Why Medicare Benefits Won’t Fall

Additional analysis on what the health care legislation means for older Americans can be found on the website of the National Committee to Preserve Social Security and Medicare. Here are a couple of key points: One is on the budget impact of the reform and why Medicare benefits won’t be cut. The other concerns private Medicare Advantage plans.For the entire statement, go here.

Despite the fear mongers’ claims, Medicare benefits will not be cut to pay for covering the uninsured.  Before health reform, the federal government was projected to spend about $6 trillion on the Medicare program over the next decade.  After enactment of health reform, Medicare is still projected to spend about $5.6 trillion.  That means over the next 10 years about $450 billion less of American’s money will be spent on wasteful tests, haphazard treatment options, wasteful subsidies to private insurance companies and reimbursement policies that drive up costs without improving the quality of care seniors receive.  The rate of growth will be trimmed by about 1.0 percent over the next 10 years, from about 6.8 percent growth rate to 5.8 percent – hardly the destruction of Medicare that opponents have claimed.  

As a result, the lifespan of the Medicare Trust Fund will more than double: its solvency will be extended from 2017 to about 2026.  Medicare will continue to grow to meet the needs of an expanding older population, but it will grow at a slower rate that will more closely match the growth of the rest of the economy.  And because health reform is designed to slow the growth of costs in the entire health care system at the same time, seniors’ out-of-pocket costs will be trimmed without driving providers out of the Medicare program or creating other barriers to care. 

While these improvements are being made, health reform also provides new tools to help crack down on the fraud in the current Medicare program.  For example, by allowing the Department of Health and Human Services and the Internal Revenue Service to share information, it will be easier to stop Medicare payments to scam artists masquerading as legitimate providers.  The health reform legislation also gives the agencies more time to verify that providers are legitimate and that they have provided seniors with the wheelchairs, hospital beds, oxygen tanks and other lifesaving pieces of equipment that they are billing to the Medicare program.  Fraud in the Medicare program hurts us all by increasing costs. 

Many people worry that curtailment of the Medicare Advantage ripoff plans signals the beginning of the end, denying care to millions and–as people always warn whenever there’s government “intervention” in medicine, driving the doctors out of business. Here’s what the Committee has to say about Medicare Advantage:

Making changes in the Medicare Advantage program is another way of restoring the integrity of Medicare by reducing wasteful spending.  Medicare Advantage is the privatized part of Medicare whose growth has been fueled by the massive subsidies enacted in the Medicare Modernization Act of 2003.  Medicare Advantage plans are paid on average 13 percent more per enrollee than it costs to provide comparable care in traditional Medicare.  These subsidies, which cost over $11 billion in 2009 alone, are paid for by taxpayers and by all beneficiaries, whether or not they are enrolled in a private plan.  It is estimated that every couple receiving Medicare, including the 75 percent in traditional Medicare, will pay about $90 in additional Part B premiums this year to subsidize those in the private Medicare Advantage plans.  And although these plans provide some additional benefits, many require much higher cost-sharing from seniors for expensive services such as chemotherapy, extended hospital stays and skilled nursing home care – a shortcoming few seniors realize until they find themselves needing the service. 

Despite what some are claiming, the health reform legislation does not eliminate Medicare Advantage plans or reduce the extra benefits they provide.  The legislation simply phases down the exorbitant subsidies they are currently getting so their payments end up more in line with what it would cost traditional Medicare to cover the same seniors.  It is up to each private insurer to decide how to absorb the reduced payments, and whether to continue providing extra benefits.  The insurers who run Medicare Advantage plans cannot cut guaranteed benefits – they are required to offer all benefits covered by traditional Medicare.  And under the new health reform law, they are now prohibited from charging seniors more than traditional Medicare for expensive services.  They are also, for the first time, required to spend at least 85 percent of their revenue on patient care rather than profits or overhead.  Finally, the legislation rewards Medicare Advantage plans that are providing high-quality care by giving them bonus payments. 

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