News You Need
Medicare Posts 2019 Rates, Pinches High Earners
Part B premiums will rise faster than Social Security for couples earning more than $750,000 per year.
Related: Trump’s CMS Posts 2018 Medicare Premiums)
Medicare managers announced today that they will hold increases in Medicare Part B premiums to about 1.1% for most enrollees in 2019. For some high-income enrollees, however, premiums will rise 7.4%.
Medicare Part B is the component of the traditional Medicare program that covers physician services and hospital outpatient care.
Here’s a look at how the monthly Part B premiums will change, by annual income level:
- Individuals earning less than $85,000, and couples earning less than $170,000: $135.50 in 2019, from $134 this year.
- Individuals earnings $160,000 to $500,000, and couples earning $320,000 to $750,000: $433.40 in 2019, from $428.60 this year.
- Individuals earning $500,000 or more, and couples earning $750,000 or more: $460.50 in 2019, from $428.60 this year.
The annual Medicare Part B deductible will increase 1.1%, to $185.
Another component of the traditional the Medicare program, Medicare Part A, covers inpatient hospital bills.
Medicare managers use payroll taxes to cover most of the cost of running the Medicare Part A program. Few Medicare Part A enrollees pay premiums for that coverage. But, for the enrollees who do have to pay premiums for Medicare Part A coverage, the full premium will increase 3.6%, to $437 per month.
The Medicare Part A deductible for inpatient hospital care will increase 1.8%, to $1,340.
Why are high earners paying so much more for Medicare Part B?
Congress has been increasing the share of Medicare costs that high earners pay in recent years.
For 2018, the top annual income category for Medicare Part B rate-setting purposes was for $160,000 and over for individuals, and for $320,000 and over for couples. Premiums from those Medicare Part B enrollees are supposed to cover 80% of their Part B claims.
In the Balanced Budget Act of 2018, Congress added a new annual income category: for individuals earning $500,000 or more and couples earning $750,000 or more. Premiums from Part B enrollees in that income category are supposed to cover 85% of those enrollees’ Part B claims.
Who do these rate increases actually affect?
Medicare now has about 60 million enrollees of all kinds, according to the CMS Medicare Enrollment Dashboard.
About 21 million are in Medicare Advantage plans and other plans with separate premium-setting processes.
About 38 million are in the traditional Medicare Part A, the Medicare Part B program, or both the Medicare Part A and the Medicare Part B programs. CMS refers to the traditional Medicare Part A-Medicare Part B program as Original Medicare. The rate increases have a direct effect on the Original Medicare enrollees’ costs.
How do the Medicare increases compare with the Social Security cost-of-living adjustment (COLA)?
The Social Security Administration recently announced that the 2019 Social Security COLA will be 2.8%.
(Related: Social Security COLA for 2019: 2.8%)
That means the size of the COLA will be greater than the increase in Medicare premiums for all Medicare enrollees other than the highest-income Medicare Part B enrollees and the enrollees who pay the full cost of the Medicare Part A premiums.
Why should financial professionals care about Original Medicare premiums?
For consumers who already have traditional Medicare coverage, the Part A and Part B premiums may affect how much they have to spend on other insurance products and related products, such as Medicare supplement insurance coverage.
For retirement income planning clients, Medicare costs are something to factor into income needs calculations.
Because access to Medicare coverage is critical to all but the very wealthiest retirees, knowledge about how to get and keep eligibility for Medicare coverage on the most favorable possible terms is of keen interest to many consumers ages 50 and older. Some consumers may like to get information about that topic from their insurance agents, financial planners and other advisors.
Officials at the Centers for Medicare and Medicaid Services, the agency that runs Medicare, are preparing to publish the official 2019 Medicare rate notices in the Federal Register on Wednesday. A preview copy of the Part A notice is available here, and a preview copy of the Part B notice is available here.
Health Insurers Try Paying More Upfront To Pay Less Later
Michael McBrayer of St. Paul, Minn., needs to pay a lot attention to his health.
“I give myself shots multiple times a day, as well as controlling my diet and exercise,” he said.
Ten years ago, McBrayer learned he has Type 1 diabetes. Now he knows he faces dire consequences if he fails to control his blood sugar.
“Kidney failure, blindness, heart disease — all those things are looming out there,” he said.
McBrayer has health insurance through his wife’s employer, the state of Minnesota. It’s a HealthPartners plan that charges extra to employers — in this case, the state — to cover diabetes care. So for the past several years, McBrayer’s plan has paid for everything he needs to keep his diabetes in check. He doesn’t spend a dime on supplies.
Diabetes, high blood pressure and other chronic conditions account for the vast majority of health spending in the U.S., according to the Centers for Disease Control and Prevention. Almost half of American adults have at least one chronic physical or mental health condition, and spending on those adds up to some $2.3 trillion a year.
Some health plans are beginning to offer free maintenance care for people with chronic health problems, hoping that spending a little more early on will save a lot of money in the long run.
“We’ve been trying to change the health care conversation in the United States from how much we spend to how well we spend,” said Dr. Mark Fendrick, head of the University of Michigan’s Center for Value-Based Insurance Design.
He said it makes both medical and economic sense to make properly managing chronic conditions affordable.
“I want the health insurance plan my patients have to charge my patients the least for the services that are going to make them healthier,” he said. “Let’s allow those to be covered on a pre-deductible basis; you’re not leaving the patients paying 100 percent of the cost.”
That may seem like common sense, but health plans have been running hard in the opposite direction. Consumers are on the hook for a rapidly increasing amount of their health costs — in large part to try to curb health costs.
But corporate buyers of health insurance are starting to realize that people may be putting off necessary care, says Mike Thompson, who runs the National Alliance of Healthcare Purchaser Coalitions. The organization advises around 12,000 organizations that buy health plans for tens of millions of Americans. He said those who provide insurance need to take a thoughtful look at what they pay for and what consumers should pay for.
“So that people are more prudent on discretionary care but are more compliant with the care they need and certainly the care they need to stay healthy,” Thompson said.
If people have to pay out-of-pocket for care they might not need, they might think twice, but their day-to-day health needs are taken care of.
One major obstacle to this approach, known as “value-based health insurance,” is an IRS rule that does not allow free maintenance care for chronic conditions for the 20 million Americans with health savings account-qualified, high-deductible insurance.
The enhanced insurance benefit that pays for all McBrayer’s Type 1 diabetes maintenance is paying off for state taxpayers, according to HealthPartners, his provider.
That program has helped quadruple the number of diabetes patients with optimal care, saving the state about $1 million on medical services since its inception almost 10 years ago, said Dan Rehrauer, a program manager at HealthPartners.
“We’ve shown that we’ve reduced hospitalization and emergency department utilization, which is exactly what we want to see,” Rehrauer said. “You’ve got a healthy employee and that results in not ending up in the hospital [which saves] money.”
As Seniors Get Sicker, They’re More Likely To Drop Medicare Advantage Plans
When Sol Shipotow enrolled in a new Medicare Advantage health plan earlier this year, he expected to keep the doctor who treats his serious eye condition.
“That turned out not to be so,” said Shipotow, 83, who lives in Bensalem, Pa.
Shipotow said he had to scramble to get back on a health plan he could afford and that his longtime eye specialist would accept. “You have to really understand your policy,” he said. “I thought it was the same coverage.”
Boosters say that privately run Medicare Advantage plans, which enroll about one-third of all people eligible for Medicare, offer good value. They strive to keep patients healthy by coordinating their medical care through cost-conscious networks of doctors and hospitals.
But some critics argue the plans can prove risky for seniors in poor or declining health, or those like Shipotow who need to see specialists, because they often face hurdles getting access.
A recent report by the Government Accountability Office, the auditing arm of Congress, adds new weight to criticisms that some health plans may leave sicker patients worse off.
The GAO report, released this spring, reviewed 126 Medicare Advantage plans and found that 35 of them had disproportionately high numbers of sicker people dropping out. Patients cited difficulty with access to “preferred doctors and hospitals” or other medical care, as the leading reasons for leaving.
“People who are sicker are much more likely to leave (Medicare Advantage plans) than people who are healthier,” James Cosgrove, director of the GAO’s health care analysis, said in explaining the research.
David Lipschutz, an attorney at the Center for Medicare Advocacy, says the GAO findings were alarming and should prompt tighter government oversight.
“A Medicare Advantage plan sponsor does not have an evergreen right to participate in and profit from the Medicare program, particularly if it is providing poor care,” Lipschutz says.
The GAO did not name the 35 health plans, though it urged federal health officials to consider a large exodus from a plan as a possible sign of substandard care. Most of the 35 health plans were relatively small, with 15,000 members or fewer, and had received poor scores on other government quality measures, the report said. Two dozen plans saw 1 in 5 patients leave in 2014, much higher turnover than normal, the GAO found.
Medicare Advantage plans now treat more than 19 million patients, and are expected to grow as record numbers of baby boomers reach retirement age.
Kristine Grow, a spokeswoman for America’s Health Insurance Plans, an industry trade group, says Medicare Advantage keeps expanding because most people who sign up are satisfied with the care they receive.
She says that patients in the GAO study mostly switched from one health plan to another because they got a better deal, either through cheaper or more inclusive coverage.
Grow says many Medicare Advantage plans offer members extra benefits not covered by standard Medicare, such as fitness club memberships or vision or dental care, and do a better job of coordinating medical care to keep people active and out of hospitals.
“We have to remember these are plans working hard to deliver the best care they can,” Grow says. Insurers compete vigorously for business and “want to keep members for the long term,” she adds.
Some seniors, wary of problems ahead, are choosing to go with traditional Medicare coverage. Pittsburgh resident Marcy Grupp says she mulled over proposals from Medicare Advantage plans but worried she might need orthopedic or other specialized health care and wanted the freedom to go to any doctor or hospital. She’s decided on standard Medicare coverage and paid for a “Medigap” policy to pick up any uncovered charges.
“Everything is already in place,” says Grupp, a former administrative assistant who turns 65 this month.
The GAO report on Medicare Advantage comes as federal officials are ramping up fines and other penalties against errant health plans.
In the first two months of this year, for instance, the federal Centers for Medicare & Medicaid Services fined 10 Medicare Advantage health plans a total of more than $4.1 million for alleged misconduct that “delayed or denied access” to covered benefits, mostly prescription drugs.
In some of these cases, health plans charged patients too much for drugs or failed to advise them of their right to appeal denials of medical services, according to government records. Industry watchers predict more penalties are to come.
Last month, CMS officials ended a 16-month ban on enrollment in Cigna Corp.’s Medicare Advantage plans. CMS took the action after citing Cigna for “widespread and systematic failures” to provide necessary medical care and prescription drugs, policies officials called a “serious threat to enrollee health and safety.”
A flurry of whistleblower lawsuits have surfaced, too. In late May, Freedom Health, a Florida Medicare Advantage insurer, agreed to pay nearly $32 million to settle allegations that it exaggerated how sick some patients were to boost profits, while getting rid of others who cost a lot to treat.
Freedom Health allegedly kept a list of some “unprofitable” patients that it discouraged from staying in the health plan, while encouraging healthier, “more profitable” members to remain, according to the whistleblower suit. Federal regulations prohibit health plans from discriminating based on a person’s health.
Asked by Kaiser Health News for comment, Freedom Health corporate counsel Bijal Patel emailed a statement that read, in part: “We agreed to resolve the case so that we can continue focusing on providing excellent care.”
Casey Schwarz, a lawyer with the Medicare Rights Center, a consumer service organization, notes that health plans are required to have a formal process for patients to appeal denials of medical services. She says patients should know their rights and insist on them.
“We want people to vote with their feet and leave plans not serving them,” Schwarz says.
KHN’s coverage related to aging & improving care of older adults is supported by The John A. Hartford Foundation.
Medicare’s Financial Outlook Slightly Improved, Trustees Say
The Trump administration said Thursday that the financial outlook for Medicare’s hospital insurance trust fund improved in the past year due to health costs rising more slowly than expected and predictions that enrollees will use hospital services less often.
The report said that trust fund would last through 2029, one year later than what was projected last year. Two years ago, 2030 was the projected depletion date.
Medicare Part B premiums — which cover visits to physicians and other outpatient costs — should remain stable next year, the trustees said. About a quarter of Part B costs are paid for by beneficiary premiums with the rest from the federal budget.
In contrast, the Part A hospital trust fund is financed mostly through payroll taxes.
The report, from the trustees of the Medicare program, noted that projected costs of the program assume the Affordable Care Act stays in place. President Donald Trump and Republicans in Congress are trying to overhaul the law, which when enacted in 2010 added several years to the fiscal life of the trust fund.
Health and Human Services Secretary Tom Price, one of four Medicare trustees, also said the hospital trust fund forecast was secure enough that it would not trigger an ACA provision to make automatic cuts to the program. Those cuts are required by the ACA when spending is expected to exceed certain benchmarks.
Despite the slightly improved outlook, the trustees warned that the aging of the baby boom population and rising health care costs will cause Medicare expenses to increase from 3.6 percent of gross domestic product in 2016 to 5.6 percent of GDP in 2041, and then level off somewhat to 5.9 percent by 2091.
As in previous trustee reports, the latest analysis warned that Washington should address the financial challenges of Medicare as soon as possible to avoid having to cut benefits to millions of retirees and seniors.
The trustees said national health expenses have slowed considerably in recent years, although it is uncertain if this is a result of the Great Recession, which ended in 2009, or efforts taken by the federal government and private sector to change doctor and hospital reimbursement programs. Senior administration officials said some of the slowing growth in Medicare was due to Obamacare saving money through its accountable care organizations, which pay doctors and hospitals a lump sum each month to care for senior citizens.
Medicare provides health coverage to nearly 57 million people, including seniors and people with disabilities. It has added 5 million people since 2013.
“For 51 years, Medicare has played a crucial role in providing healthcare for America’s senior citizens,” Price said in a statement. “Unfortunately, on its current trajectory, Medicare’s hospital insurance trust fund will be depleted in just over a decade. … As the Trustees Report says, this means that reform to the program is needed.”
Medicare spending were about $679 billion last year. The hospital insurance trust fund helps pay hospital, home health services, nursing home costs and hospice costs.