Matt Feret (02:03)

After a brief summer hiatus, The Matt Feret Show is back. Hey everybody. My guest today is Bob O'Connor. Bob and I go back to our days at Aetna Medicare, where one of his jobs was running one of their biggest Medicare markets. He's got a really unique perspective on how Medicare plans get built and how they get delivered, and I thought he'd be a great guest to bring on as we head into the Medicare busy season. Bob, it's good to see you. Welcome to the show.

Bob O'Connor (02:31)

Good to see you, Matt. It's been a while. Always enjoyed working and interacting with you. Always a good time.

Matt Feret (02:34)

It has. Yep, same, same. Well, to start us off, let's start. Tell everybody what you do, how long you've been doing it, and how you help people.

Bob O'Connor (02:45)

Yeah, yeah, sure. So I've been in the industry for about 20 years with a couple different companies, including a local Blue Cross plan and a national player, one that we worked with together, Aetna. I've had a chance to work almost all aspects of Medicare, and specifically Medicare Advantage, kind of seeing behind the curtain and oftentimes being the guy behind the curtain putting together the programs.

I've also worked in some other industries where I've developed and merchandised and helped people provide products to older Americans. So I've got some different thoughts and different perspectives on that, on what's important, what's not.

What I've been doing lately is helping companies within the industry connect with insurance companies. There are a lot of great ideas in the health tech and medtech space and so many different choices to sort through. So I help people on both sides figure out what's right and how they can better help the members.

Matt Feret (03:41)

From where you sit, what's the one thing about Medicare plans that consumers don't see but absolutely shapes their experience?

Bob O'Connor (03:53)

So I think there's a couple things. One of them is that when you look at a plan on face value and think about it as a product, we purchase a lot of products as consumers, whether it be cars or auto insurance or a house or whatever. But the complexity behind Medicare in particular can be really confusing for people and a little daunting.

I do sometimes see people, I wouldn't say make mistakes because the good news is you can redo it and try again the next year, but they certainly do some things that are suboptimal and don't work out for them.

So I think the biggest thing is the lack of understanding of the complexity. I also think another piece people don't understand is all the forces that are going into the products they see and the pricing they see, whether it be funding from the government, what's going on with providers, and what's going on with the greater healthcare ecosystem in our country.

Matt Feret (04:48)

So talk about that a little bit because I don't think most people really get that piece. You’ve got a unique experience.

I talk a lot about the three ways to consume Medicare. One I call “bare with Medicare,” which is Medicare Parts A and B, original Medicare, then add a Part D. The second version is that, but add a Medigap or Medicare Supplement plan on top of it. Then the third way is an MAPD or Medicare Advantage plan with a prescription drug card.

They're not the same things, and I think people really confuse them. The number one question they always have is which one should I do: version two, Medigap plus a Part D, or version three, Medicare Advantage?

They're very different things and they operate very differently. You mentioned one has a lot of federal government intervention in pricing and negotiations and contracts and reimbursements, and then the other one is really state-based and doesn't get reimbursed from the federal government at all.

What's the interplay, from where you sit, between the two and where things have been and where they're going?

Bob O'Connor (05:50)

Well, I think the important thing with option B is that the federal government and Medicare are still your partner in this because the Medigap product isn't covering 100% of the person's care. It's actually wrapping around traditional Medicare.

So I think it's always the underlying funding from the government that is driving a lot of that.

In the case of the Medigap programs, they are standardized nationally. While they are governed by state filings, they're pretty standard nationally and somewhat regulated by the government, but not as closely as Medicare Advantage plans are.

If the Medicare trust fund is struggling, then the program will change and the funding will change.

One of the interesting things, and I think you remember earlier in the year there was a lot of discussion about prior authorization, kind of a nerdy topic, and I'm guessing we'll get to it later.

If you think about a Medicare Supplement, traditionally it’s like, “Hey, I’m going to pay my premium and not worry about co-pays and I can go wherever I want and nobody is going to tell my doctor what to do.”

While that’s still directionally true, now there’s a little bit of an asterisk on it.

A lot of the newer Medicare Supplement plans have cost-sharing on them, whereas some of the older ones didn’t.

And then the other thing, which is almost mind-blowing to me, is that the government is actually doing a test in six states next year to add prior authorization to traditional Medicare.

That’s really interesting and a big game changer.

You know how this stuff starts. It starts little. It’s a pilot. It’s a test. If it works out, it becomes the new normal.

Over time, as tends to happen, the products and choices become more similar than different.

I think about Medicare Advantage five or ten years ago, and there were drastic differences in plans, drastic differences in benefits, drastic differences in networks.

Now, over the last three years in a lot of metros around the country, the plans are awfully similar.

Matt Feret (08:36)

Yeah, they are.

That prior authorization piece — and I know we’re nerding out a little bit for the audience — prior authorizations are what happens in managed care.

Your doctor orders something and the insurance company says, “Whoa, wait a minute.”

Silly example, but I still use it all the time: You have pain in your shoulder and the doctor orders an MRI. The insurance company says, “Hold on a second. Did they do physical therapy first? Did they do an X-ray first before ordering a multi-thousand-dollar MRI?”

That tends to annoy doctors and patients, but that’s cost control built into the system.

Traditionally, original Medicare Parts A and B have never done this. That was one of the benefits of buying a Medigap or Medicare Supplement policy: if Medicare pays it, the supplement pays it.

Now this pilot is starting something new where Medicare themselves are saying, “Wait a minute, we need some prior authorization rules in original Medicare.”

The Wall Street Journal and others have been all over companies in the last 24 to 36 months about really tough and stringent prior authorization rules and hammering them.

Now the federal government is doing it themselves.

It’s going to be really interesting how this plays out to keep healthcare costs down and what the feds do and what companies are allowed to do. From the consumer standpoint, we’ll all see how it impacts us.

Bob O'Connor (10:15)

Right. But how crazy is that?

At the same time the government is calling out insurance companies for prior authorization, they’re rolling it out themselves.

Does that mean it’s good or bad? I guess it depends on your perspective.

I’ll never forget this story from probably 10 or 12 years ago.

I was at a member meeting in State College, Pennsylvania, and a guy comes up to me afterward and says, “You blankety blanks are the worst ever.”

I’m like, “Sir, what’s going on?”

He says, “You blanks wouldn’t authorize my MRI. My doctor said I needed it and you people said no, go get physical therapy first.”

I’m thinking, “Okay, where’s this going?”

Then he says, “Well, I went to physical therapy and it was such an inconvenience. I went for weeks.”

I said, “Okay… and how’s your shoulder?”

He says, “Fine.”

“Did you get the MRI?”

“No.”

“Did you get surgery?”

“No.”

So, validation. The system actually can work.

Matt Feret (11:26)

Yeah. The system can work.

It’s inconvenience versus cost, right? I mean, if they don’t have to pay for it, I guess I want it now too.

Bob O'Connor (11:43)

Well, physical therapy — I mean, that’s the funny thing, Matt. I don’t know if you’ve seen what that costs in terms of co-pays. My wife used to go a lot, and it’s so expensive when you go three or four times a week.

It probably would have been cheaper to cover the MRI. So it wasn’t about money. It was more about getting on that path where you get the MRI and the doctor says, “Well, you’ve got a problem. We can try drugs, we can try physical therapy, or we can schedule surgery next week.”

Oftentimes people want the fast results, so they go with surgery because it feels definitive. But we’ve all had friends where you get cut and it ends badly.

Matt Feret (12:28)

Yeah. Side note, I’ve never met a friend who had back surgery that went well. Have you? There’s always some problem.

All right, so every fall — and this episode is going to be released in early October — people are just bombarded with ads and mailers. Look, in my corporate career, I’ve been the one sending them out. Maybe you have too.

From your perspective, what actually matters when comparing plans and what’s just noise?

Bob O'Connor (12:59)

I think people need to look at the whole package of what’s being offered.

There’s a tendency to shop based on the benefits, right? “This plan has $2,000 of dental and my current plan has $1,000. That must be twice as good.”

But you really have to look at the details around what is actually covered.

Is it just cleanings, or does it cover root canals?

Another good example is the network. If your doctor isn’t in the network, does it really matter what the co-pay is?

If the hospital you trust isn’t in the network, does it matter what the co-pay is when you don’t even want to go there?

I think the biggest thing is looking beneath the surface.

Another area people disregard is drug coverage, especially if they’re not on many medications.

But with all the new therapies and medications coming out, some are on your current formulary and some aren’t.

Is your pharmacy in the network?

So it’s really about understanding your needs. If you think you need help with that, then you should probably ask for help.

Matt Feret (14:30)

Makes sense.

So you talked about products and cost-benefit analysis and digging into the details. What’s the most common mistake you’ve seen people make when choosing a Medicare plan, and what usually causes it?

Bob O'Connor (14:49)

I think it falls into a couple categories.

One is not understanding what’s actually going on with their pharmacy program, particularly formularies.

You can take the exact same medication with three different insurance companies and have one company cover it at zero dollars, another have it at Tier 3 for $47, and another not cover it at all.

That can be a really big deal.

The second category is people not thinking about what medical utilization they’re actually likely to have.

When people ask me for advice, I talk to them about the last three or four years. What was the worst year they had medically?

People will say, “Well, I had surgery three years ago.”

Okay, were you hospitalized?

“No, it was outpatient.”

How many medications are you on?

“These three.”

And they’re all zero-dollar drugs with the companies you’re comparing.

How often do you go to the doctor?

“Well, I see my PCP three times a year and one specialist.”

When you think about that, it sounds like someone with significant healthcare needs, but in reality, their actual out-of-pocket costs on most Medicare Advantage plans are pretty minimal.

A lot of times people think they need the most expensive program, the biggest network, the richest coverage, and they’re paying premiums for things they aren’t going to use.

Or conversely, they’re chasing low medical co-pays and giving up supplemental benefits they could actually use.

It’s really about understanding what’s most likely to happen to you next year.

And if things go worse than expected, how bad could it really be financially?

Most of the time, it’s not as catastrophic as people think.

Matt Feret (17:19)

In that vein, do star ratings on Medicare Advantage plans really matter, or is it more marketing than meaning?

Bob O'Connor (17:29)

I’d actually say it’s more meaning than marketing.

There’s quite a bit to it.

The interesting thing is that star ratings are different measures the federal government has chosen to designate as quality measures.

You can think of it superficially as a Good Housekeeping Seal of Approval, but it’s much more than that.

To some extent, it’s the federal government manipulating the system to push it in the direction they want.

At the same time, everything in there is real-life healthcare. Things that matter to you.

There are a few broad categories.

One is screening measures: what percentage of people got a colonoscopy, mammogram, flu shot, and so on.

Think about how the system moves when the government says they’re going to measure flu shots.

That changes what you see from insurance companies and pharmacies.

Right now, pharmacies and insurance companies might offer gift cards if you get your flu shot. If flu shots stop being part of Stars, those incentives disappear.

There are operational measures too: how quickly claims are handled, how quickly appeals are handled, how quickly the company answers the phone, whether foreign language lines are accessible.

Then there are survey measures.

One is the member survey. It asks how you feel about your insurance company and your physician.

Surveys are funny because if you catch me in a bad mood, you might get different answers than if you catch me happy.

There are also longitudinal surveys where Medicare asks the same person over time about their physical health, mental health, exercise habits, and whether their doctor talks about preventive care.

Those are harder to measure fairly because, honestly, how do I know if my mental health is better than two years ago?

But Medicare Advantage exists to improve healthcare outcomes, not just collect premiums.

The ratings also directly impact funding.

As companies move from three stars to three-and-a-half to four stars and higher, it changes the amount of money they receive from the government.

Higher-star plans can offer richer benefits and invest more into growth.

Poorly rated plans receive less money.

The biggest threshold is moving from three-and-a-half stars to four stars because there’s a 5% revenue bonus.

There are markets where if you’re under four stars, your product simply won’t compete long term.

That’s why people should pay attention if their plan consistently falls below four stars.

And then there are extremes.

Very low-rated plans can actually get a warning symbol on the CMS Plan Finder, kind of like a warning light on your dashboard.

Matt Feret (22:41)

Yeah, I call that the flat tire indicator. That’s exactly what it looks like.

Bob O'Connor (22:45)

Exactly. The little red triangle.

On the other end, if you’re a five-star plan, you can enroll members year-round.

That’s huge from a marketing standpoint.

Matt Feret (23:15)

It is.

I’m going to ask a couple questions and you’re probably going to think I’m pushing back, but I’m really trying to look at this from the consumer standpoint.

One thing I know is that the data is two years old. So if you see a four-star rating this fall, that’s based on data from years ago.

Things could have changed.

The second thing is that Medicare changes the goalposts every year. They change the weighting and measurements constantly.

So from a consumer standpoint, can someone really trust that a 3.5-star plan is worse than a 4.5-star plan?

Bob O'Connor (24:49)

Well, I can debate you on those, Matt.

But I’ll start by saying star ratings are not the most important thing.

If a five-star plan doesn’t include your doctor or hospital, those five stars are going to taste pretty bad.

And if the benefits don’t meet your needs, same thing.

As far as the timing, yes, the data lags, but everything lags.

The plans you’re seeing on October 1st were finalized months earlier using older claims data.

Companies themselves also don’t change that quickly.

A company that values customer service usually keeps valuing customer service.

Healthcare philosophies don’t dramatically flip year to year.

Most things trend over time.

Where it gets tricky is when Medicare changes the weighting or removes and adds measures entirely.

That absolutely creates chaos internally.

Sometimes companies even take Medicare to court over those changes.

And sometimes they win.

Matt Feret (28:44)

It is fascinating.

How do you explain going from dozens of five-star plans one year to only a handful the next?

Did companies suddenly become terrible overnight?

Bob O'Connor (29:56)

A lot of that was pandemic-related.

During COVID, the government eased up on some of the Stars requirements because providers were closed and people literally couldn’t get care.

That temporarily inflated ratings.

Then things snapped back to normal.

And because the thresholds are so narrow, even tiny changes in data can massively affect ratings.

When you’re talking about a 5% revenue bonus tied to stars, that’s enormous money.

Multiply that by a million members and it moves mountains.

Matt Feret (32:05)

It absolutely does.

All right, quick downshift.

You and I have both been doing this forever.

What’s the biggest change you’ve noticed in how people choose plans today versus when you started?

Bob O'Connor (33:16)

Fifteen or twenty years ago, people focused heavily on brand, medical co-pays, and networks because that was basically all there was.

Today, supplemental benefits drive decisions.

People are making much more economic decisions now.

You’ll hear someone say, “I’ve been seeing Dr. Smith for 15 years,” but then they switch plans because another plan covers more dental.

It’s not really Dr. Smith’s fault, but people are under economic pressure.

There’s convergence between financial health and medical health.

The things that matter at 65 are different than what matters at 75 or 80.

Matt Feret (35:19)

Yeah, they sure are.

When you were running one of Aetna’s biggest markets, what was the toughest part personally about balancing what the company wanted with what members wanted?

Bob O'Connor (36:17)

Honestly, it wasn’t that hard.

Kidding aside, it’s about taking a long-term view.

You can make decisions that make people happy in the short term, but you have to think in rolling three-to-five-year periods.

You also have to recognize that every consumer is different.

You can’t build a custom plan for every person, but you can create a portfolio that fits different types of people and lets them move through life changes.

Some people just need something affordable.

Others want broader networks or richer benefits.

So it’s about building a good-better-best progression and taking the long view.

Matt Feret (38:39)

And that’s the key phrase: taking the long view.

Some companies seem to do that better than others.

Some are stable and consistent, while others come in aggressively with huge benefits and then disappear.

What advice would you give consumers trying to decide whether to stay put or switch?

Bob O'Connor (40:09)

A lot depends on personality and financial situation.

I’ve had the same auto insurance company for 25 years. If they treated me badly, I’d switch instantly. But if I’m happy, I stay.

Health insurance is more dynamic and more complicated.

I think people who switch every single year put themselves through a lot of unnecessary work.

But I also think people who chose a plan at 65 and never looked again are making a mistake too.

If there’s a major change, absolutely look.

Even if there isn’t, I still think people should reassess every few years.

Matt Feret (41:29)

I share that opinion.

All right, this is October, we’re heading into the busiest Medicare season.

What really goes on behind the scenes at Medicare companies during this time that consumers have no idea about?

Bob O'Connor (42:10)

Well, first of all, everybody takes long naps in the afternoon.

Matt Feret (42:17)

Said no one in Medicare ever.

Bob O'Connor (42:19)

Exactly.

There really isn’t downtime anymore.

There’s preparation for enrollment, sales, marketing, communications, training agents, processing enrollments, handling CMS data, making sure ID cards go out, making sure PCP assignments are correct, making sure systems work January 1st.

And CMS has basically zero tolerance for errors.

If a member goes to the pharmacy January 2nd and there’s a problem, heads roll.

Thankfully, companies have gotten much better at this over the years.

Fifteen years ago, January 1st could be chaos.

Today, most companies flip the switch and things work pretty smoothly.

Matt Feret (48:29)

I agree.

You mentioned all the plan cancellations and service-area reductions happening this year. I’d love your thoughts on that.

Bob O'Connor (48:44)

It varies.

Some companies are leaving the business entirely.

Others are leaving specific counties.

Others are just terminating one product while keeping several others.

In some cases, the old product had become terrible and people just didn’t realize it yet.

Sometimes the replacement product is materially better.

Nobody likes being canceled. It feels insulting and disruptive.

But sometimes it gives people a second chance to choose something better.

And importantly, if your plan is terminated, you usually get a guaranteed issue opportunity again.

That means you can potentially move into a Medicare Supplement without underwriting.

That’s huge for some people.

The worst thing someone can do is nothing.

If you do nothing, you can fall back into Original Medicare without drug coverage, and that can become financially devastating.

Matt Feret (54:53)

That’s probably one of the biggest problems I have with the entire Medicare infrastructure.

There are so many rules and deadlines and penalties that nobody really explains clearly to consumers.

If you miss something, you can get lifetime penalties.

Nobody is chasing you down reminding you.

That’s the part I’d fix if I had a magic wand.

If you had one, what would you change?

Bob O'Connor (57:12)

I’d focus on accountability and stability.

Not every company adds value.

Not every provider adds value.

Not every part of the system performs equally well.

Consumers should demand more — not necessarily richer benefits, but products that truly fit their needs.

Matt Feret (58:59)

Makes sense.

There’s not a lot of extra money floating around anymore.

Bob O'Connor (59:07)

Exactly.

That’s why consumers shouldn’t try to go it alone.

There’s nothing wrong with asking for help.

Especially if you’re one of the millions losing coverage this year, don’t just pick what your neighbor has or blindly accept the next product offered.

Think long term.

Because if you chase the “best deal” every year, you can end up stuck on a hamster wheel constantly changing insurance.

Matt Feret (1:02:07)

That’s actually part of my Prepare for Medicare Insider Method.

One of the steps is evaluating the insurance company itself — whether they’re stable and built for the long term.

That’s something consumers rarely think about.

All right, last question.

When you talk to friends or family about Medicare, what’s the number one piece of advice you give them?

Bob O'Connor (1:04:09)

Take a careful look around.

Check the formulary.

Check the provider network.

Check the co-pays for the actual care you’re likely to need.

And get a second opinion.

Independent agents can be really valuable because they can give you a broader view.

The other thing I emphasize is stability.

Where I live in Western Pennsylvania, there are three companies that have been stable for fifteen years.

Could you pick another company? Sure.

But tread carefully.

Because sometimes those potholes are deeper than they look.

Matt Feret (1:05:32)

And not all insurance companies are created equal.

Bob O'Connor (1:05:36)

No, they’re not.

Here in Pittsburgh last year, a bus thought it was driving into a pothole and it actually swallowed half the bus.

Sometimes those potholes are really sinkholes.

So be careful out there.

Matt Feret (1:05:51)

Bob, this has been a lot of fun and really useful.

Thank you very much for doing it. Great to see you again.

Bob O'Connor (1:06:02)

Good seeing you, Matt.

Thanks so much. Let’s talk again soon.

Matt Feret (1:06:06)

I hope so.