Hundreds of thousands of older Americans are opening their mailboxes this fall and finding Dear John and Dear Jane letters from their Medicare plans.
A majority of the displaced enrollees will be members of Medicare Advantage private fee-for-service (PFFS) plans – privately run Medicare plans that cover care provided by any physicians and hospitals that take Medicare.
Many of the displaced enrollees will turn to Medicare supplement insurance products.
“There’s huge interest in Medicare supplement insurance,” according to Jim Yocum, executive vice president at DestinationRx Inc., Los Angeles, a company that sells Medicare product comparison systems. “Medigap is back.” His firm recently added Medigap tools because of the surge in interest.
Dwane McFerrin, director of Medicare solutions at Senior Market Sales Inc., Omaha, Neb., also is expecting to see more interest in Medigap plans, but he said some Medicare enrollees may rely solely on the basic Medicare Part A hospitalization plan and the basic Medicare Part B physician and outpatient services plan, even though basic Medicare puts no limits on a patient’s out-of-pocket costs.
“It’s a changing market,” McFerrin said. “Wherever there’s change, there’s opportunity for producers.”
When Congress created the Original Medicare Plan in 1965, it left holes in the coverage on purpose, to hold down costs and discourage overuse of benefits. Private insurers began selling supplemental plans in 1966, and they began forming the first Medicare health maintenance organization (HMO) plans in the 1970s.
Congress tried to accelerate the shift to private Medicare HMOs and other private Medicare plans in 1997, by setting up the Medicare+Choice program, but budget constraints in the bill that created the program soon led to rapid decline in the number of private Medicare managed care providers, rather than an increase.
Congress formed the current version of the program, Medicare Advantage, in 2003.
Now the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) is causing carriers to rush toward the exits. The law requires PFFS plans to offer enrollees provider networks in any community with at least two network-based Medicare Advantage plans. MIPPA also requires PFFS plans to report quality data.