Washington Extension

October 7, 2011

Medicare News

Researchers at the Harvard School of Public Health found that among Medicare beneficiaries in their last year of life in 2008, one-third had a surgical procedure performed. One-fifth had surgery in the last month of life, and one in ten had surgery in the last week of life. The rates of surgery varied dramatically across the country, but geographic variation is controversial because it is unclear whether it reflects unnecessary care or true differences in patient needs. This report adds to the influential research conducted by the Dartmouth Atlas of Health Care showing Medicare beneficiaries living in areas of the country with lower intensity of end-of-life care do not have higher mortality rates.

The Michigan state legislature voted to end retiree health benefits for future and newer sitting legislators, in the face of state budget shortfalls. Retiree health benefits cost the state about $5 million in the last fiscal year. Governor Rick Snyder has promised to sign the legislation.

ACA Updates

The Institute of Medicine (IOM) released its highly-anticipated report on the criteria for determining essential health benefits (EHB) that ACA-qualified health plans must cover. The ACA defined ten categories of commonly-covered health services that plan benefits must include. The IOM identifies criteria for defining and updating specific components of the EHB, including: use a public deliberation process, include only medically necessary services that are value-based, promote some state flexibility, make annual updates based on credible evidence of effectiveness of benefits, and rely on typical coverage in the small employer market. Unlike Medicare’s coverage standard of “reasonable and necessary”, the IOM recommends higher standards for benefit coverage, such as the treatment demonstrate meaningful improvement over current effective services/treatments, and is cost effective. These criteria (among others) are aligned with the criterion that the EHB package, in aggregate, be affordable.

In ongoing litigation regarding the ACA, 26 states and the NFIB filed petitions to the Supreme Court to appeal the ruling in the Eleventh Circuit which struck down the individual mandate but upheld the remainder of the ACA. The Department of Justice also filed its own petition requesting review of the Circuit Court decision, significantly increasing the odds that this issue will appear on the Supreme Court’s docket this term (though the Court may have more than one case to choose from). Outstanding questions remain about the ability of the Court to rule on a federal tax law before anyone has actually paid the tax (i.e. the individual mandate penalty).

Nebraska will wait until the Supreme Court decides on the constitutionality of the ACA before setting up a health insurance exchange. According to the governor, the state is designing a program and applying for federal funding, but won’t build a “formal proposal” until the Court decides. Minnesota’s prospects are less clear: while the governor has secured millions of federal dollars, and has support to design a state-run exchange from the Minnesota Chamber of Commerce and some Republicans in the legislature, a debate rages about whether the governor needs authorization from the GOP-controlled legislature—which has been unwilling to pass a bill—to set up an exchange.

On the Hill

House Republicans released their 2012 draft budget for health, labor and education, totaling $153.4 billion. This compares with the Senate Democrats’ proposed budget of $165.3 billion. The Republicans’ draft bill prohibits funds to implement the ACA, as well as provisions to rescind funding already provided for ACA programs. Rep. Denny Rehberg (R-MT), chairman of the House Appropriations Labor-Health and Human Services subcommittee, recently wrote to the “Super Committee” recommending they cut ACA Medicaid expansions and affordability credits to achieve their $1.2 trillion deficit reduction goal.

Reports/Other News

About one quarter of retirees think that life in retirement is worse than before they retired, according to a RWJF/NPR/Harvard School of Public Health poll. This compares with only 14% of pre-retirees who expect that retired life will be worse. Retirees cite costs of medical treatment and long-term care as especially worrisome. Many fewer pre-retirees think that their health will be worse (13%) during retirement than retirees who say their health actually is worse (39%). Pre-retirees are also less confident (38%) that Medicare will provide benefits of at least equal value to current benefits than retirees (52%).

Average annual premiums for employer-sponsored health insurance in 2011 rose 8% for single coverage (to $5,249) and 9% for family coverage (to $15,073) over 2010 costs, according to this year’s Kaiser Family Foundation/HRET employer health benefits survey. The percentage of total premium paid by workers is similar to 2010 (18% for individuals, 28% for family coverage). Among firms offering coverage to employees, 26% offer retiree coverage, similar to 2010. State and local governments are most likely to offer retiree health benefits (83%), while large firms in the retail and wholesale industries are least likely (15% and 16%). Nearly all (91%) of offering large firms cover early retirees below age 65, while 71% cover Medicare-age retirees. AHIP blames rising insurance costs on prices for medical services, asserting that Washington must do more to control cost growth. Kaiser attributed 1-2% of the premium increase to provisions of the Affordable Care Act, including allowing children up to age 26 on their parents’ health insurance.

The Government Accountability Office (GAO) released a report showing 170,000 Medicare Part D beneficiaries received prescriptions for controlled substances from five or more physicians in 2008, indicating fraud and prescription drug abuse in Part D. In ten individual cases examined by the GAO, physicians did not know that their patients were receiving drugs prescribed by other physicians. Although Part D plans are required to perform retrospective drug utilization reviews to identify inappropriate or unnecessary medication use, plans are not authorized to restrict drug access based on the findings.

Visit Extend Health — the nation’s largest private Medicare exchange.

Will 2011 be known as the year big insurers gobbled up Medicare Advantage companies? According to a recent article in HealthLeaders Media, by Margaret Tocknell, it just might. Tacknell speculates that the MA HMO acquisitions by HealthSpring, WellPoint and Humana are just the beginning as MA growth continues to climb, driven by companies transitioning retirees from employee-sponsored plans to MA plans, and increasing numbers of baby boomers reaching retirement age. To point out just how fast Medicare Advantage is growing, the article sites data from the Kaiser Family Foundation indicating enrollment in MA plans has more than doubled in recent years, growing from 5.3 million in 2005 to 11.1 million in 2010. Trocknell writes:

. . . competition is heating up as well-financed players such as Aetna, Humana, WellPoint and UnitedHealth look to increase their share of the market. James [Sarah James, health insurance analyst with Wedbush Securities] expects to see more acquisitions of smaller Medicare Advantage companies as healthcare reform kicks in and economies of scale become even more important. “The Medicare Advantage market is very fragmented and it’s getting more difficult to be a small player.”

Read the full article: “Insurers Eye Medicare Advantage Acquistions.”

Visit Extend Health — the nation’s largest private Medicare exchange.

If you were to guess where people spend the most money on health care in the U.S. where would you pick? How about a big city like New York or Los Angeles? If you did, the results of a recent study by Thomson Reuters might surprise you.

If you went against your instincts and pick Anderson, IN you’d be right. People there with employer-provided insurance spent $7,231 on health care compared to Ogden-Clearfield, Utah where they spent only $2,623. That’s a pretty big variation compared to the national average of $4,104. Here are the ten highest and lowest spending MSAs according to the study.

Ten Highest Spending MSAs:

  • Anderson, IN $7,231
  • Punta Gorda, FL $7,168
  • Racine, WI $6,528
  • Naples-Marco Island, FL $6,312
  • Ocean City, NJ $6,128
  • Barnstable Town, MA $6,123
  • Flint, MI $6,061
  • Lake Havasu City-Kingman, AZ $5,977
  • Ocala, FL $5,976
  • Carson City, NV $5,931

Ten Lowest Spending MSAs:

  • Ogden-Clearfield, UT $2,623
  • Dubuque, IA $2,719
  • Fayetteville-Springdale-Rogers, AR-MO $2,762
  • Fort Smith, AR-OK $2,916
  • Laredo, TX $2,919
  • Amarillo, TX $2,942
  • McAllen-Edinburg-Mission, TX $2,950
  • Salt Lake City, UT $2,979
  • Fargo, ND-MN $2,996
  • Sioux City, IA-NE-SD $3,029

The Thomson Reuters study, titled Geographic Variation in Spending and Utilization Among the Commercially Insured utilized the Thomson Reuters MarketScan Research Databases to “examine variation in spending for enrollees with employer-sponsored health insurance (private insurance).”

Their research focused on three age groups

  • Children (age 0-17 years)
  • Adults (age 18-64 years), and
  • Seniors (age 65 years and over)

The study analyzed 382 metropolitan statistical areas (MSAs) with at least 100 enrollees in each of the age categories. It looked at geographic variation across MSAs and age groups for spending on
Medical care

  • Inpatient medical care
  • Outpatient medical care
  • Outpatient prescription drug, and
  • Total spending

Not surprisingly, the study found that healthcare utilization and spending varied across geographic regions in the United States.

The general consensus seems to be that variations cannot be fully explained by age, gender and health status. Perhaps that is why adjustments for “demographic characteristics and health status” were not made in this study.

However, the data did show that within each MSA medical spending varied by age, which had an impact on overall spending and relative ranking compared to other MSAs. For instance, Medicare spending in Anderson, IN was lower than it was in Punta Gorda, FL. But total spending in Anderson was higher overall because more was spent on children and adults. So, while an MSA might have higher overall spending, that does not mean spending is higher for all age categories.

The study pointed out that current beliefs about the causes for geographic variation may need revising due the observed patterns for Medicare and the commercially insured. The study cites the following factors that seem to influence geographic variation:

  • Regional differences in practice, training and financial incentives, as well as the availability of physicians and specialists.
  • Basic health, health behaviors, and healthcare preferences
  • Market structure, pricing and competition
  • Fraud and abuse, such as fraudulent billing schemes.

The study concludes that more research needs to be done to fully understand the reasons for the variation. Future health care policy changes will need to take into account these causes if they are to be effective.

The Thomson Reuters study offers the following five main findings:

  • There was significant geographic variation in healthcare spending by age
  • Location of the highest & lowest spending MSAs varied considerably by age group, and the type of spending was different from past results for Medicare.
  • Not including seniors with supplemental insurance, variation in drug spending was greater than variation in medical care spending
  • There was a strong positive correlation between inpatient and outpatient spending, and a weak correlation between medical and outpatient drug spending.
  • There was a weak correlation on medical spending between age groups, but a stronger correlation with drug spending.

In conclusion, the study found that the variation in spending by commercially-insured populations is significant, but the spending for seniors differed from previous results for Medicare. While the differences may be due to causes such as market structure, pricing and competition, more research is needed to determine if these variations would still be found after adjusting for demographic characteristics and health status.

If you would like to read the Thomson Reuters whitepaper you can find it here.

Additional Reading: The Cost Conundrum, by The New Yorker.

Visit Extend Health — the nation’s largest private Medicare exchange.

As part of our ongoing effort to make sure people aging in to Medicare have the information they need, Extend Health just put out a press release titled “For Seniors Turning 65: With the Medicare Annual Enrollment Period Less Than a Month Away, Five Things You Should Know About Medicare and Your Coverage Options.”  The press release provides a link to our free guide to Medicare, which includes a section on eligibility rules, explains the different parts of Medicare, the advantages of different private Medicare options, and how to enroll, and contains a glossary of Medicare terms. If you’re a person aging in to Medicare, or an employer with Medicare-eligible employees or retirees asking questions about Medicare, this guide is a very useful resource.

Aon Consulting has just published its predictions for medical plan cost increases in 2011.  Based on a survey of more than 60 health insurance carriers, Aon projects that in 2011 health care costs will increase by:

  • 10.5 percent for HMOs
  • 10.6 percent for POS plans
  • 10.7 percent for PPOs
  • 11 percent for CDH plans 

For Medicare-eligible retirees over the age of 65, Aon projects rates to grow by 7.5 percent for Medicare Supplement plans and 6.7 percent for Medicare Advantage plans.

Extend Health, our client Volkswagen, and Ford retiree spouse Barry Wood are all part of this very interesting piece just out on Information Week. The story investigates how our web-based and call center technology, much of it developed in-house, work together with our highly-trained benefit advisors to help retirees navigate the “maze of Medicare.” Mr. Wood says that Extend Health’s services “took the fear out of making the wrong choice.” Thanks Mr. Wood – that’s exactly what we aim for: confidence that the plan you enroll in is your best possible choice.

We just published the results of our latest retiree survey. We asked 504 retirees how satisfied they are with their individual Medicare coverage – and how it compares to the group insurance they had with their former employers. 85% said they are “very” or “somewhat” satisfied with their Medicare coverage. And 67% said they are as satisfied, or more satisfied, with Medicare than their previous employer-sponsored group health plans. Top reasons for overall satisfaction were (a) fewer billing and payment problems (37%), (b) better benefits (30%) and (c) lower cost (28%). You can see all the results in this press release.

The latest Kaiser Family Foundation health tracking poll shows some interesting results. The number of people with an unfavorable view of reform has dropped to 35%, from 41% last month, but the number who have a favorable view has only increased by 2%, up to 50%.

This month’s poll took a closer look at the attitudes of seniors, who’ve been the most unfavorable group overall so far. This and an earlier survey by the National Council on Aging give an indication why: both show that a majority of seniors are misinformed about key components of the bill, with many believing that it cuts basic Medicare benefits, institutes so-called “death panels,” and will weaken the financial condition of the Medicare fund. A majority are unaware of new benefits for Medicare recipients such as free preventive screening and yearly checkups.

Group insurance is better, right?

Isn’t it always cheaper than buying an individual plan?

The answer is no, not always. Not in the Medicare world. Read the rest of this entry »

There are many layers to the federal Medicare program. Your employees will want you to help them figure out where to begin.

STEP 1: Break Down Medicare Into Manageable Pieces

Employees first need to know if they qualify for Medicare coverage, what coverage is available in their area, and how to get enrolled in a plan that fits their needs. Which means, the 3 most common questions an HR benefit administrator will be asked are:

  • When am I eligible?
  • What are the different parts of Medicare?
  • How do I enroll?

Click here for a simple summary page that provides the answers.

STEP 2: Provide Online Resources to Guide Them

The process of identifying the right Medicare plan and selecting the best policy is equally confusing. Employees find it easier to utilize an online search tool that can take their personal information and provide them with the best options. The following tools can assist them: