Medicare Supplement Insurance and Claim Cost Trends Report to NCOIL American Academy of Actuaries Medicare Supplement Insurance Work Group Mike Abroe, Chairperson AMERICAN ACADEMY of ACTUARIES
Medicare 65+ Market Share 10%
31%
19%
10%
30%
Medicaid
Medicare HMO
Medicare Supplement
Medicare Only
Employer
As of 1998 – CMS Reports AMERICAN ACADEMY of ACTUARIES
Medicare Risk HMO Enrollees Year
Enrollees
Change
1995 1996 1997 1998 1999 2000 2001
3,089,259 4,115,293 5,211,339 6,055,546 6,347,434 6,260,549 5,480,899
820,895 1,026,034 1,096,046 844,207 291,888 -86,885 -779,650
Source: Medicare Managed Care Contract Reports, CMS
AMERICAN ACADEMY of ACTUARIES
Medicare Supplement Lives By Plan 40.0% 30.0% 20.0% 10.0% 0.0%
A
B
C
D
E
F
G
H
I
J
ALL
Source: 1998 NAIC
AMERICAN ACADEMY of ACTUARIES
Medicare Supplement Update Benefit Plans A-J Plan A Basic Benefits
Plan B Basic Benefits
Plan C Basic Benefits Skilled Nursing Coinsurance Part A Deductible Part B Deductible
Plan D Basic Benefits Skilled Nursing Coinsurance Part A Deductible
Plan E Basic Benefits Skilled Nursing Coinsurance Part A Deductible
Plan F Basic Benefits Skilled Nursing Coinsurance Part A Part A Deductible Deductible Part B Deductible Part B Excess 100% Foreign Travel Foreign Travel Foreign Travel Foreign Travel Emergency Emergency Emergency Emergency At-Home Recovery
Plan G Basic Benefits Skilled Nursing Coinsurance Part A Deductible
Plan I Basic Benefits Skilled Nursing Coinsurance Part A Deductible
Part B Excess Part B Excess 80% 100% Foreign Travel Foreign Travel Foreign Travel Emergency Emergency Emergency At-Home At-Home Recovery Recovery Basic Drugs Basic Drugs $1,250 Limit $1,250 Limit
Preventive Care Basic Benefits: Part A and B
Plan H Basic Benefits Skilled Nursing Coinsurance Part A Deductible
Plan J Basic Benefits Skilled Nursing Coinsurance Part A Deductible Part B Deductible Part B Deductible Foreign Travel Emergency At-Home Recovery Extended Drugs $3,000 Limit Preventive Care
Co-insurance AMERICAN ACADEMY of ACTUARIES
Nationwide Annual Claim Trend 1996 Through 1998 Reasons For Higher Medicare Supplement Trends • • • • •
Hospital outpatient Disableds/ESRD M+C Enrollment Demographics/Aging Population Rx Costs AMERICAN ACADEMY of ACTUARIES
Medicare Supplement Claim Trends – 1996 to 1998 Prescription Drug Experience
Plan
Rx Benefits Only
Non-Rx Benefits
All Benefits
Plans H,I
14.9%
10.5%
11.4%
Plan J
14.2%
5.2%
7.8%
Plans H,I,J Mass. Product
15.0% 25.1%
8.7% 10.5%
10.3% 16.5%
AMERICAN ACADEMY of ACTUARIES
Nationwide Annual Claim Trend 1996 Through 1998 Plan A Plan C Plan F Plans BDEG Plans ABCDEFG
17.6% 10.9% 9.0% 12.8% 11.2%
Source: AAA Study Dated June 8, 2000
AMERICAN ACADEMY of ACTUARIES
96/98 Medicare Fee-for-service Trend Versus Medicare Supplement Trend 15.0% 11.9%
12.0%
11.2%
9.0% 6.0%
7.2% 3.6%
6.9%
5.9%
3.9%
3.0%
1.1%
0.0% -0.5%
-3.0%
Part A
Part B
Medicare Program
Parts A&B
Medicare Beneficiary
Sources: AAA Study/HCFA
Supplement AMERICAN ACADEMY of ACTUARIES
Claim Trends – Hospital Outpatient One Carrier’s Plan F Experience 1996-1997
1997-1998
Average 1996-1998
Outpatient Hospital
18.4%
15.3%
18.2%
Total Plan F
8.8%
9.0%
7.7%
The excess trend applied since 1992, the first year of standardization, implies aggregate claims costs 20% lower if Hospital outpatient inflated at the same rate as all other benefits combined. AMERICAN ACADEMY of ACTUARIES
Medicare’s New Prospective Payment Methodology for Outpatient Services • One-time reduction in aggregate coinsurance costs nationwide • HCFA estimates a 12% initial reduction in Hospital Outpatient Benefits – or 3.1% of all beneficiary claim obligations • Lowered Trend Thereafter • But, Full Implementation up to 40 years, and AMERICAN ACADEMY of ACTUARIES
Ratio of Disabled to Aged Annual Claim Cost Plan Plan A Plan C Plan F Plans B,D,E,G All Plans A-G
Ratio 3.83 2.48 1.35 1.55 1.78 AMERICAN ACADEMY of ACTUARIES
Claim Trends by Region 1998/96 14.0%
13.9% 10.7%
12.0% 10.0%
11.2% 9.7%
9.4%
8.0% 6.0% 4.0% 2.0% 0.0%
Northeast
Midwest
South
West
All AMERICAN ACADEMY of ACTUARIES