Monday, April 5, 2010

“New Twist on an Old Product”

Selling Medicare Supplements has been the same old game for the past two decades. Not anymore, thanks to Plans M and N. Since the early 90’s when Medicare Supplements (also known as “Medi-Gap plans) became Standardized Plans A-J under the TEFRA legislation, the same exact plans have been available.

In 2003 Congress passed the Medicare Modernization Act. Under the MMA, several new Medicare benefits were introduced, the most notable being Part D, the prescription drug benefit plans. Americans were also introduced to new Medi-Gap Plans K and L. Another phase of the MMA begins June 1, 2010 when certain “standardized” plans are dropped (E, H, I and J) and two “modernized” plans roll out (Plans M and N).

Get the new terms memorized. “Standardized plans” refer to Plans A-J. “Modernized” plans refer to the new Medicare Supplement plan grid. Plan F has been the most popular plan, but the new Plan N could become the new “Medi-Gap Darling”. For the first time, Medicare Beneficiaries will have an office copay option with Plan N. The office copay could be up to $20, and the Emergency Room copay could be up to $50. The initial Plan N premiums appear to be as much as 30% less than the most popular Medi-Gap plan, Plan F.

While a respectable premium savings is attractive, note that Plan N does not cover the Part B deductible ($155 in 2010). This is easy to look past considering you will save far more than $155 in premium. However, the “excess charge” of 15% a Provider may add to the current Medicare reimbursement level is not covered (Plan F covers “excess charges”.) Assuming a person sees the doctor once a month, and the average office charges over a one year period are $2400, the “excess charges” will equal $360. If the doctor collects a $20 office copay, add another $240.

If the Medicare Beneficiary incurs a $100,000 Part B claim (say, for six weeks of chemotherapy and radiation for prostate cancer) and the outpatient facility adds 15% to the bill, losing the “excess charges” benefit begins to impact one’s financial statement with a new $15,000 out of pocket expense. Weigh the risk of premium savings vs. the new “excess charge” exposures carefully when comparing Medicare Supplement policies.

Plans H, I and J are eliminated May 31, 2010. These three plans carried the only prescription drug benefits, but due to Part D on January 1, 2006, the Plan’s Rx benefits were eliminated. Plan E is also being dropped due to benefits being mandated, making Plan E & F virtually the same.

With funding cuts coming to Part C of Medicare (The Medicare Advantage program), Medicare Advantage plans will be forced to cut benefits and raise premiums. Look for “Med Sups” to gain popularity.

Finally, the Provider community prefers patients have a Medi-Gap plan, making access to healthcare easier for the patients.

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