Long-Term Care
The Latest Spin on Medicare! What You Need to Know about the Changing Market
by David Schmidt

As the Baby Boom generation ages, enormous numbers of people are advancing toward their Medicare years. By 2030, one in every five Americans will be elderly; the number of those 65 or older will grow from 35 million in 2000 to 71.5 million. By 2050, there will be one million Americans over 100.
   Over the coming decades, Medicare will serve more people than ever since Americans are generally healthier and living longer. It is no wonder that the future of Medicare is a regular subject of debate in Washington and a regular staple on page one of the newspapers. All indications point to it being a hot topic as part of the broader healthcare discussion in the 2008 presidential elections.
   At the same time, Medicare is becoming more complex. In fact, there were more changes to Medicare in 2006 than at any time in the program’s 40-year history. One of the biggest changes and the one that has stirred the most excitement and confusion is the introduction of the much-heralded Medicare Part D. The new benefit provides Medicare beneficiaries with prescription drug coverage through a Medicare Advantage Prescription Drug plan or a stand-alone prescription drug plan. These plans replaced the Medicare drug discount card program, which was introduced just two years ago to help seniors reduce drug costs.
   In 2006, the government and individual health plans spent a great amount of time and money attempting to educate the public on this new change and encourage seniors to take advantage of the potential savings this new law brings. However, as each plan tried to plug the holes in the government’s model and create added value, seniors soon discovered that there was a great variance in health plan offerings. Already in 2007, Part D formulary changes are broadening; plans are offering re-tooled models; and Part B premiums have changed.
   With its growing complexity and stringent governmental regulation, Medicare is more than just “sign on the dotted line” healthcare coverage. Beneficiaries have new language to understand, numerous options to consider, and important choices to make. Brokers must understand these options and explain them carefully to their elderly clients.
   Interestingly, the Medicare changes are encouraging a stronger alliance between brokers and Medicare HMOs. One of last year’s most significant changes to Medicare was the introduction of open enrollment, also known as “lock-in.” Beneficiaries used to be able to change Medicare plans as often as they wanted any time throughout the year, but now open enrollment is restricted to January 1 through March 31. New coverage starts the first of the month after the selection is made. The annual coordinated election period is 45-days beginning November 15 with coverage beginning January 1. During those periods, beneficiaries can switch from the following:
• Original Medicare to a Medicare private health plan, such as an HMO, PPO, or private fee for service plan.
• A Medicare private health plan to original Medicare.
• One Medicare private health plan to another.
The designated open enrollment period is a common practice in the commercial world, but has been a revolutionary concept where Medicare is concerned. Not only was it a startling development for seniors – many of whom were caught off guard by the change – but it also caused Medicare HMOs to rethink their marketing strategies. With year-round enrollment possible, Medicare HMOs have always employed sales teams to introduce and sell their coverage non-stop. There was clearly some seasonality to the sales cycle, including dips in the summer and a refocus in fourth quarter, for example. But, advertising and other direct response marketing went on 12 months a year, such as sales presentations at local restaurants or senior centers.
   But, with today’s defined and limited enrollment period, many HMOs are open to new ways of selling their product. One option is to rely more heavily on brokers. There are significant implications for brokers. Brokers who want to become players in this field must become experts and stay updated on the changes and complexities of Medicare; they must comply with sales and marketing guidelines put forth by the Centers for Medicare & Medicaid Services (CMS) and individual HMOs. There may be great rewards for brokers who are up to this challenge.
   Medicare is a highly regulated industry. Getting a copy of the CMS Medicare Managed Care Manual is a good place to start. It spells out what CMS expects of sales representatives. Among many other regulations, these expectations include the prohibition against discriminatory activity, such as seeking or discouraging Medicare participation based on income or perceived health status. The regulations detail activities that could mislead or confuse beneficiaries or misrepresent the organization, its marketing representatives, or CMS. These activities, which CMS will not tolerate, cover a variety of marketing terms and practices that brokers or any other sales representative could use in offering other forms of coverage. CMS guidelines also describe and prohibit the use of gifts and incentives, door-to-door solicitation, and the distribution of marketing materials that have not been approved by regulatory agencies.
CMS takes these regulations very seriously in protecting Medicare consumers and its own integrity. Failing to comply with the requirements can result in charges of fraud, suspension of enrollments, and hefty fines of up to $25,000 for misrepresenting or falsifying information provided to an individual or an entity. The fines go up to $100,000 for misrepresenting or falsifying information provided to CMS.
   While absorbing the substantial content of Medicare coverage and CMS policies, brokers must learn the specifics of individual Medicare HMOs, which are not all the same. Just as in the commercial world, each Medicare HMO is looking to differentiate itself from the competition, keeping in mind that CMS must be review and approve their benefit offerings and pricing models. Provider networks can be the answer to differentiation in some markets, but local hospitals or medical groups contract with multiple plans in many cases. As a result, differentiation often comes from customer service or add-on benefits, which go beyond the traditional Medicare offering. This means that brokers must familiarize themselves with HMO products and services and with each plan’s mission and ethical guidelines.
Representing Medicare HMOs successfully can lead to stronger relationships between brokers and healthcare organizations. Brokers who are able to comply with the CMS and HMO guidelines will have more opportunity to serve their customers as new products and services become available and the target audience grows.
   Compliance is more than a legal term. It certainly embodies following rules set out by CMS, but it also means being sensitive in dealing with consumers and their families and staying up to date on Medicare changes. In this ever-changing world, there will be considerable demands on seniors, Medicare HMOs, and the brokers who represent them. But, we all stand to benefit if we can meet the challenge on all sides.
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David Schmidt is chief executive officer of SCAN Health Plan. SCAN Health Plan is a Medicare Advantage HMO, serving more than 90,000 seniors in approved zip codes in seven Southern California counties. Founded in 1977, SCAN is a not-for-profit organization, which is one of only four social HMOs in the United States. It offers a combination of in-home personal care services and comprehensive medical benefits, which enabless older adults to remain independent and avoid nursing home care. For more information on Medicare, visit the CMS Website at www.cms.hhs.gov. For more information on SCAN Health Plan, visit www.scanhealthplan.com.