THE ALLIANCE OF COMMUNITY HEALTH PLANS:
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THE ALLIANCE OF COMMUNITY HEALTH PLANS:
“Medicare Modernization in a Polarized Environment: Facing the Challenge”
National Academy of Social Insurance
The Future of Medicare Advantage
Presentation by Jack Ebeler January 27, 2005
Presentation at
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What is the future of Medicare Advantage?
Outline:First look back at BBA 1997
What expected?What happened?What lessons?
Then look at MMAWhat expected?What might happen?
Key factors for future
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Place ourselves back in 1996-1997
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What was going on in 1997?
Post-health care reform
Fundamental debates over future of Medicare – structure and funding – 1995 government shut-down
1997 - renewed focus on deficit reduction, including Medicare (funding and structure)
Private market changing
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Actual enrollment in Medicare TEFRA HMOs had grown to 5 million, and CBO projected continuing growth pre-BBA 1997
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16
1985
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p20
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Congressional Budget Office BBA Projections Total Enrollees data from Social Security Trustees ReportNote: 2004 data from Mathematica Policy Research, Inc. Medicare Advantage and Medicare Beneficiaries Monthly Tracking Report for December 2004
Mil
lion
s of
En
roll
ees
Actual through 1997Pre-BBA CBO projection
29%
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There was increasing enrollment in managed care in the employment market from 1988-1996
31%21%16%
14%
7%
28%
26%
11%
27%
46%
73%
0%10%
20%30%
40%50%60%
70%80%
90%100%
2004
2003
2002
2001
1998
1996
1993
1988
HMO POS PPO ConventionalSource: Kaiser/HRET Survey of Employer-Sponsored Health Benefits: 2004
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Real increases in Medicare spending per capita were increasing while private health insurance dropped, 3 year rolling averages, 1989-1996
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
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1994
1995
1996
1997
1998
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2000
2001
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2003
Per
cent
of
fede
ral s
pend
ing
ACHP computation from Office of the Actuary, National Health Statistics Group, January 2005
Medicare
Private Health Insurance
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With enactment of Medicare+Choice in BBA 1997, enrollment in private was projected to increase further
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p20
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Congressional Budget Office BBA Projections Total Enrollees data from Social Security Trustees ReportNote: 2004 data from Mathematica Policy Research, Inc. Medicare Advantage and Medicare Beneficiaries Monthly Tracking Report for December 2004
Mil
lion
s of
En
roll
ees
BBA 1997
Post-BBA CBO enrollment projection
34%
Pre-BBA CBO projection
29%
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But actual enrollment in Medicare+Choice fell far short of the BBA 1997 projections
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p20
07p
Congressional Budget Office BBA Projections Total Enrollees data from Social Security Trustees ReportNote: 2004 data from Mathematica Policy Research, Inc. Medicare Advantage and Medicare Beneficiaries Monthly Tracking Report for December 2004
Mil
lion
s of
En
roll
ees
BBA 1997
Post-BBA CBO enrollment projection
34%
Actual
Pre-BBA CBO projection
29%
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What happened?
Commercial market changes - shifted to much “looser” managed care, more PPOs
Managed care “backlash” in mid- late 90sVery tight labor market
Not a magic bullet - comparative Medicare/private growth story much more complicatedImpetus for change – health plans, not beneficiaries BBA 97 coupled structural change with savings - deep funding constraints across traditional Medicare and M+C – and that combination is always difficult
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There was increasing enrollment in managed care in the employment market from 1988-1996
31%21%16%
14%
7%
28%
26%
11%
27%
46%
73%
0%10%
20%30%
40%50%60%
70%80%
90%100%
2004
2003
2002
2001
1998
1996
1993
1988
HMO POS PPO ConventionalSource: Kaiser/HRET Survey of Employer-Sponsored Health Benefits: 2004
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But commercial market started shifting to looser managed care about time BBA 1997 enacted
25%24%26%23%27%31%21%16%
15%17%18%22%24%14%
7%
55%54%52%48%35%
28%
26%
11%
5%5%5%7%14%
27%
46%
73%
0%10%
20%30%
40%50%60%
70%80%
90%100%
2004
2003
2002
2001
1998
1996
1993
1988
HMO POS PPO ConventionalSource: Kaiser/HRET Survey of Employer-Sponsored Health Benefits: 2004
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Real increases in spending per capita under Medicare and private health insurance, 3 year rolling averages, 1989-1996 …
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
Per
cent
of
fede
ral s
pend
ing
ACHP computation from Office of the Actuary, National Health Statistics Group, January 2005
Medicare
Private Health Insurance
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Real increases in spending per capita under Medicare and private health insurance, 3 year rolling averages, show more cyclical trend
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
1983
1984
1985
1986
1987
1988
1989
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1991
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1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
Per
cent
of
fede
ral s
pend
ing
ACHP computation from Office of the Actuary, National Health Statistics Group, January 2005
Medicare
Private Health Insurance
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BBA 97 dropped overall Medicare growth rate substantially as private health insurance began to increase, 3 year rolling averages, 1983-2003
-1.00%
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
7.00%
8.00%
9.00%
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
Per
cent
of
fede
ral s
pend
ing
BBA 97
ACHP computation from Office of the Actuary, National Health Statistics Group, January 2005
Medicare
Private Health Insurance
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The result….
Consumers increasingly concerned about approach – private and public
Private market changedEasiest to hold tight and not change
In Medicare, M+C plans:Revised, expanded networksEstablished, increased premiums, coinsurance
Decreased supplemental benefits
That lessened attractiveness of plans for beneficiariesPlans either stabilized or exited markets
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Back to today…
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What will MA enrollment be? Differences between CBO and CMS
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p
2007
p
2009
p
2011
p
2013
p
Congressional Budget Office. The Budget and Economic Outlook: An Update Washington, DC, 2004*MMA Projections from CBO
Mil
lion
s of
En
roll
ees
MMA 2003
CBO 13%
Administration
24%
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What is future of Medicare Advantage ?
Depends on:
Federal funding for all Medicare
What happens in the private market
Enrollment shifts – especially Medigap population
Viability of PDP only plans
Ability to implement low income provisions
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What will happen to Medicare funding levels – FFS and MA?
MMA was coupled with initial payment increases (lesson from 1997?)
But what about longer-term?
Fiscal situation points to reductions.
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The current policy deficit could begin to shrink, but not if tax cuts are extended – with Iraq …
-200
-100
0
100
200
300
400
500
2001 2002 2003 2005p 2006p 2007p 2008p 2009p 2010p 2011p 2012p 2013p 2014p 2015p
Deficit, current policy
Deficit, assuming AMT, extension of tax cuts
$ B
illi
ons
Congressional Budget Office. The Budget and Economic Outlook Washington, DC, 2005
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Federal interest payments on the national debt increase as deficits accumulate
0
50
100
150
200
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2001
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p
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p
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p
2008
p
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p
2010
p
2011
p
2012
p
2013
p
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p
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p
Net interest, current policy
Net interest, assuming extension of tax cuts
Congressional Budget Office. The Budget and Economic Outlook Washington, DC, 2005
$ B
illi
ons
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Federal spending is dominated by five key items – including Medicare (2015 projections)
13%
23%
19%
10%
13%
14%
8%
Other Discretionary
Net
InterestDefense
Social Security
MedicareMedicaid
Other Mandatory
Congressional Budget Office. The Budget and Economic Outlook Washington, DC, 2005
2015 Total Federal Outlays =
$3,706 Billion
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Outlook - Funding
MMA increases for 2005-2006? –2007? will likely be maintained
Anticipate constraints for all Medicare, including the Medicare Advantage program . . .
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. . . Any plan that enters the MA program in anticipation of funding at the 2004-2006 levels FOR LONG TERM (2007-8? or later) is either
foolish, a short-term participant, or can’t count
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What is happening in private market?
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Commercial market started shifting to looser managed care after BBA 1997 enacted
25%24%26%23%27%31%21%16%
15%17%18%22%24%14%
7%
55%54%52%48%35%
28%
26%
11%
5%5%5%7%14%
27%
46%
73%
0%10%
20%30%
40%50%60%
70%80%
90%100%
2004
2003
2002
2001
1998
1996
1993
1988
HMO POS PPO ConventionalSource: Kaiser/HRET Survey of Employer-Sponsored Health Benefits: 2004
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Now, even more changes - more firms offering employees a high-deductible health plan, 2003-2004
0%
5%
10%
15%
20%
25%
All Firms Jumbo Firms
20032004
Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits 2004
5%
17%
10%
20%
(5,000+ Workers)
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Employers with high likelihood of offering high-deductible health plan with a personal or health savings account option in the next two years
28%21%
22%
6%
0%
10%
20%
30%
40%
50%
60%
Jumbo Firms (5,000+ Workers)All Firms
Somewhat Likely Very Likely
Kaiser/HRET Survey of Employer-Sponsored Health Benefits 2004
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Where would enrollment shifts come from?
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Medicare beneficiaries currently have a range of options
28%
9%
16%2%
12%
33%
MedPAC. Healthcare Spending and the Medicare Program June 2004.Note: Data based on noninstitutionalized Medicare beneficiaries. Chart depicts 2001 percentages.
Medigap
No Supplemental
Managed CareOther Public Sector
Medicaid
Employer Sponsored
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What will Medicare beneficiaries opt for as choices expand in future?
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Employer
Medicaid
MA LocalMA Regional PPOMA HSA, PFFS
MFFS + PDP
MedigapMFFS onlyMFFS
Medigap
M+C
Medicaid
Employer
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What will employers do – will they drop?
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
?
Employer
Medicaid
MA LocalMA Regional PPOMA HSA, PFFS
MFFS + PDP
MedigapMFFS only
Employer
Medicaid
M+C
Medigap
MFFS
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What happens in Medicaid – active and default?
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Employer
Medicaid
MA LocalMA Regional PPOMA HSA, PFFS
MFFS + PDP
Medigap
MFFS only
?Medicaid
Employer
M+C
Medigap
MFFS
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What will current MA beneficiaries do – and what type plan might they join?
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Employer
Medicaid
MA LocalMA Regional PPOMA HSA, PFFS
MFFS + PDP
MedigapMFFS only
? ??
?Medicaid
M+C
Employer
Medigap
MFFS
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What will Medigap enrollees do?
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Employer
Medicaid
MA LocalMA Regional PPOMA HSA, PFFS
MFFS + PDP?
MedigapMFFS only
?
??
?Medicaid
M+C
Employer
Medigap
MFFS
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Who will reach lower income individuals, given MMA’s spending on low-income Rx drug subsidies?
Low-income subsidy
$192 billion
Remaining Investment
$208 billion
48% 52%
Total Federal Investment = $400 billion
Total number of beneficiaries, 2006 =
41 million
14 million low-income-
eligible beneficiaries
Remaining beneficiaries
35%
Congressional Budget Office
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Increasing segmentation puts incredible pressure on already-stressed geographic and risk adjusters
Duals
M’GapAged
Retiree Disabled
Low incomeAged aged
M FFS
Employer plan PDP only
PPO
Local HMO
PFFS
HSAChronic
Plan X
Geog. Adjustment
Risk Adjustment
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Major difference, 2006 - Beneficiary must act
Major difference in 2006, compared with 1997, is the new Rx drug benefit
Beneficiaries have to sign up for something – either a PDP only plan or MA plan
Doing nothing incurs a cost
So there will be more movement – but where?
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Summary – what will happen to MA
What are funding levels – base and rate of changeHow accurate are payments/risk adjustment – or risk sharing – critical for sustainability?Where do Medigap enrollees (about 30%) go? Do Medigap carriers offer PPOs?How available and attractive are the PDP-only plans –that is crucial factor for the beneficiary decision of FFS v. MA
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Another important question…
What happens within MA – is it dominated by:
Regional PPO?
Local MA?
Health Savings Accounts?
Private Fee For Service?
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Is it worth it? Long term, how do MA plans demonstrate value?
Transaction processers?
Risk bearing insurers?
Benefit redesigners?
Organizers of care?
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What will MA enrollment be? Don’t know, but…
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p
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p
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p
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p
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p
Congressional Budget Office Comparison of CBO and Administration Estimates of the Effect of H.R. 1 on Direct Spending February 2004
Mil
lion
s of
En
roll
ees
MMA 2003
CBO 13%
Administration
32%
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Thank you