Health Care Reform: What’s in It for Seniors?

By Care For You •

The Patient Protection and Affordable Care Act passed by Congress and signed by the President earlier this year, represents the greatest increase in government involvement in health care issues since passage of Medicare and Medicaid in the mid-60s.

Paying for the law

Many seniors have expressed concern that the expanded coverage to many uninsured Americans will come at the expense of reduced Medicare services. However, according to the non-partisan Congressional Budget Office (CBO), this is not the case.

CBO has estimated that the new law will save Medicare about $400 billion over the next 10 years. A reasonable person might ask: How can this be accomplished without reducing services?

For starters, the CBO projects that about half the savings will be achieved by reducing the rate of growth in payments to hospitals, nursing homes and home health agencies. (For many of these providers, the slowed growth in payments will be offset by profits from the newly insured.)

And, as mentioned in an earlier article, the CBO anticipates that significant savings will come through the gradual reduction of the Medicaid Advantage “premium”. By reducing the MA “overpayment” over a period of about six years until it reaches parity with traditional Medicare, the CBO estimates the government will achieve about a 30% savings. (This overpayment was initially offered to insurers to entice Medicare enrollees to select the HMO option.)

Note though, that while Medicare Advantage plans must continue to offer the same benefits as traditional fee-for-service Medicare, certain additional benefits could be curtailed, or individual premiums could be increased. Medicare Advantage enrollees should review their premium and coverage prior to open enrollment in November to determine if their insurer has increased premiums or limited benefits in any way.

The CBO anticipates additional savings through reducing fraud and waste, and from program efficiencies (10%).

Certainly, reducing the number of uninsured Americans is a laudable goal. Paying for the new law through reductions in insurer overpayments, fraud and waste – to the extent they can be achieved – is also key. But remember, projections are based on assumptions. Whether the CBO’s assumptions will be born out through actual experience remains to be seen.

Prescription Drug Coverage

Congress passed the Medicare prescription drug plan (Part D) earlier in the decade. The plan now covers the cost of prescription drugs up to $2,830 in a given year. The insured is responsible for paying for all prescription drugs until total costs reach $6,440, at which point the government will pay 100%. This gap in coverage is known as the donut hole. But starting in 2010, people whose drug expenses reach the $2,830 threshold will receive a $250 check from Medicare. Starting in 2011, when a person reaches the threshold, Medicare will pay for half of all brand-name drugs up to the higher limit, at which point the full amount will be covered. This donut hole will be completely eliminated by 2020.