, mean that soon, selling Medicare Advantage could be a lot more difficult for many agents. So is it time to throw in the towel? Or is this merely another blip on the radar of a rapidly evolving insurance industry?

The changes
According to Chuck Moore, chief financial officer of the Premier Agent Group brokerage, the biggest change is that the Medicare selling season will be shorter than usual. This fall, the selling season will only run from Nov. 15 to Dec. 31 (during the annual election period); in the past, there were an additional three months at the beginning of the year during which beneficiaries were able to make one more change (the open enrollment period, or OEP). In 2011, the annual election period will last from Oct. 15 to Dec. 7.

"What agents are going to have to do," said Moore, "is make very good use of their time and spend very long hours if they want to see the same number of people they'd normally see during an OEP. They'll have a very narrow 45-day window in which to see all of their clients and prospects and finalize their plans."

Rusty Rice, president of the Texas Association of Health Underwriters, is concerned about the trickle-down effect that reduced doctor reimbursements will have on Medicare Advantage beneficiaries.

"Physicians will start exiting Medicare Advantage at a huge rate," said Rice. "Here in Texas, in the last two years, 300 physicians have exited the program. Fifty have exited in the first half of 2010 alone. Physicians just can't be profitable at the new rates."

And if a client's favorite doctor stops taking MA -- or worse still, if no doctor in their area accepts the plan -- the client will want to explore their options.

Furthermore, beginning in 2012, carrier reimbursements will be restructured and made uniform to bring payments closer to the average county-by-county costs of Medicare beneficiaries,. Reimbursements will gradually be reduced to levels closer to the costs of enrollees in traditional Medicare in each county, with lower reimbursements in counties with higher fee-for-service Medicare costs, and higher reimbursements in counties with lower fee-for-service costs.

This means that carriers will be even more selective about where they market their products. Additionally, plans that perform well on certain quality measures will receive modest bonuses, which will be used, in part, to provide richer benefits. To compare plan ratings, visit the Medicare Plan Finder; plans that receive higher than 3.5 stars will be rewarded.

For a quick look at the Medicare changes contained within PPACA, see "Medicare Reform: The Next 4 Years."

The reaction
Independent agent JoDella Sickles said that even though Medicare Advantage might completely change, she's not worried at all.

"Regardless of what it's called or what it's not called, there's always going to be a need for something for senior citizens," she said. "It's not a 'get to,' it's a 'have to.' It might not be called 'Medicare Advantage,' but you can't take away something without giving them something. So whatever it's called, I will know it like the back of my hand to be able to help [clients] to the best of my ability."

Some people, including Scott Golden, chief financial officer of the health benefits consulting company Golden & Cohen, predict that other Medicare plans -- such as original Medicare with a Part D or Med supp addition -- will start to become more attractive as Medicare Advantage loses its luster.

"Whenever you make one product less attractive, you'll make the other product more attractive," Golden said. "So it does work to an advantage for those who work in the indemnity market."

Moore added that the phasing out of the Part D doughnut hole could add to the attraction of the alternative plans, although he doesn't see this as a major factor.

Sickles said, however, that the sentiment among clients -- who may not be as plugged in to the changes as are agents -- is much less calm, cool, and collected.

"They're scared," she said. "They're scared that they won't be able to afford Medicare; they're scared that it's going to go away. There's a lot of confusion. A lot of times, when things change, it's not put in layman's terms. I get calls daily from a lot of clients; they're worried, they can't sleep, and whenever that happens, I just let them know that we're going to get through it -- not alone, but together."

Rice agreed that there's a lot of uncertainty among consumers as everyone waits to see how the changes will affect their policy or their doctor.

"My mother-in-law is on a Medicare Advantage policy, and she's undergoing cancer treatment. It's one of the most expensive treatments you can undergo. It's changed, so her deductible is going to increase, and she can barely afford it now, let alone if it increases again," he said. "Who this is really going to affect is people who are in a financial situation that can't afford the higher premiums of a Med supp plan."

The future
For now, the future of Medicare Advantage seems uncertain. The program isn't going away -- at least, not for now. But thanks to the PPACA, there is no doubt that it has changed forever.

"I think it's going to change, but I don't think it's going to go away," said Rice. "I think it's going to be a lot more buy-in or pay-in. It just won't be the benefits the members are used to seeing. I think there will be some markets that Medicare Advantage will have to exit completely."

And while only time will tell how sales will be affected, Moore is confident that the market will thrive. As the baby boomers age, he said, agents will find new ways to communicate with the latest Medicare beneficiaries -- who will be aging in to the program at a rate of nine per second -- by using new strategies.

There may still be more legislative changes on the horizon; Rice, however, thinks we may be headed in the wrong direction.
"When you talk about Medicare Advantage or Medicare, there are a couple of different directions the government could go in. We know there's a tremendous amount of waste in Medicare. And Medicare Advantage has the ability to monitor that. I think it's a situation where we shouldn't really look at reducing the fees for Medicare, but we should look at where we're reducing the fees for Medicare -- fraud, abuse, where beneficiaries will receive quality care," he said. "I think we're not taking a look at how we can save Medicare and Medicare Advantage -- we're looking at the quick fix. If it costs too much, we're reducing the fees; we're not looking at how we can solve the problem. I think we're barking up the wrong tree. And the person that's going to hurt in the long run is the consumer."

Heather Trese is the associate editor of the Agent's Sales Journal. She can be reached at or 800-933-9449 ext. 225.

Calming Consumers: How to Communicate MA Changes to Your Senior Clients

Throughout the creation of the health care reform bill, the media placed an emphasis on health insurance and pre-existing conditions. Now that the PPACA is law, however, many seniors are concerned about how the Medicare-related provisions will affect their plans, their doctors, and their bottom lines. Here are a few tips to help you communicate with your Medicare beneficiary clients and help them understand the changes.

Pick up the phone. Don't wait for them to call you, by which time they may already be confused. If you reach out to them -- whether with a phone call, letter, or brochure -- and answer their questions in advance, you can make sure they get the right information the first time around.

Make it easy to find a doctor. Since many doctors are exiting the Medicare Advantage market, don't make it difficult for your Medicare clients to find a new doctor if that happens to them. Send out a newsletter containing information on where they can look up providers.

Offer highly rated plans. Although the changes to plan reimbursements may not affect plans slated for the steepest reductions for up to six years, there is still a concern that reduced reimbursement rates will lead plans to reduce benefits, raise premiums, or both. Although agents can't control the county-based reimbursements, they can choose to offer Medicare Advantage plans that have historically been highly rated so that beneficiaries can feel confident they are choosing a plan they can stick with. Be up front with your clients about the plan ratings and how those ratings affect reimbursements and, ultimately, benefits.

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