The 2015 Medicare Trustees report was released last week with the news that the long-term outlook of Medicare has improved overall. In addition to the numbers and explanations for this improvement, there is also an interesting piece of information found in the report that is of particular interest to Medicare Supplement carriers and seniors with traditional Medicare FFS.
It has already been reported by several sources that Part B premiums are projected to increase by 52%, but what hasn’t yet been reported is that the same section of the report also projects that the Part B deductible will also increase by 52%. This could mean a double-whammy for many seniors who will end up paying a higher premium for their Part B coverage, and also end up paying more out-of-pocket costs in order to meet their deductible.
The projected increase in the Part B deductible also impacts Medicare Supplement carriers, and CSG Actuarial is working with many of our clients to analyze what the impact will be to Medicare Supplement claim costs for 2016, as well as how it translates to rate adjustments being filed here in the next several months.
Table V.E2 of the Trustees report shows the 2016 Part B deductible is projected to increase to $223 per year, which is up from $147 per year in 2015. The large projected increase in the Part B deductible is due to the projected increase in the Part B premiums (from $104.90 to $159.30 per month) which is caused by the hold-harmless provision in the law and the expected 0% cost-of-living adjustment to Social Security.
You can see in the chart below that this large of an increase has not been a common occurrence in recent years:
It will be interesting to watch how Medicare Supplement carriers respond to this projected Part B deductible increase. Though the Part B deductible is not officially determined until closer to the start of 2016, many Medicare Supplement carriers are already beginning to file rate increases for 2016 effective dates.
CSG Actuarial estimates that the increase in the Part B deductible would lead to 4% higher Plan F claim costs in 2016 (this is compared to no increase in the Part B deductible, excluding all other medical trends, and is based on age 70 claim costs). This increase, combined with normal medical trends could mean Plan F claim costs could be 8% higher in 2016. Will carriers file for 2016 rate adjustments to match the claim cost increase, or will they take a longer term approach?
Other Medicare Supplement plans, such as Plan G, will be affected differently than Plan F. Since Plan G does not pay the Part B deductible, but does pay the Part B coinsurance amount, the claim costs associated with Part B payments may actually be down slightly overall.
The big unknown is whether the cost-of-living adjustment for social security will ultimately be set at 0% as expected, or if a positive cost-of-living adjustment will be implemented. Unfortunately for carriers filing 2016 rate adjustments in the next few months, there is no way to know, and they will have to make decisions based on what is projected today.
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