Americans differ on Medicare reform. They may disagree on the right future for Medicare. But one thing is certain: Under the current laws regarding the Affordable Care Act (ACA), seniors will pay more—much more—and they will pay this steep price in many different ways, including a loss of access to care resulting from continuing to cut the money paid to doctors and other medical professionals which results in the cutting back of Medicare practices or, in some cases eliminating a doctors Medicare practice altogether.
Doctors and other medical professionals are facing a bleak future in the future, due to continued reimbursement reductions and the higher administrative costs of complying with an even larger set of increasingly complex rules and reporting requirements. They have already cut Medicare Part A and Medicare Advantage provider-reimbursement rates to levels that even government actuaries have stated, in print, to be unrealistic. They have instituted a new Medicare tax on the “unearned” income of upper-income Americans (such as investment income) that will not even be exclusively used to enhance the solvency of Medicare.
The vaunted Medicare “savings” from Medicare provider payment reductions and other changes enacted through the PPACA will also finance health insurance coverage mandated by the ACA. The bottom line: Medicare “as we know it” is already a thing of the past.
1) Huge payment reductions that reduce access to care – the Affordable Care Act will reduce Medicare reimbursements by $716 billion over 10 years. These cuts will hit Part A providers such as hospitals, nursing homes, skilled nursing facilities, and hospices, along with Medicare Advantage plans – not due to eliminating “waste, fraud and abuse”. Providers will not be able to sustain continuing negative margins due to the cuts and will have to withdraw from serving Medicare beneficiaries. It is estimated that there will be 15% fewer providers by 2019, 25% by 2030, and 40% fewer providers by 2050
2) Medicare “savings” are spent on other parts of the Affordable Care Act. Medicare payroll taxes will increase from 2.9% to 3.8% for high income earners and also extends the 3.8% Medicare tax to investment income. This is the largest tax increase in The Affordable Care Act costing almost $320 billion, and it claims to increase the solvency of the Part A trust fund, but that simply is not true. The new tax revenue will be paying for new entitlement spending in The Affordable Care Act.
3) Medicare Advantage Cuts – $156 Billion will be cut from the program in the next 8 years. Cuts will come by increasing out of pocket costs and imposing a special fee to all health insurance plans. 27% of all Medicare beneficiaries are enrolled in a Medicare Advantage plans, and in 3 years this number will be reduced by 50% due to the rising premium costs, reduced benefits, and plans no longer being offered/available. The alternative will be to join a less generous, traditional Medicare plan with bigger gaps in coverage.
4) Higher Part B Premiums – Means testing will be used to determine new Part B premiums. Under current law, there are four income adjusted brackets, but will be expanded to nine brackets. These new brackets will result in 25% of all beneficiaries to pay a higher monthly premium. In 2014, beneficiaries will pay an average of $340 more a year in monthly premiums, and by 2017 that number will increase to more than $400.
5) New Fees – For new baby boomers aging into Medicare, starting in 2017, there is a $25 increase in the Part B deductible. By 2021, the Part B upcharge will be $75 plus a $100 co-payment for home health services in certain cases. In addition, a premium surcharge will be assessed to all new beneficiaries who choose a Medigap plan that includes first-dollar or near first-dollar coverage. This surcharge will result in a 15% premium increase for beneficiaries.
6) Prescription Drug Costs – The donut hole is slated to close by 2020, which results in a 9% average premium increase for all beneficiaries to do so even though this benefits only 7.4% of the total Medicare population.
Today in Medicare Part D, private plans and drug manufacturers negotiate a discounted price; it is a market price. The government is not involved at all in these negotiations. The result: Market efficiencies have been dramatically successful in controlling Medicare drug costs and stabilizing the growth in seniors’ premiums.
The President’s recent budget proposal, however, would require drug companies to pay the government the difference between the privately negotiated Medicare price and the price (the “rebate”) the government sets for the sale of drugs in the Medicaid program for low-income Medicare beneficiaries. These seniors today receive subsidies, and they account for about 30 percent of all Medicare Part D enrollees.
The President’s proposed Medicare “rebate” would act as a tax on the drug companies doing business with the federal government, but it would also function as a price control on Medicare drugs. In other words, the new rebate policy would distort the Part D market by fixing artificially low prices for one group of beneficiaries, and creating powerful incentives for the companies to try to make up the revenue losses by charging higher prices in other sectors of the Medicare market. This means that most seniors would experience increased premiums anywhere between 20 percent and 40 percent.
7) The ominous and looming power of IPAB, a board formed to oversee the Affordable Care Act, will consist of 15 unelected and unaccountable bureaucrats, charged with meeting a newly created budget target in Medicare. When Medicare spending surpasses the target, IPAB will have to make recommendations to reduce Medicare spending. The trustees project the much-hated IPAB will need to step up and make recommendations for the first time in 2016.
Just the FACTS for 2014 Medicare Changes:
|2013||2014||+/- Percent Increase|
|Part A Deductible||$1,156||$1,336||+ 13.5%|
|Part A Hospital Coinsurance after day 60||$289 per day||$334 per day||+ 15.6%|
|Part B Premiums||$99.90||$128.20||+ 28.3%|
|Part B Deductible||$140||$180||+ 28.6%|
|Health Insurer Fee for Medigap plans||-||2.6%||+ 2.6%|
|Health Insurer Fee for Medicare Advantage Plans||-||$25-$32 per month||+ 80-140%|