Created in 1965, Medicare is the federal health insurance program for people ages 65 and over, regardless of income, medical history, or health status. The program was expanded in 1972 to cover people under age 65 with permanent disabilities. The program helps to pay for many medical care services, including hospitalizations, physician visits, and prescription drugs, along with post-acute care, skilled nursing facility care, home health care, hospice care, and preventive services. The Medicare Advantage (Part C) refers to the Medicare program where beneficiaries can enroll in a private health plan, such as a health maintenance organization (HMO) or preferred provider organization (PPO), and receive all Medicare-covered Part A and Part B benefits and typically Part D benefits. Medicare spending accounted for 15% of total federal spending in 2016 and 20% of total national health spending in 2015.
Medicare enrollment is on the rise. According to CMS’s recent media release:
- Medicare Advantage enrollment is expected to increase to 20.4 million in 2018, a nine percent increase compared to 2017
- More than a third of all Medicare enrollees (34%) are projected to be in a Medicare Advantage plan in 2018
- As per historical enrollment numbers published by Kaiser Family Foundation, Medicare private health plan enrollment has gone up from 14% to 33% in the last 15 years
- The number of Medicare Advantage plans available to individuals to choose from across the country is increasing from about 2,700 to more than 3,100
- Almost 99% of people with Medicare will have access to a Medicare Advantage plan
- More than 85% of people with Medicare will have access to 10 or more Medicare Advantage plans
Baby boomers will lead the charge
According to recent study by Deloitte, approximately 26 million Baby Boomers will age into Medicare through 2030 at a rate of about 10,000 a day over the next 10 years. This next wave of Medicare enrollees referred to as “trailing edge” is different from “leading edge” boomers, many of whom have already enrolled in Medicare. Consumer experts suggest these boomers are more likely to select Medicare Advantage products because of their extensive experience with employer coverage, networks, benefit designs, and health plans that offer MA products.
4+ CMS STAR ratings will be critical to attract consumers
CMS assigns Medicare Advantage plans an annual ranking of one to five stars based on quality and performance. Plans with five stars are considered to be highly above average in quality, and plans with one star are considered to be very below average in quality. As per a recent study by PWC, 52% of Medicare Advantage enrollees were in the highest rated plans with four or more stars in 2014. That rate increased to 68% in 2017. To win new members and achieve the highest star rating, plans will have to provide a high quality customer experience. STAR ratings have become extremely important attribute for consumers in their decision making process because of the ability to compare Medicare Advantage plans more easily. Recently published McKinsey’s analysis of 2017 STAR ratings reveals that 90% of contracts that left the market between 2013 and 2016 were below four Stars. Among the 2014 contracts that remained in the market in 2016, those that retained a four plus Star rating experienced 40.9% growth while those with consistent performance below four Stars had only 0.9% growth. Additionally, plans with four plus STAR rating qualify for performance bonus from CMS and higher rebates.
Social media will replace traditional outreach
Health plans are employing several strategies as they seek to attract and retain this next wave of Medicare enrollees. These strategic investments are focused on improving customer experience of a growing population of tech-savvy seniors. The “trailing edge” boomers are technologically literate with increasing willingness to use digital health services. Consumers are more likely to have a live visit with a physician via an application on their smartphone if it costs less than a traditional option. Computer and smart phone savvy seniors prefer online research to choose health insurance. Health insurers should prioritize investments in creating user-friendly websites and should use social media platforms to increase brand awareness.
Opportunity for health insurers in Medicare Advantage will expand in 2018 as more baby boomers reach age 65. Health plans that provide easy-to-use tools to understand plan benefits and out-of-pocket expenses will attract significantly higher number of consumers. By expanding care management network, adopting mobile and self-service offering, and investing in care coordination activities to manage chronic conditions, plans can significantly improve their scores on outcome-based measures which have higher weightage and greater impact on overall STAR ratings. Plans using analytics to unlock newer avenues for member outreach will improve member engagement as they collaboratively partner to achieve healthier outcomes through timely interventions, better education and informed decisions.