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TONI KING: Retiring: Should I focus on health or Part D prescription drug plan?

TONI KING: Retiring: Should I focus on health or Part D prescription drug plan?

TONI KING: Retiring: Should I focus on health or Part D prescription drug plan?

Toni King



Posted: Thursday, June 30, 2016 10:00 am

TONI KING: Retiring: Should I focus on health or Part D prescription drug plan?

By Toni King

Houston Community Newspapers

Toni:

I am retiring January 1, 2017 and am beginning to search for the right Medicare option for me and my wife, who is having breast cancer treatment at MD Anderson. Her cancer treatment drugs are semi-expensive and I am concerned about the Medicare Part D out of pocket. I am a diabetic and using the flex pen with high blood pressure prescriptions. Most of mine are generic, except for the diabetic prescriptions.

Our Medicare Part B will begin January 1st as my company benefits will end December 31st of 2016. What should I do to prepare for this medical insurance change? I will be 70 and my wife is turning 65 by the time I retire and I want to be sure I do this correctly. Thanks, Dennis from a Katy reader.

Great question, Dennis:

The cornerstone of Medicare planning at the Toni Says office is prescription drug planning. The first topic discussed at a Medicare consultation is what Medicare Part D prescription drug plan or plans cover all of your prescriptions. Not all medications are covered under Medicare Part D plans.

Many are concerned about their doctor and completely miss if their prescriptions are covered under their new Medicare Part D or Medicare Advantage prescription drug plan. To their surprise, they must pay 100 percent out of pocket because their generics or even expensive brand name drugs are not covered.

Every Medicare Part D plan has a formulary whether it is a standalone or Medicare Advantage (Part C) prescription drug plan. If your drugs aren’t on that formulary, then you will pay 100 percent out of your pocket.

When we consult on Medicare at the Toni Says office, our motto is “Medicare is not cookie cutter … One size does not fit all!” Everyone’s Medicare health and prescription drug situation is different and your medical situation as well as your prescription drugs that you take should be considered in your Medicare needs calculation.

Those receiving Medicare Part B for the first time need to understand the value of the Medigap (Medicare Supplement) open enrollment. On page 102 of the 2016 Medicare and You handbook, it discusses “When to Buy” a Medicare Supplement. It states that “the best time to buy a Medigap (Medicare Supplement) policy is during the 6 month period which begins the first day of the month in which you’re 65 or older and enrolled in Medicare Part B.”

During this 6 month window one can enroll in any Medicare Supplement plan without having to answer any health questions and not be denied coverage. After the 6 month window, then medical underwriting takes place and one may not qualify for a Medicare Supplement.

At the Toni Says office, we treat receiving Part B like “gold” because of what it offers.

Many new Medicare beneficiaries explore the option of Medicare Advantage plans which is known as Medicare Part C. It is a good option and with health conditions such as you and your wife have, we advise that you speak with your doctor about what plans they accept or if that provider accepts Medicare Advantage plans.

To explore your options, visit www.tonisays.com and sign up for the Toni Says newsletter, download the 2016 Medicare costs and receive a free copy of the2016 Medicare Prescription Drug Survival Guide e-book version.

Take your time and explore your Medicare health and Part D prescription drug options.

Toni King, author of the new Medicare Survival Guide®, which is a simple guide that puts Medicare in “people” terms, is on sale at www.tonisays.com. Email questions or to schedule a “Confused about Medicare and Social Workshop” for your organization or company lunch and learn to www.tonisays.com/ask-toni or call 832/519-TONI (8664).

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ER care reimbursement lawsuits underscores gap between hospitals, Blue Cross Blue Shield of GA

Bridging the Gap Medigap bridge moneyBlue Cross and Blue Shield of Georgia faces separate lawsuits accusing it of sending reimbursement money for emergency room care directly to patients — and not to the hospital because it isn’t part of the insurer’s network.

That’s costing the hospitals money since patients don’t always turn over the funds, according to the lawsuits, filed by Polk Medical Center in northwest Georgia and Martin Luther King, Jr. Community Hospital in Los Angeles — 2,000 miles apart. Each suit also says some patients have sought to profit from receiving the direct payments for their ER care.

By sending money directly to patients, Polk Medical Center says the insurer forces the hospital to find ways to collect it. Even though patients are obligated to pay the facility the amount sent to them by Blue Cross, in some cases they have spent the money, according to the lawsuit.

The Polk lawsuit said that Blue Cross, in its new payment process, was pursuing “retaliation” for the Cedartown, Ga., hospital’s not agreeing to “unreasonable and unfair” terms in order to be part of the insurer’s network. Hospital officials said the payment shift has hurt the hospital financially.

“Blue Cross insures a significant number of individuals in Polk County,’’ said Tommy Manning, the attorney for the Floyd Medical Center system, of which Polk Medical Center is a part.

Manning said that Blue Cross has sent ER payments to patients for several months.

And he said he was unaware of the Los Angeles lawsuit prior to the filing of the Polk complaint.

The lawsuit from Martin Luther King, Jr. Community Hospital alleges that “most of the MLK patients who receive checks from [Blue Cross of Georgia] are unaccustomed to receiving payments in such large amounts. Some of these patients do not know that they are required to endorse those checks over to MLK. Other patients know that they should endorse those checks over to MLK but instead use such funds to pay for their personal expenses. When MLK attempts to collect the amounts from these patients, the money is often spent.”

In the case of patient “B.G.,’’ the suit alleges that the patient went to the MLK emergency room 11 times between Oct. 19 and March 27 for various ailments, including complaints of chest or back pain. Blue Cross of Georgia paid the patient a total of more than $70,000 for these visits to MLK, according to the lawsuit.

The lawsuit said the practice overall has caused MLK to suffer damages in excess of $350,000.

Blue Cross declined comment on the lawsuits, citing pending litigation.

Patients are protected under federal law when seeking care in hospital emergency rooms. Under the Emergency Medical Treatment and Labor Act (EMTALA), they must at least be stabilized and treated, regardless of their insurance status or ability to pay.

Manning said this month that he’s not aware of any other insurer in Georgia paying the patient instead of the hospital.

At least one other major hospital that is not part of the suits has reported difficulty in getting payments from Blue Cross when it was out of the insurer’s network. Officials at Grady Memorial Hospital in Atlanta said that when it was out of Blue Cross’ network for the four months ending in March 2015, the insurer sent reimbursement payments to some patients and not to Grady.

Daron Tooch, a Los Angeles attorney representing MLK Hospital, said other Blue Cross plans in the United States use similar tactics. The Los Angeles patients worked for a company that has Blue Cross of Georgia coverage, he said. MLK is out of network for the Blue Cross plans in California.

“This is not unique to MLK,’’ said Tooch. “This happens to all out-of-network providers for Blue Cross of Georgia.”

Going after the patients for payment instead of the health plan simply hasn’t worked, attorneys for MLK said. The patients “are typically unable or unwilling to pay MLK for the medical services received,” according to the suit.

Manning agreed. “We will continue to pursue collection with patients, but filing numerous lawsuits would not be fruitful, particularly given that Blue Cross Blue Shield is the party ultimately at fault,” he said.

Asked about the Blue Cross of Georgia payment strategy, the national Blue Cross Blue Shield Association, through a spokesman, declined comment. Clare Krusing, a spokeswoman for America’s Health Insurance Plans, a trade group, said that those types of reimbursement arrangements would vary by plan and by contract. She added that she did not have details on other plans that may do the same.

Paying patients directly is an insurer tool used more commonly in the West, “particularly when non-network facilities are unwilling to negotiate reimbursement related to out-of-network service,’’ said Janet Guptill of the Tatum firm, which provides interim chief financial officers and other executives to health care organizations.

“The insurer takes the position that the provider claim is a private pay issue between the provider and the patient, so the facility has the responsibility to collect the payment from the patient,’’ Guptill said.

Guptill said that when a hospital isn’t in network, its charges for ER and other care tend to be higher than the charges from facilities in the insurer’s network.

For insurers, paying patients directly is “a clever and probably effective tactic,’’ said Chris Kane, a consultant with DHG Healthcare. The hospital, he said, may already be dealing with other collection challenges, including those involving high-deductible health plans.

A hospital attempting to collect the money may end up alienating the patient and thereby discouraging future visits, Kane said.

And patients pocketing the money is another problem, he added. “It’s more troubling if a patient views this as a source of cash.’’

This story was done in partnership with Georgia Health News.

Photo: BigStock Photo

A Program Helping 7 Million Seniors Save Money Is About to Get the Axe

Would you call a U.S. program that helps 7 million seniors save money on Medicare annually “unnecessary”?

Probably not. But a network of more than 3,300 free Medicare counseling services could lose its $52 million in federal funding due to budget cuts. The State Health Insurance Assistance Program (SHIP) is on a list of more than a dozen programs lined up to get the axe from the Senate Appropriations Committee.

“Duplicitous or unnecessary,” said U.S. Senator Roy Blunt, explaining the rationale. The Missouri Republican probably meant “duplicative” there, but never mind. He is wrong either way. This is one SHIP that definitely should be kept afloat.

Navigating the Medicare program is complicated — more complicated than it needs to be. Over the years, Congress has added coverage options built around marketplaces offering commercial plans. The typical senior selecting a Part D prescription drug plan must choose between an average of more than 20 choices, according to the Medicare Rights Center (MRC). Those who opt for a Medicare Advantage plan must choose from an average of 19 possible prescription drug plans.

That approach is driven mainly by conservative ideology, which holds that the private market can deliver superior efficiency and products. But there is precious little evidence that this approach works in healthcare. Independent studies have shown repeatedly that Medicare enrollees waste money by over-insuring themselves in the Part D program.

A new analysis of hospital networks in the Medicare Advantage program by the Kaiser Family Foundation (KFF) finds spotty participation by hospitals in plans, and that shopping for a plan with a specific hospital in network “can be tough for consumers.” The study also finds that some plans lack access to the highest quality academic medical centers.

Adding insult to injury, the powerful Senate Appropriations Committee recently voted to end funding for SHIPs, which help seniors navigate these messy options. SHIPs operate in all 50 states, plus Puerto Rico, Guam, the District of Columbia and the U.S. Virgin Islands. The local SHIPs have more than 14,500 counselors – 57 percent of whom are highly trained volunteers, according to MRC. (Find your local SHIP here,)

Tough decisions

Medicare offers an annual enrollment period during which beneficiaries can shop for new prescription drug or Medicare Advantage plans. During last year’s autumn enrollment period (Oct. 15 to Dec. 7), SHIPs helped nearly 1.1 million seniors, according to MRC data.

Very few enrollees bother to re-shop their coverage annually, but they should. Insurance companies often change their offerings year-to-year in ways that can increase drug costs, or make it more difficult to obtain certain drugs. At the same time, a senior’s drug needs may have changed since the last plan selection period in ways that make a plan less beneficial.

A study by the Kaiser Family Foundation found that, on average, just 13 percent of enrollees voluntarily switched their drug or Medicare Advantage plans – but that nearly half of those who did switch plans saved at least 5 percent the following year, mainly on premiums.

SHIPs also helped nearly 1.3 million low-income seniors with Medicare enrollment last year, according to MRC. Much of that work was focused on options to save money on premiums, such as Extra Help, which often covers up to 75 percent of prescription drug costs (http://reut.rs/1OXKZ9b). About 1.2 million low-income beneficiaries who qualified for Extra Help were enrolled in higher-cost Part D plans last year, according to KFF – a sure sign that greater outreach and assistance is needed.

Calculator: What are my long-term care insurance needs?

SHIPs also help with enrollment in Medigap plans, which help cover gaps in traditional Medicare such as copayments, coinsurance and deductibles. They also can help seniors make sure they enroll on time, avoiding costly late enrollment penalties.

The budget cuts approved by the Senate Appropriations Committee were part of a broader move to increase funding in some areas where dollars are needed. All told, $2 billion would be shifted to the National Institutes of Health, and used to restore year-round Pell Grants for college students, and to increase resources to prevent and treat opioid abuse.

“Our understanding is that some tough decisions were made,” said Stacy Sanders, federal policy director at MRC. “It’s the product of a tight budget environment.”

SHIP funding actually has declined against inflation – spending for fiscal 2017 would be just over $66 million if it had kept up with inflation, according to the National Council on Aging.

A vote by the Senate is not expected until this fall, and the House of Representatives has yet to weigh in. Here is hoping that Congress can somehow right the SHIP.

Modifying Medicare’s Benefit Design: What’s the Impact on Beneficiaries and Spending?

Proposals to modify the benefit design of traditional Medicare have been frequently raised in federal budget and Medicare reform discussions, including in the June 2016 House Republican health plan as part of a broader set of proposed changes to Medicare.1 Typically, benefit design proposals include a single deductible for Medicare Part A and B services, modified cost-sharing requirements, and a new annual cost-sharing limit, combined with restrictions on “first-dollar” Medigap coverage. Some proposals also include additional financial protections for low-income beneficiaries. Objectives of these proposals may include reducing federal spending, simplifying Medicare cost sharing, providing people in traditional Medicare with protection against catastrophic medical costs, providing low-income beneficiaries with additional financial protections, and reducing the need for beneficiaries to buy supplemental coverage.

This report examines the expected effects of four options to modify Medicare’s benefit design and restrict Medigap coverage, drawing on policy parameters put forth in recent years by the Congressional Budget Office (CBO), the Medicare Payment Advisory Commission (MedPAC), and other organizations. For each option, we model the expected effects on out-of-pocket spending for beneficiaries in traditional Medicare, and assess how each option is expected to affect spending by the federal government, states, employers and other payers, assuming full implementation in 2018. The model is calibrated to CBO’s traditional Medicare and Medicare Advantage 2018 enrollment projections. Details on data and methods are provided in the Appendix.

Option 1 would establish a single $650 deductible for Medicare Part A and Part B services, modify cost-sharing requirements, add an annual $6,700 cost-sharing limit to traditional Medicare, and limit the extent to which Medigap plans could cover the deductible. Option 2 aims to reduce the spending burden on beneficiaries relative to Option 1 by reducing the deductible to $400 and the cost-sharing limit to $4,000. Option 3 aims to provide additional financial protection to some low-income beneficiaries by providing them with full Medicare cost-sharing subsidies under the modified benefit design. Option 4 aims to make the modified benefit resign more progressive by income-relating the deductible and cost-sharing limit.

Key Findings

Proposals to modify the benefit design of traditional Medicare have the potential to decrease—or increase—federal spending and beneficiaries’ out-of-pocket spending, depending upon the specific features of each option (Figure S1). These options can be designed to maximize federal savings, limit the financial exposure of beneficiaries, or target relief to beneficiaries with low-incomes, but not simultaneously. Among the four options modeled, Option 1 is expected to produce the greatest federal savings (-$5.5 billion) but minimal aggregate savings for beneficiaries (-$0.7 billion), while exposing more than three million low-income beneficiaries to higher out-of-pocket costs, compared to current law. Conversely, Option 2 would provide greater financial protections and savings for beneficiaries, but result in a substantial increase in federal spending. And under each of the four options, some beneficiaries would be better off relative to current law, while others would not fare as well.

Figure S1: Under 4 options to modify Medicare’s benefit design, some beneficiaries would spend less in 2018, compared to current law, but others would spend more; the effect on federal spending would vary widely

Figure S1: Under 4 options to modify Medicare’s benefit design, some beneficiaries would spend less in 2018, compared to current law, but others would spend more; the effect on federal spending would vary widely

  • Modifying Medicare’s benefit design, with a single $650 Part A/B deductible, a new $6,700 cost-sharing limit, varying cost-sharing amounts, and restrictions on first-dollar Medigap coverage (Option 1) would reduce net federal spending by an estimated $5.5 billion and state Medicaid spending by $2.1 billion, with a more modest reduction of $0.7 billion in beneficiary spending in 2018. Just over one-third (35%) of beneficiaries would face higher costs under the modified benefit design, including 3.4 million beneficiaries with incomes below 150% of poverty,2 while 40% of beneficiaries in traditional Medicare would see savings.
  • A similar approach, but with a lower deductible ($400) and cost-sharing limit ($4,000) (Option 2) would produce higher net savings for beneficiaries (-$3.8 billion) and for state Medicaid programs (-$3.8 billion) than Option 1, but would substantially increase net federal spending by an estimated $8.8 billion in 2018. A smaller share of beneficiaries would face spending increases compared to Option 1 (from 35% down to 25%).
  • Fully subsidizing Medicare cost sharing for a subset of low-income beneficiaries (Option 3) would provide valuable financial help to some (but not all) low-income beneficiaries, but would eliminate nearly all the federal savings associated with the modified benefit design under Option 1. Compared to Option 1, a smaller share of low-income beneficiaries with incomes below 150% poverty would face higher out-of-pocket costs (from 36% down to 23%) and a larger share would face lower costs (from 25% up to 40%). This option would result in larger aggregate savings for beneficiaries than Option 1 (-$1.9 billion), but lower net federal savings (-$0.6 billion) and similar state Medicaid savings (-$2.0 billion) in 2018. As modeled, eligibility for subsidies under this option is narrowly defined (see page 3 for details) and only modestly improves upon existing subsidy programs for some low-income beneficiaries; expanding eligibility would help more low-income beneficiaries, but would also increase federal spending.
  • Income-relating the deductible and cost-sharing limit (Option 4) would increase the progressivity of the modified benefit design, providing greater financial protection to beneficiaries with lower incomes and less financial protection to those with higher incomes. The lowest deductible and cost-sharing limit ($325 and $3,350, respectively) would apply to all traditional Medicare beneficiaries with incomes less than 150% of poverty, regardless of assets or supplemental coverage status, which results in a larger number of low-income beneficiaries receiving financial subsidies than under Option 3. Compared to Option 1, a smaller share of beneficiaries in traditional Medicare would see lower out-of-pocket costs in 2018 (from 40% down to 21%), even though more low-income beneficiaries would be helped. This option would reduce total beneficiary spending by an estimated $0.9 billion, while modestly increasing net federal spending by $0.3 billion in 2018 and reducing state Medicaid spending by $4.4 billion.

Conclusion

Our analysis shows that options to modify the benefit design of traditional Medicare combined with restrictions on first-dollar supplemental coverage vary widely in their impact on spending by the federal government, beneficiaries, and other payers. Aggregate changes in spending depend on the specific features of each option, including the level of the deductible and cost-sharing limit and whether additional financial protection is provided to low-income beneficiaries.

Some beneficiaries in traditional Medicare would be better off under each option than under current law, but others would not fare as well in a given year. The impact on beneficiaries’ out-of-pocket spending for premiums and cost sharing would depend on a number of factors, including beneficiaries’ use of services, whether or not they have supplemental coverage, and their incomes.

In general, adding a cost-sharing limit would provide valuable financial protection to a relatively small share of the Medicare population that incurs catastrophic expenses in any given year, although a larger share of beneficiaries would be helped by this provision over multiple years.3 Some beneficiaries could see savings due to lower premiums for Medicare and Medigap, but those without supplemental coverage may be more likely to incur higher spending because of cost-sharing increases.

Options designed to reduce the impact on out-of-pocket spending, whether for all beneficiaries in traditional Medicare or only for those with low incomes, can be expected to produce lower federal savings or could actually increase federal spending relative to current law. An income-related benefit design would be more progressive than if the same amounts applied to all beneficiaries regardless of income, and could be structured in a way to achieve aggregate savings for beneficiaries or the federal government, but at the same time, it would most certainly increase the complexity of the program for beneficiaries and program administrators.

Proposals to modify Medicare’s benefit design have the potential to produce federal savings, reduce aggregate beneficiary spending, and reduce spending by other payers, including spending by states on behalf of beneficiaries who are dually eligible for Medicare and Medicaid, and by employers who provide supplemental coverage to retirees. Such proposals could also simplify the program, provide beneficiaries with valuable protection against catastrophic expenses, add additional financial protections for low-income beneficiaries, and reduce the need for beneficiaries to purchase supplemental insurance. As this analysis demonstrates, however, it will be difficult for policymakers to achieve all of these ends simultaneously.

Introduction

Michigan BCBS to sell services to smaller Blues plans

Blue Cross Blue Shield of Michigan has created a new division as part of its restructuring plan to sell management and consulting services to up to 20 smaller Blues plans in other states.

With millions of baby boomers retiring every year, health insurers like Blue Cross and Health Alliance Plan have been targeting growth in Medicare Advantage — a federal program that contracts with private insurers to offer managed care services to seniors — as a profitable business.

Last month, the board of the Michigan Blue Cross approved a plan to create an emerging markets division that would coordinate new and enhanced business lines like Medicare Advantage. Besides helping fellow Blues plans, the idea is to boost revenue and profits to help Michigan Blue Cross subsidize other operations.

As part of that new plan, Blue Cross now is managing claims and offering various support services to two smaller Midwest Blue Cross plans for their Medicare Advantage products, said Elizabeth Haar, Blue Cross’ new president of the emerging markets division.

Haar declined to name the two smaller Blues plans under contract for Medicare services. The total membership Michigan’s Blues are managing this year in the two states is 23,000, said Haar, the former CEO of the Accident Fund group who also is now senior vice president for subsidiary operations.

The emerging markets division now includes the Accident Fund, Medicare Advantage, Medigap (Medicare supplemental insurance) and two unnamed departments that will handle functions such as claims processing and quality improvement services for Medicare products.

Like Blue Cross, HAP also is looking at opportunities for growth in the Medicare Advantage market.

Mark Hall, HAP’s vice president of business development and sales, said HAP has received approval from Medicare to expand its Medicare Advantage offerings from nine counties into 22 adjacent counties. It still must receive federal approval for its proposed pricing for Medicare Advantage products.

HAP’s region will extend south from Monroe County, west to Jackson County and north through Saginaw County to Iosco County. It encompasses the Thumb-area counties that include Huron, Sanilac and Lapeer. The expanded region also covers the markets held by newly acquired Allegiance Health in Jackson and HealthPlus of Michigan in Flint.

Hall said HAP’s Medicare Advantage membership now stands at about 65,000. He said he expects 5 percent to 10 percent growth over the next two years. He expects some growth in HAP’s Medigap product line as Blue Cross is ending its subsidy program for low-income seniors this year per its agreement with the state.

Over the past five years, since the Affordable Care Act of 2010 cut rates by 15 percent and required plans to improve quality to receive bonus payments, many of the smaller Blues plans in the nation have been unable tap into this lucrative market or score high margins because they have lacked necessary skills and infrastructure support, Michigan Blues executives told Crain’s.

Michigan Blue Cross, the nation’s largest single-state Medicare Advantage provider, has been steadily adding Medicare Advantage members, growing to 468,964 in May from 170,567 in December 2010.

Under CEO Dan Loepp, Blue Cross has been diversifying its business lines to help subsidize its commercial individual and Medicare supplemental insurance lines, which have lost hundreds of millions of dollars in recent years. Overall, Blue Cross operates at a very small profit margin for its core health insurance product lines.

For example, in 2011 Michigan Blue Cross paid $215 million for a minority interest in AmeriHealth Caritas, a profitable 15-state Medicaid HMO, which it now co-owns with Independence Health of Philadelphia. Blue Cross Complete is now a for-profit member of AmeriHealth Caritas.

Blue Cross also has acquired or founded several companies the past 10 years, including Brighton-based LifeSecure Insurance Co. and ikaSystems Corp., a Southborough, Mass.-based information technology vendor, to primarily help it manage its Medicare plans and as a revenue generator. In 2014, Blue Cross obtained a 40 percent interest in Data Driven Delivery Systems Inc., which helps physicians manage risk contracts.

To become more competitive, Blue Cross last fall began a restructuring project intended to cut administrative costs by $300 million over three years and boost revenue in growth areas like Medicare. Blue Cross reported it lost $68 million in net income on its overall operations in 2015.

Julie Smith, senior vice president for senior health services, said many smaller Blues plans haven’t had the staff or time to fully adjust to changes under the Affordable Care Act to be rewarded for quality.

“Our intent is to support their core services,” Smith said.

Haar said about 20 Blues plans either have less than 50,000 members in Medicare Advantage or don’t offer a product at all.

BCBS to sell services to smaller Blues plans” originally appeared in Crain’s Detroit Business.

Meet the Medigap players

Many of the largest carriers sell Medicare supplemental insurance. UnitedHealthcare, the health insurance unit of UnitedHealth Group, dominates the Medigap market because of its relationship with AARP.

More than 4 million seniors had a UnitedHealthcare Medigap plan in 2015, or about one-third of the entire Medigap population.

Blue Cross and Blue Shield insurers also hold a lot of power in their respective markets. Health Care Service Corp., the Blues carrier in five states, had more than 615,000 Medigap members last year. Publicly traded Anthem declined to disclose the exact number of Medigap enrollees, but industry analysts estimate Anthem covers around 850,000 members.

Aetna and Humana, which are trying to obtain regulatory approval for their pending merger, have a combined 725,000 Medigap enrollees. John Osborn, president of Osborn Associates, said the Aetna deal has created anxiety in his state, where regulators recently called the merger anti-competitive.

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Changes loom as most-popular Medigap plans face extinction

“Everybody is scared to death of that acquisition,” he said. “We basically need to cross our fingers, and hopefully the insurance companies will be able to include us in the enrollments of those plans. The first thing that they take away is the compensation to the agent.”

Medicare supplement plans represent a small slice of most insurers’ total revenue, but a Modern Healthcare analysis of health insurance filings shows companies are reaping sizable profit margins. That has helped insurers that have taken a financial beating from the Affordable Care Act exchanges.

Health Care Service Corp. posted a $314 million underwriting profit from its Medigap plans in 2015 after collecting $1.4 billion in Medigap premiums, equaling a 22% margin. Mutual of Omaha had a 25% margin on its Medigap plans last year, leading to a $161.5 million surplus. Highmark, the Pittsburgh-based Blues giant, reaped $62.3 million in profit last year from its Medigap policies.

Blue Cross and Blue Shield of Michigan is a notable outlier for losing money. The insurer had roughly 200,000 Medigap members last year and lost a whopping $170 million. In 2011, Michigan’s attorney general enacted a five-year rate freeze on the Michigan Blues’ Medigap plans. The rate hike prohibition ends this August.

Changes loom as most-popular Medigap plans face extinction

Government officials estimate 10,000 Americans are reaching the Medicare-eligible age of 65 every day, thanks to the rising tide of aging baby boomers. Anjel Jiron observes that growth every day.

“It’s been beautiful. Business is booming,” said Jiron, who has been an insurance broker at Teague Financial Insurance Services in La Mesa, Calif., for a decade. “I’ve got my phones ringing off the hook for people who are aging into Medicare.”

Over the past several years, many seniors have gravitated toward Medicare Advantage, the HMO version of Medicare that often comes with extra bells and whistles, such as no premiums, eye and dental care, and gym memberships. However, traditional Medicare remains the de facto payer for more than two-thirds of seniors and disabled people, mostly because of the program’s freedom to see any provider.

Jiron and other brokers across the country have found many people continue to choose traditional Medicare and pair that coverage with Medicare supplement insurance, commonly known as Medigap, as well as a prescription drug plan.

“As far as our clientele base, 90% of the time, we’re selling Medigap,” Jiron said.

But changes loom for Medigap, which has been very profitable for health insurance companies. In addition to pending consolidation that will affect the market, a provision within the new Medicare physician payment law eliminates the most popular types of Medigap plans and therefore will lead to future Medigap enrollees paying more out of pocket for their medical care. The policy change is part of the broader trend of making patients think twice, or at least shop around, before they decide to go to the doctor or hospital.

“They want folks to have that slap on the wrist,” said John Osborn, president of Osborn Associates, an insurance brokerage in Springfield, Mo. It’s also commonly known as giving patients “skin in the game,” although academic literature finds pitfalls with that hypothesis.

People buy a Medigap plan to cover the cost of care that traditional Medicare doesn’t pick up, including deductibles, copays and coinsurance. Unlike Medicare Advantage, traditional Medicare does not have a cap on out-of-pocket spending. Medigap plans shield seniors from those potentially ruinous medical costs.

Nearly 12 million people had a Medigap plan in 2015, according to consulting firm Mark Farrah Associates. Prices vary depending on the insurer, age of the enrollee, geography and type of Medigap policy, but it’s not difficult for carriers to collect high gross margins.

Companies are able to register quick profits on Medigap plans because the policies are mostly an exercise in actuarial underwriting. Insurers don’t have to build provider networks or provide in-home assessments like they do with Medicare Advantage.

Medicare services in trouble; Local Office for the Aging urges residents to contact local representatives

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Last week, the U.S. Senate Appropriations Committee voted to completely eliminate the $52.1 million in funding for the Medicare State Health Insurance Assistance Program (SHIP), more commonly referred to as Health Insurance Information Counseling Assistance Program (HIICAP) in New York, from the 2017 budget, which, if passed, can cause local Office for the Aging departments to cut or lose needed and popular services.

“A major program we have is the health insurance counseling, and if this funding is eliminated, we would losing the total funding,” said Melissa Blanar, director for the Orleans County Office for the Aging.

The money goes toward helping older adults navigate the options they have for Medicare and what the best option they have, choosing from more than 20 prescription drug plans, an average of 19 Medicare Advantage plans, not to mention the various Medigap supplemental insurance policies.

“In Orleans County, we have people who go to Buffalo, some go to Rochester, so we have to see what plan would work for them best,” Blanar said. “I don’t know if they’re going to expect us to pick up the slack somehow (if the funding gets eliminated) because people are going to continue to come to our door for that. That’s mostly what we see in our office; ‘I’m turning 65. I don’t know where to go. I don’t know what to do. I’m not sure what my options are.’”

In 2012, the Orleans County Office of the Aging helped 568 people. In 2015, it helped 797 for health insurance needs.

Orleans County isn’t the only one who saw an increase over the three year span; Genesee County Office for the Aging saw a similar jump, servicing 1,346 people in 2012 and 5,400 in 2015.

“That program is the one of greatest demand in our agency, and the one growing over time, especially with the growing baby boomer population,” said Ruth Spink, director for the Genesee County Office for the Aging. “We don’t really understand why (the U.S. Senate Appropriations Committee voted to eliminate the funding). It has been a program that has been pretty level funded for decades.”

All three counties offer the service for free, but ask for donations to help with costs. Spink also pointed out the Office for the Aging is the only place people can get unbiased information, and in the first six months of 2015, the Genesee Office of the Aging saved Genesee County residents $353,000 overall for those six months.

“We’re all scrambling as far as Office for the Aging to insure that money is kept there because should they cut funding, that really is attached to staff. You eliminate that funding, you’re going to eliminate services,” said Angie Milillo, deputy director for Wyoming County Office for the Aging. “With the baby boomers coming through, we’re just starting now to in the last five, seven, years or whatever just start hitting the baby boomers.”

Currently the U.S. House of Representatives haven’t voted on SHIP funding, and Office of the Aging urges local representatives United States Senators Charles Schumer and Kirsten Gillibrand and United States Congressman Chris Collins to not eliminate funding for SHIP in the 2017 fiscal year. The Orleans County Legislature passed a resolution Wednesday afternoon requesting federal officials to instead increase funding for SHIP to $59.4 million, to keep pace with inflation and increasing needs among a growing Medicare population, or at a minimum, level funding of $52.1 million should be provided. The local Office for the Aging also urges residents to contact representatives to ask local representatives not to eliminate the funding.