The Medicare Maze

A classic episode of the TV comedy I Love Lucy depicted Lucy and her sidekick, Ethel, fumbling hilariously as they tried to wrap candies that continued to stream along a fast-moving conveyor belt. The faster they wrapped the chocolates, the more confections came speeding toward them until the two women became overwhelmed and handled the situation as only Lucy and Ethel could.

When Mark Squires thinks about the wave of consumers reaching Medicare age, he is reminded of the candy-wrapping scene. In his vision, the candies represent those Medicare-eligible individuals — and they just keep coming.

Nearly 37 million baby boomers will turn 65 over the next decade, according to the U.S. Census Bureau, with 10,000 boomers hitting that landmark birthday every day from now until 2030.

Boomers approaching their 65th birthday face a bewildering array of choices when selecting a Medicare plan. Should they buy a Medicare supplement? Or is that zero-premium Medicare Advantage plan that some celebrity is hawking on TV a better deal? Will their doctors and local hospital be covered under the plan they select? How much will they end up paying out of pocket?

Not only are more people reaching Medicare age, but they also have more plans from which to choose, especially if they select Medicare Advantage.

The number of Medicare Advantage plans available increased for 2021 to the highest it’s ever been, with more than 4,800 plans available nationwide. The majority of beneficiaries have at least one zero-premium plan available to them, and the average enrollee can select from among 33 plans in 2021.

In 2020, nearly four in 10 (39%) of all Medicare beneficiaries — 24.1 million people out of 62 million Medicare beneficiaries overall — were enrolled in Medicare Advantage plans; this rate has steadily increased over time since the early 2000s. Between 2019 and 2020, total Medicare Advantage enrollment grew by about 2.1 million beneficiaries, or 9% — nearly the same growth rate as the prior year. That’s according to Kaiser Family Foundation. The Congressional Budget Office projects that the share of all Medicare beneficiaries enrolled in Medicare Advantage plans will rise to about 51% by 2030.

As more Americans reach Medicare age, more of them look to advisors such as Squires to help them make the best decision to cover their health care needs.

Squires brands himself as The Medicare Whisperer, and Medicare makes up a big part of his practice. As president of Wise Choices Financial in Independence, Mo., Squires has become somewhat of a local celebrity, discussing Medicare on radio talk shows and in a series of YouTube videos.

He has seen the Medicare market come a long way from the days when he sold Part D coverage from a table inside a local supermarket.

“I distinctly remember my first day. I was sitting at a grocery store, and instead of putting me back by the pharmacy, they put me right in front of the front door. It was snowing and windy in Kansas City. Every time the doors opened, my sign blew over. And I spent most of my morning answering more questions about the pumpkin rolls on display behind me than I did about what I was selling,” he recalled.

Eventually, he started advising people who were disabled, under 65 years old and on Medicare. And he discovered his passion for helping others.

“It gave me an entirely new perspective — not on the business, but on life,” he said. “I was now in a position where I was helping people. I was changing lives. And that for me became part of the mission. That is what we do every day — we help people, we get paid to do it, and that’s great.”

Squires continued to learn more about Medicare. Clients started calling him the Medicare Whisperer, and he trademarked the name. Although his practice also encompasses life insurance and long-term care insurance, his Medicare business continues to grow to the point where it has increased about 130% over last year.

The growth of Medicare Advantage and premium increases on Medicare supplement plans have been among the biggest changes Squires said he has seen during his time in the business.

“Medicare Advantage was in its infancy back when I first started selling Part D plans,” he said. “But now the federal government has put more resources into swaying people toward the Medicare Advantage product.”

“We’ve seen a lot of our older clients who are on Medicare supplements seeing their premiums rise on Part F plans, so that also has been significant.”

But another change is the increase in competition for business. Carriers bombard consumers with direct mail, TV commercials and other advertising urging them to go to a call center and buy coverage. Advisors can cut through the clutter by offering consumers an opportunity to have their questions answered by an expert. And as in any other segment of insurance advice, tailoring a recommendation to the client’s individual needs is crucial.

“When we’re meeting with a client for the first time, we have no preconceived notions about what we’re going to recommend,” Squires said. “We want to know as much as we can about the client, we want to know about their life, what makes them tick, what’s their lifestyle, what do they want to do in retirement? And then we answer their questions and look at what’s most appropriate for this person in their circumstances.”

More Focus On Social Determinants

Ritter Insurance Marketing in Harrisburg, Pa., is a field marketing organization that has focused on the senior market since 2005. Among the biggest changes in recent years has been an expansion of benefits offered by Medicare Advantage plans, said Craig Ritter, the company’s CEO.

“In the last three years, the Centers for Medicare and Medicaid Services has opened up these plans to include benefits that are more aligned with social determinants of health,” he said.

“We’re talking about things like access to nutrition, access to transportation — things that go beyond paying for surgery or paying for an office visit or paying for preventive tests. It’s addressing issues where people say, ‘OK, I have this great benefit, but I can’t get to the doctor because I’m homebound and I have no one to drive me.’

“So CMS is really focused a lot more on providing more flexibility to managed care plans to be able to address these other needs.”

Clients and advisors must look deeper into the benefits when selecting the right plan, Ritter said.

“It’s a bit more multidimensional now,” he said. “Does the plan have a caregiver benefit? Does the plan cover enhanced dental? Does the plan provide for transportation? These are the considerations that agents need to make, and I think it’s one of the biggest changes agents need to deal with in recommending a good plan for their clients.”

Two factors are driving these changes in Medicare Advantage plans, he said. One is a regulatory change that gave these plans more flexibility to offer innovative benefits. The other is increased federal funding that enables plans to offer more benefits.

“We’ve seen very good support from CMS,” he said. “Medicare Advantage is probably one of the few things that has good bipartisan support. Both Democrats and Republicans have agreed that their constituents really like this program, it serves the Medicare population very well and it’s cost-effective. So it really has flourished in the last 10 years and continues to improve year over year.”

As for what 2021 is bringing to Medicare supplements, Ritter said, “We’ve seen increases in Medicare supplement premiums in the 4% to 6% range over the last three to five years. The products continue to be extremely competitive. Even with the growth in Medicare Advantage, there is still a large market for Medicare supplements.”

Ritter said that although fewer carriers are entering the Medicare market, those that already are in it have expanded the number of plans available for 2022.

For advisors who want to serve this market, “there’s as much of a need as ever,” Ritter said.

“If you look at the dynamics of the market, you have a market that’s growing organically at a double-digit rate every year,” he said. “And you have that dynamic in place for the next decade. So you have some really powerful tailwinds.”

Democrats in Congress are pushing for two major changes to Medicare as part of a multitrillion-dollar spending plan: lowering the eligibility age to 60 and adding coverage for dental, vision and hearing care.

“If Congress passes this bill, it will enhance some benefits and provide more funding to Medicare in terms of dental, vision and hearing, which in turn would provide more funding for Medicare Advantage,” Ritter said. “And that alone would increase the number of beneficiaries.”

Ritter also noted the growth of direct-to-consumer marketing by Medicare carriers and a greater use of call centers to enroll people in coverage. But he said advisors still have a role to play by providing a greater range of products and greater support to clients.

“By providing that kind of support to their customer, and going above and beyond for your clients to make sure that they have the right plan, then you’re getting referrals,” he said. “Then you’re able to build a reputation within your market and be successful.”

For advisors who may be late entering the Medicare market and concerned about whether they missed out on a major wave of potential clients hitting age 65, Ritter said it’s not too late.

“You didn’t miss the train. And there’s plenty of room on the train.”

Preventing Damage

With all the decisions that a consumer faces in selecting a Medicare plan, it’s easy to make a decision that ends up costing them a fortune or — even worse — puts their health in jeopardy. That’s where Joanne Giardini-Russell comes in.

Giardini-Russell is owner and self-proclaimed “Medicare nerd” of Giardini Medicare in Brighton, Mich. She and her staff of fellow “nerds” have a practice devoted to helping consumers on the Medicare journey.

“When we did a survey, we found that our clients told us the most confusing thing about getting coverage was figuring out the difference between Medicare Advantage and Medicare supplement,” she said. “So I realized we had a lot of educating to do.”

She and her team produced a series of YouTube videos discussing the various Medicare options as well as the pros and cons of each. They also produce a series of webinars and have a coordinated communication campaign reaching out to clients and prospects.

“Our business model is that we serve lots of credit unions, banks, financial planners and people like that. We’re kind of the arm that does their Medicare for their clients because they don’t have time to do it. And we get referrals from that as well.”

There can be costly consequences of choosing the wrong coverage. That’s what Giardini-Russell and her team attempt to prevent.

“My daughter, Natalie, works with me, and she said the most important thing a new agent in this market has to realize is the damage you can do,” she said. “Your client can end up on the hook for thousands of dollars in out-of-pocket costs if they make the wrong decision. It’s your job to see that doesn’t happen.”

Among the changes she has seen in the marketplace, the biggest recent change has been the way clients adapted to COVID-19 restrictions. “Clients found they didn’t need to meet in a conference room. They told us their preferred way of communicating is through email. They like doing webinars. Let’s face it — people who are 65 years old have been on a computer for 25 years by now. So they are accustomed to doing things online.”

Even with Medicare and related coverage, older Americans are still facing out-of-pocket costs for health care. Giardini-Russell predicted that Congress will add a dental benefit to Medicare.

“In terms of Medicare, I think everything will get more expensive,” she said. “Especially the cost of prescription drugs. I see this perfect storm in health care, where people are spending $3,000, $4,000, $5,000 a year on medications, but they are living on only $32,000. They can’t do it — something’s got to give. If we could come up with a maximum annual out of pocket for even $2,000 for prescriptions, that would be phenomenal.”

Giardini-Russell said she wishes the financial planning community would begin discussing Medicare with their clients long before they blow out the candles on their 65th birthday cake.

“You really should begin explaining this 15 years before they hit Medicare age,” she said. “Someone needs to talk with them about planning for their health care costs.”

Medicare enrollment is stressful for clients, she observed.

“Because it kind of coordinates with all those thoughts around retirement and your health, because you’re getting older and people do get sick and things happen. And you’re trying to make good decisions. It’s tough, and it’s stressful, but it’s important. So we break it down and help people learn it.”

Medicare Timeline

Medicare has been part of the American health care landscape for more than a half-century, as the program was implemented on July 1, 1966. Here are some significant dates and milestones in the Medicare program.

1937
U.S. Surgeon General Thomas Parran proposed that national health insurance first cover Social Security beneficiaries.

1945
President Harry Truman publicly lent his support to national health insurance after the Social Security Board called for beneficiary health insurance.

1965
Medicare and Medicaid were enacted as Title XVIII and Title XIX of the Social Security Act, providing hospital, post-hospital extended care and home health coverage to almost all Americans aged 65 or older. At the time, seniors were the population group most likely to be living in poverty, and only about half had health insurance coverage.

To implement the Health Insurance for the Aged (Medicare) Act, the Social Security Administration was reorganized and the Bureau of Health Insurance was established on July 30, 1965. This bureau was responsible for the development of health insurance policy.

1966
More than 19 million people enrolled in Medicare by July 1 — the first day the program was implemented.

1972
Medicare eligibility was extended to individuals under age 65 with long-term disabilities or end-stage renal disease.

1980
Coverage of Medicare home health services was broadened. Medicare supplemental insurance, also called “Medigap,” was brought under federal oversight.

1983
Medicare established a hospice benefit as an option for terminally ill beneficiaries to receive all-inclusive care to relieve pain and manage symptoms in a home setting rather than an institutional setting.

1987
The Omnibus Budget Reconciliation Act of 1987 strengthened the protections for nursing home residents.

1988
The Medicare Catastrophic Coverage Act included the most significant changes since enactment of the Medicare program. The law improved hospital and skilled nursing facility benefits, authorized Medicare to cover mammography, and included an outpatient prescription drug benefit and a cap on patient liability.

1989
The Medicare drug benefit and other enhancements of Medicare coverage in the Medicare Catastrophic Coverage Act were repealed after higher-income seniors protested new premiums. A new Medicare fee schedule for physician and other professional services, a resource-based relative value scale, replaced charge-based payments.

1990
Additional federal standards for Medicare supplemental insurance were enacted.

1995
The Social Security Administration became independent of the Department of Health and Human Services.

1997
The Balanced Budget Act established an array of new Medicare managed care and other private health plan choices for beneficiaries, offered through a coordinated open enrollment process. The act also expanded education and information to help beneficiaries make informed choices about their health care, expanded benefits for preventive care, and slowed the rate of growth in Medicare spending, extending the life of the Medicare Trust Fund by 10 years.

1999
The first annual Medicare & You handbook was mailed to all Medicare beneficiary households.

2001
The Health Care Financing Administration was renamed the Centers for Medicare & Medicaid Services.

2003
The Medicare Prescription Drug, Improvement and Modernization Act made the most significant changes to Medicare since the program began. MMA created a new optional outpatient prescription drug benefit, effective in 2006, provided through private health plans. The act also changed what was formerly known as Medicare+Choice plans to Medicare Advantage.

For the period prior to 2006, MMA created a temporary prescription discount card program. Beneficiaries with incomes less than 150% of the federal poverty level became eligible for subsidies under the new Part D prescription drug program. MMA also required beneficiaries with higher incomes to pay a greater share of the Part B premium beginning in 2007.

2006
Medicare prescription drug coverage (Part D) began for 39 million Medicare beneficiaries.

2010
The Affordable Care Act provided for expanded Medicare drug and preventive services benefits.

2021
As of 2021, more than 26 million Americans — 42% of all Medicare beneficiaries — were enrolled in Medicare Advantage plans.

Susan Rupe is managing editor for InsuranceNewsNet. She formerly served as communications director for an insurance agents' association and was an award-winning newspaper reporter and editor. Contact her at [email protected].