Q My out-of-pocket costs are expensive enough as it is. Why should I support cutting Medicare as a part of health care reform?
A Despite the rumors you may have heard, health care reform does not cut Medicare’s traditional, guaranteed benefits. Quite the opposite: the new law explicitly prohibits such benefit cuts. There are significant Medicare savings in the bill, but the money does not go to pay for covering the uninsured — it just looks that way because of our government’s budget and accounting rules.
In fact, the Medicare savings stay in the Medicare program — which is why the Part A Trust Fund will stay solvent at least seven years beyond what we expected before health care reform, and premiums and other out-of-pocket costs will grow more slowly in the future. Most of the savings were voluntarily agreed to by hospitals and other affected provider groups because they believe the additional insured patients and efficiencies included in the law will save them money. They contributed part of these savings back to the Medicare program by agreeing to slower rates of growth in future payments. It also phases down subsidies for private Medicare Advantage plans over time so that, on average, plans will receive payments comparable to what it would cost traditional Medicare to cover the same seniors.
Q Is there anything good for seniors in the law? What’s in it for me?
A Over time, the overwhelming majority of seniors in the United States will have lower out- of-pocket costs and better coverage as a result of the enactment of health care reform. The Medicare Part B premium for 2012 rose significantly less than projected to $99.90 per month. In addition, the Part B annual deductible decreased by $22 from $162 to $140.
The biggest immediate improvement for Medicare is in its drug coverage. The law phases out the donut hole in the Part D prescription drug program. The donut hole is the gap in coverage where seniors continue to pay full premiums, but also pay the cost of their drugs — a gap that does not exist in other health insurance programs. As a first step to help seniors struggling with the high cost of prescription drugs today, anyone who fell into the donut hole in 2010 received a $250 payment from the government. Currently, deep discounts in drug prices are being phased in to close the gap for seniors.
The Affordable Care Act also includes significant benefit improvements to keep seniors healthy by eliminating copayments and deductibles for preventive care and providing coverage for an annual wellness visit and personalized plan.
Finally, many of the payment reforms that will save money for Medicare are also designed to provide better quality health care for seniors. For example, hospitals will be encouraged to implement programs that prevent hospital-acquired infections and unnecessary readmissions, while doctors will receive bonus payments to improve access for seniors. In future years, the entire health care system will be redirected away from a model that pays based on the number of procedures and tests that are ordered and focuses more on rewarding providers based on the quality of the health care they provide.
Q I still don’t understand how you can cut Medicare by over $400 billion and not hurt seniors. Where does the money come from?
A Most of the savings come from reducing the annual increase in Medicare payments to hospitals, skilled nursing facilities, and home health agencies. They will continue to get larger payments every year; those payments will simply get smaller inflation increases in the future. Hospitals will also see gradual reductions in the payments they receive to help cover the cost of uncompensated care because they will have fewer uninsured patients to treat.
Additional savings come from bringing Medicare Advantage payments in line with traditional Medicare. Medicare Advantage is the privatized portion of Medicare. In order to entice private insurers to cover seniors, Congress has been subsidizing these plans — at a cost of $11 billion in 2009 alone. This raises the government’s costs and shortens the solvency of the Part A Trust Fund. Seniors are also subsidizing these plans through higher Part B premiums whether they are enrolled in a Medicare Advantage plan or not.
The new law does not cut the benefits Medicare Advantage plans offer — it slowly reduces reimbursements to the private insurance plans over time so they are closer to the amounts traditional Medicare would pay to cover the same seniors. The new law also includes significant new protections for those enrolled in the plans.
Finally, the new law strengthens efforts to reduce waste and fraud in the Medicare program, and puts in place the building blocks for significant new cost savings in the future through changes in our health care delivery system.
While the dollar value of these savings is a lot of money, it’s important to remember it represents just a small percentage of Medicare spending. The government is projected to spend about $6 trillion on Medicare during the next decade. The non-partisan Congressional Budget Office has estimated the savings in the new law will trim the growth of Medicare spending by about 2 percent a year.
Q So how does all this get paid for? I don’t want to leave the bill to my grandchildren.
A The Congressional Budget Office (CBO) estimates that the combination of Medicare savings and increased revenues in the bill reduces the deficit, both over the first ten years as well as over the longer term. And this estimate uses extremely conservative cost estimates, as CBO economists refused to “score” as savings any part of the bill that could not be verified through their economic models. Many of the savings health experts expect from changes such as payment reforms and coordination of care models were not counted because CBO considered them “too speculative.” For this reason, many experts believe much greater savings will result from enactment of health care reform than is currently estimated.