Posted on

Medicare’s Choices Have Grown, but Many Americans Don’t Review Options

This is the time of year when seniors face a barrage of messages about their Medicare coverage — everything from insurance companies’ direct mail blitzes and television ads to the federal government’s emails and mailings.

All of it focuses on the fall open enrollment season, the annual opportunity to change coverage. From Oct. 15 until Dec. 7, enrollees can shop Medicare’s marketplace for the prescription drug and Advantage plans offered by commercial insurance companies. They can also switch between fee-for-service original Medicare and Advantage.

And they will have plenty of choices: Next year, the typical Medicare enrollee will be able to choose from 57 Medicare prescription or Advantage plans that include drug coverage, according to the Kaiser Family Foundation.

It hasn’t always been this way. At its creation in 1965, Medicare was envisioned as a social insurance program. All eligible workers would pay into the system during their working years via the payroll tax and pay uniform premiums when they enrolled at age 65 — and they would all receive the same coverage.

But privatization of Medicare began in the 1990s, encouraged by federal policy and legislation. The marketplace approach accelerated with the introduction of prescription drug coverage (Part D) in 2006 and the rapid growth of Advantage over the past decade.

Proponents of privatization argue that giving Medicare enrollees plenty of choices, with competition among health insurance companies, keeps consumer prices down and encourages innovation.

That notion hinges on having consumers roll up their sleeves to compare products and make changes in order to get the best prices and coverage. But a new study by the Kaiser Family Foundation finds that often doesn’t happen.

The study, based on Medicare’s own enrollee survey data, found that 57 percent didn’t review or compare their coverage options annually, including 46 percent who “never” or “rarely” revisited their plans. Strikingly, two-thirds of beneficiaries 85 or older don’t review their coverage annually, and up to 33 percent of this age group say they never do. People in poor health, or with low income or education levels, are also much less likely to shop.

“A large share of the Medicare population finds this whole task pretty unappealing, and they just don’t do it,” said Tricia Neuman, director of the Medicare policy program at the Kaiser Family Foundation and a co-author of the report. “That raises questions about how well the system is working.”

The indifference can’t be chalked up to a shortage of information.

Each September, Medicare sends an Annual Notice of Change document (via mail or email), which lists the changes in a person’s current coverage for the year ahead, such as the premium and co-pays. Medicare also mails a thick handbook, “Medicare & You,” containing detailed information about plan options. A flurry of email alerts urging enrollees to shop their coverage using the Medicare Plan Finder website also go out each fall.

Insurance companies flood the airwaves and mailboxes with advertisements and brochures.

None of it is working very well. The Kaiser study found that 44 percent of enrollees had never visited the Medicare website, with another 18 percent reporting that they did not have access to the internet or had no one to go online for them. Only half reported that they had reviewed “Medicare & You.” Just 28 percent have ever called the Medicare help line (800-MEDICARE) for information; the rest have never called or were not even aware the line exists.

If you’re enrolled only in original Medicare with a Medigap supplemental plan, and don’t use a drug plan, there’s no need to re-evaluate your coverage, experts say. But Part D drug plans should be reviewed annually. The same applies to Advantage plans, which often wrap in prescription coverage and can make changes to their rosters of in-network health care providers.

“Plans can not only change the monthly premium but the list of covered drugs,” said Frederic Riccardi, president of the Medicare Rights Center. “And they can change the rules around your access to drugs, or impose quantity limits or require prior authorizations.”

Complexity is a key issue. Kaiser found that 30 percent of enrollees said the Medicare program was either “somewhat difficult” or “very difficult” to understand, and those percentages were higher among younger people on Medicare who have disabilities or are in poor health.

These plans are required to meet federal requirements in terms of covered benefits, cost sharing and other features. But drug plans have tiers with varying co-payments, coinsurance, and preferred options for brand-name drugs, generics and pharmacies.

“The amount of information that consumers need to grasp is dizzying, and it turns them off from doing a search,” Mr. Riccardi said. “They feel paralyzed about making a choice, and some just don’t think there is a more affordable plan out there for them.”

But that assumption can be very wrong. In a review of the 10 most heavily enrolled Part D plans for next year, Avalere Health found several with average premiums jumping by double-digit percentages, with others holding steady or dropping a bit. Kaiser calculates that eight out of 10 enrollees in stand-alone Part D plans will pay higher premiums next year in their current plans.

Anthony Hodge, a 65-year-old Medicare Rights Center client who lives in Massapequa, N.Y., expects to save about $1,000 next year by switching Part D plans. Mr. Hodge has a kidney condition that will require a transplant, and he uses seven prescription drugs. The savings stem from differences in premiums and co-pays, including details such as pharmacies used and the “tier” on which each plan places each of his medications.

“It’s pretty crazy when you review all the different plans,” he said. “You can really get bleary-eyed.”

Supporters of the marketplace approach note that drug plan premiums have generally remained affordable since the Part D program was introduced.

“The existence of these markets, regardless of how consumers actually operate and choose, puts substantial downward pressure on the prices offered by the plans, because any marginal move away from them to a competitor has a big effect on their profitability,” said James C. Capretta, a resident fellow at the American Enterprise Institute whose research focuses on health care, entitlement programs and federal budget policy.

“Even if only 5 or 10 percent of consumers take advantage of the marketplace, it is a powerful check on plans raising costs,” he added.

The average monthly premium for Medicare stand-alone prescription drug plans was $38 this year, according to Kaiser, a slight increase from $37 in 2010. Moreover, 89 percent of Medicare Advantage plans next year will include prescription drug coverage, and 54 percent will charge no additional premium beyond the Part B (outpatient services) premium.

But focusing solely on premiums misses the bigger picture of how the Part D program affects enrollees, said Dr. Neuman of Kaiser.

“Insurers understand that consumers are more likely to compare premiums than other plan features that can impact their annual drug costs, so they have an incentive to offer low-premium products,” she said.

Insurers can extract more from enrollees through deductibles allowed under the Part D program, which the government will cap at $445 next year. Most plans (86 percent) will charge a deductible next year, and 67 percent will charge the full amount, Kaiser reported.

When creation of the prescription drug benefit was being debated, progressive Medicare advocates fought to expand the existing program to include drug coverage, funded by a standard premium, similar to the structure of Part B. The standard Part B premium this year is $144.60; the only exceptions to that are high-income enrollees, who pay special income-related surcharges, and very low-income enrollees, who are eligible for special subsidies to help them meet Medicare costs.

“Given the enormous Medicare population that could be negotiated for, I think most drugs could be offered through a standard Medicare plan,” said Judith A. Stein, executive director of the Center for Medicare Advocacy.

“Instead, we have this very fragmented system that assumes very savvy, active consumers will somehow shop among dozens of plan options to see what drugs are available and at what cost with all the myriad co-pays and cost-sharing options,” she added.

Advocates like Ms. Stein also urged controlling program costs by allowing Medicare to negotiate drug prices with pharmaceutical companies — something the legislation that created Part D forbids.

A model for this approach is the Department of Veterans Affairs, which by law can buy prescription drugs at the same discounted prices available to the Medicaid program, and negotiates deeper discounts on its own.

If you’re uncomfortable using the internet to search for plans, or don’t have internet access, the State Health Insurance Assistance Programs network is there for you. These federally funded counseling services provide free one-on-one assistance in every state; use this link to find yours.

The Medicare Rights Center offers a free consumer help line: (800-333-4114.)

You can browse plans on the Medicare Plan Finder, the official government website that posts stand-alone prescription drug and Medicare Advantage plan offerings. The plan finder now allows users to sort plans not only by premiums but for total costs, including premiums, deductibles, co-pays and coinsurance payments.

When it comes time to enroll, call Medicare to sign up at 800-MEDICARE (800-633-4227) and to ensure that your enrollment has been processed.

Posted on

Oil Industry Turns to Mergers and Acquisitions to Survive

HOUSTON — The once mighty oil and gas industry is flailing, desperately trying to survive a pandemic that has sharply reduced demand for its products.

Most companies have cut back drilling, laid off workers and written off assets. Now some are seeking out merger and acquisition targets to reduce costs. ConocoPhillips announced on Monday that it was acquiring Concho Resources for $9.7 billion, the biggest deal in the industry since oil prices collapsed in March.

The acquisition, days after the completion of Chevron’s takeover of Noble Energy, would create one of the country’s biggest shale drillers and signals an accelerating industry consolidation as oil prices languish around $40 a barrel, just above the levels many businesses need to break even. Just last month Devon Energy said it would buy WPX Energy for $2.6 billion.

But many investors are not sure such deal making will be enough to protect the industry from a sharp decline. The share prices of ConocoPhillips and Concho closed down by about 3 percent on Monday. The big problem is that the fortunes of oil companies are fundamentally tied to oil and natural gas prices, which remain stubbornly low. Few experts expect a full recovery of oil demand before 2022, and some analysts have gone so far as to declare that oil demand might have peaked in 2019 and could slide in the years to come as the popularity of electric cars grows.

“There’s a lot more red ink than there is black gold,” said Michael Lynch, president of Strategic Energy and Economic Research, who periodically advises the Organization of the Petroleum Exporting Countries. “Companies are trying to hunker down and weather the storm. Most people don’t think the oil price will recover for a couple of years.”

More than 50 North American oil and gas companies with debts totaling more than $50 billion have sought bankruptcy protection this year. Among the casualties was Chesapeake Energy, a shale pioneer based in Oklahoma City. More failures could come in the next two years as companies are required to repay tens of billions of dollars in debt.

Oil companies are facing daunting uncertainties, particularly as concerns over climate change mount and governments impose tougher regulations to reduce greenhouse gas emissions caused by the burning of fossil fuels. Small companies fear a crackdown on methane leaks and tightening regulations, especially if former Vice President Joseph R. Biden Jr. becomes president and Democrats take control of the Senate.

European oil companies have already begun pivoting away from oil and gas, plotting investments in renewable energy like wind and solar to attract new investors. While those companies have had limited success so far, American companies have for the most part stuck with their traditional businesses. They have adapted to low oil and gas prices by slashing investments by 30 percent or more. The oil and gas rig count has dropped by 569 since last fall, to only 282 operating across the country.

Oil companies are hoarding cash and renegotiating contracts with service companies that drill and complete wells. Rig rental rates are down roughly 10 percent, pressuring the companies that do the field work. More than 100,000 American oil workers have lost their jobs in recent months.

ConocoPhillips, the largest American independent oil company, has been something of an outlier, recently raising its dividend and buying back shares. Nevertheless, ConocoPhillips’s stock price has dropped by roughly half so far this year.

The company is a major producer in the Bakken shale field of North Dakota and the Eagle Ford shale field in South Texas. By acquiring Concho, it will become a major player in the world’s most lucrative shale field, the Permian Basin, which straddles West Texas and New Mexico.

With Concho’s 550,000 acres in the Permian, ConocoPhillips will more than triple its 170,000-acre position in the basin, which became the world’s most productive oil field last year.

Concho is little known outside Texas but became a major oil producer after it bought RSP Permian for $9.5 billion in 2018. Concho produced more than 300,000 barrels in the second quarter.

“Together ConocoPhillips and Concho will have unmatched scale and quality,” said Ryan M. Lance, ConocoPhillips’s chairman and chief executive, referring to their joint balance sheet, resource reserves and personnel.

The deal would help make ConocoPhillips one of the largest players in the Permian, putting it in the same league as companies that are much bigger than it over all.

“The combination is remarkable,” said Robert Clarke, a vice president and oil analyst at Wood Mackenzie, a research and consulting firm. “Just in regards to scale, ConocoPhillips is adding enough Permian production to nip at the heels of ExxonMobil’s massive program.”

As the shale industry grew over the last decade or so, many smaller companies poured billions of dollars into the Permian and other parts of the country. Now, the process appears to be headed in the opposite direction as the industry retrenches and becomes smaller.

Investment in U.S. shale oil has dropped to an estimated $45 billion this year from roughly $100 billion annually in 2018 and 2019, according to the International Energy Agency. In its annual report released this month, the Paris-based organization said a shakeout was underway.

“The influence of large players is set to grow as acreage is consolidated by larger industry players, and the focus on growth is set to be supplanted over time by a focus on returns,” the report said. “The exuberance and breakneck growth of the early years may be replaced by something a little steadier.”

American oil production fell to 11.2 million barrels a day in September from 13 million at the beginning of the year. The Energy Department expects production to fall an additional 200,000 barrels a day by mid-2021 as companies drill fewer new wells to replace older ones.

The industry has no choice but to cut back. Americans drove 12.3 percent fewer miles in August than they did a year earlier, according to the Transportation Department.

Globally, daily oil consumption was down more than 6 percent in September from a year earlier, according to the Energy Department. Oil production continues to outpace demand, keeping inventory levels high and prices low.

And the pandemic is not yet under control in many parts of the world. If sustained, the recent increase in coronavirus infections in the United States, Europe and elsewhere could reduce demand for oil and gas even further in the coming months.