Updated: Feb 17
Was that a typo in the title? Is it true that over 10,000 baby boomers are retiring every day? Indeed, a report from Deutsche Bank reveals that more than 10,000 Americans retire daily, reaching 65 years, and these rates are likely to continue until 2030. Another research from the Census Bureau expects this number to be 12,000 over the next ten years, with all the baby boomers crossing the 65 year old mark.
What does it mean for the American economy?
More retirees will rely on social security.
The overall enrollment in Medicare will grow exponentially.
Retiring baby boomers will push the Medicare budget to twice its current size by 2030.
Some experts predict that the Trust Fund will go bankrupt by 2033 and Medicare taxes will cover only 48% of the total Medicare expenses.
Are you about to retire or plan on retiring shortly? If yes, it’s imperative to understand how the program works, what does it cover, and the state of the Medicare industry? Let’s get started.
Why Medicare is a necessity when retired
Medicare is a critical component of the American health industry. It offers health coverage to more than 58 million people in the US, and these figures are likely to go past 63 million by 2020. For those who do not understand Medicare, it is a federal health program that offers medical coverage to people 65 years or older. You pay Medicare taxes throughout your professional life, and a certain component of your social security benefits go towards Medicare premiums even during retirement. Medicare coverage is available under two variants: Original Medicare (Part A, B, D) or Medicare Advantage Plan (Part C).
However, the critical question is whether Medicare is enough for all your health requirements during retirement or you need additional cover? A study from Fidelity Investments reveals that retired couples will need $285,000 or more for covering healthcare-related expenses during retirement. These expenses include premiums for Medicare Part A, B, D, cost-sharing charges, and out-of-pocket costs for healthcare during retirement. It is critical to notice that these expenses have risen at unprecedented rates over the past couple of years, $260,000 in 2016, $275,000 in 2017, and $280,000 in 2018. Considering the rising cost of healthcare, a new market for private providers who are cost-conscious and ready to offer affordable, yet better options is opening up under the Medicare Advantage category.
Is the Private Insurance sector ready to capture the growing market?
Medicare Advantage, Part C of Medicare, offers opportunities for the private healthcare provider. As per a recent report, the Medicare Advantage or MA program could cover over 70% of the eligible Medicare beneficiaries between 2030 and 2040. It is important to note that MA already provides medical coverage to roughly 35% of the qualified beneficiaries, over 22 million.
The report further states that MA providers are likely to benefit from the aging baby boomer population, with more than 10,000 retiring every day. Other factors that work in favor of MA include comparatively lower premiums, access to more elderly-care services, and a favorable political environment.
It is essential to note that the already established private insurance providers are the primary players in the MA segment, including United Health, Anthem, CVS Aetna, and Humana. Research from the Boston Consulting Group (BCG) estimates the MA market to grow up to $360 billion by 2023, with the enrollment growing at annual rates between 4% and 6% through 2017 to 2023. However, the market has become competitive, with more new players ready to take a cut out of the MA pie. Between 2016 and 2019, the number of MA insurance options available to a beneficiary has risen from 19 to 24, respectively.
The experts at BCG outline three critical factors that every MA provider must work on to improve its market share. Long-Term growth in the MA market will require tailored products and services from the insurance providers, innovative care delivery that addresses the changing demands of beneficiaries and streamlining of the products/services as per the requirements of the Medicare users.
The Bottom Line
With a positive growth outlook for private Medicare providers, the market will witness innovative products, services, and care-delivery approaches. As for the beneficiaries, they are likely to benefit the most from this competition. If you’re a Medicare user or about to become one, make sure to do the necessary research before opting for a plan.
As usual, if you have any thoughts or questions toss them down in the comments section and our team will address them!