Forward Motion: The Affordable Care Act’s Big Changes to Medicare

For more than 40 years, Medicare has provided seniors and people with disabilities with needed health coverage. The Affordable Care Act (ACA) strengthens Medicare for nearly 48,000,000 people in the U.S. and nearly 1,070,000 Tennesseans! (That’s 17% of the population in Tennessee!) [4]. The ACA has included several provisions that will strengthen Medicare, provide more care and reduce costs for its beneficiaries, and bolster the financial stability of the program. Some of these improvements include access to free preventative services, discounts on drugs, greater coordination of care, help for low income Medicare beneficiaries, and changes to Medicare Advantage plans and the Medicare Trust Fund.

Preventive Services

In the past, Medicare has concentrated on treating the conditions and diseases of its beneficiaries rather than emphasizing preventive care to keep people healthy. However, as of January 2011, most preventive services for people on Medicare are now free. This means that Medicare beneficiaries can get many important preventive services, such as screenings for diabetes, high cholesterol, and cancer, as well as vaccinations, at no cost. To help people take advantage of the preventive care benefit, the ACA also added a free annual wellness visit. People are encouraged to use the wellness visit to develop a personalized prevention plan with their doctor [1].  For more information on Medicare’s Annual Wellness Visit, go here.

Secretary Kathleen Sebelius announced recently that an estimated 32.5 million people with Medicare received at least one free preventive benefit in 2011, since the health reform law was enacted [2].

These benefits are available to all people who are enrolled in original Medicare [1]. If you’re in a Medicare Advantage Plan, check with your plan to see if these benefits will also be free for you.

For information on what preventive services will or will not be covered, and to read about other exceptions, read Families USA Medicare’s Preventive Care Benefit and CMS Guide to Medicare’s Preventive Services. For more information about specific preventive services covered by Medicare, read here.

For help with organizing your preventive screenings, see the Medicare preventive service screening checklist.

Medicare Drug Discounts

Not only are most preventive services for Medicare beneficiaries now free, but there are also other invaluable improvements to Medicare through the ACA. One of these improvements is a discount on drugs when people are in the coverage gap known as the “doughnut hole.”

The Medicare Part D drug program is infamous for including a large gap in coverage called the “doughnut hole.” In 2010, the doughnut hole began after beneficiaries incurred $2,840 in total drug costs. At that point, their drug coverage stopped until beneficiaries spent an additional $3,610 out of their own pockets (on top of their monthly premiums). At that point, catastrophic coverage began [5]. More than 3.4 million people with Medicare fall into the doughnut hole each year [6].

Under the new law, beneficiaries who fall into the doughnut hole will receive a 50 % discount on name-brand drugs and a 7 % discount on generic drugs while in the doughnut hole. These discounts will increase each year until the doughnut hole is completely eliminated by 2020 [5, 6] In 2020, beneficiaries will be responsible for only 25 percent of the cost of drugs up to the catastrophic limit (the same percentage they pay for their initial coverage under Part D). [5].

Coordination of Care

In the past, Medicare has not done a good job of coordinating care for its beneficiaries. This has resulted in worse outcomes for patients and higher costs for all tax payers. Medicare has paid doctors and other providers by the procedure, which discourages providers from taking the time to explore different treatment options with their patients or to do the extra work needed to coordinate their care [6].

Under the ACA, Medicare is being moved to a more coordinated system that promotes primary care (as opposed to specialty care) and collaboration among health care providers. Primary care physicians will receive higher reimbursements. This measure, along with others, should encourage providers to work together to improve health care quality and reduce the number of unnecessary procedures and hospitalizations [6].

Part D Low Income Subsidy

The Part D low-income subsidy provides vital help with out-of-pocket prescription drug costs to Medicare beneficiaries with limited incomes, including full coverage of their Part D premium. However, there are several problems with the program. The plans that are available, and what they charge in premiums, vary from year to year, which makes it difficult for beneficiaries to maintain stable coverage. The changes in plans can be drastic, and new plans often have different coverage rules than the old ones. The frequent changes in coverage disrupt the continuity of care for these beneficiaries, and often those who stay in plans that no longer qualify for a full premium subsidy may incur out-of-pocket premium costs they cannot afford [6].

Another problem involves dual eligibles (people with both Medicare and Medicaid coverage) who receive long-term supports and services. Those who live in long-term care institutions, such as nursing homes, do not have to pay copayments for their drugs. However, if they want to move out of the institution and into the community or an assisted living facility (taking advantage of their state’s home- and community-based care Medicaid waiver program), they are required to pay copayments. In effect, this policy penalizes people financially who want to move out of long-term care institutions and live with their families [6].

The ACA improves the Part D low-income subsidy by changing how the Part D low-income premium subsidy is calculated. This should increase the number of zero premium plans that are available to low-income beneficiaries. As a result, fewer of these beneficiaries will have to choose between different plans each year to avoid having to pay premiums to keep their plan [6].

In addition, beginning in 2012, the law eliminates the higher drug copayments paid by dual eligibles who want to receive long-term support and services at home or in the community rather than in an institution. As of January 2012, people who qualify for their state’s Medicaid home- and community-based care waiver program will no longer have to pay copayments for their prescription drugs under Part D [6].

Medicare Advantage

Private Medicare Advantage (MA) plans were introduced to Medicare because they were supposed to be a cheaper alternative to the traditional Medicare program. However, they have turned out to be more expensive. The Medicare program has been paying Medicare Advantage plans an average of 14 % more (more than $1,000 per person each year) than it costs traditional Medicare to provide the same care. This has added hundreds of billions of dollars of costs to Medicare. It also adds more than $3 a month to every Medicare beneficiary’s monthly premiums, even for the 75 percent of beneficiaries who are not in Medicare Advantage. These overpayments generate considerable profits for the insurance companies that run Medicare Advantage plans [6].

Starting in 2014, the ACA offers additional protections for Medicare Advantage plan members by taking steps that limit the amount these plans spend on administrative costs, insurance company profits, and things other than health care. Under the new law, payments to Medicare Advantage plans will be gradually reduced until they average about the same as traditional Medicare. The reductions in overpayments to Medicare Advantage plans will strengthen Medicare’s finances without diminishing access to any of Medicare’s guaranteed benefits [6]. Insurance companies that run Medicare Advantage plans will no longer benefit from billions of dollars in subsidies and will not have a financial edge over traditional Medicare [3].

Medicare Trust Fund

Before the ACA was enacted, Medicare’s Part A (hospital insurance) trust fund was projected to have insufficient funds to pay full benefits by 2017. Although Medicare would continue to operate after that time, future benefits could have been in jeopardy if nothing had changed [6].

The ACA extends the Medicare trust fund by 12 years, to 2024, without reducing any of Medicare’s guaranteed benefits. The new law makes several important changes to Medicare financing, including: hospitals and other providers have accepted reductions in payments, private Medicare Advantage plans will lose their unjustified subsidies, and Medicare payroll taxes will increase for high-income people [6].

Further, before the ACA was passed, Medicare was projected to grow at a rate of about 6.8 percent a year. With the new health care law, Medicare is projected to grow at a rate of 5.5 percent a year. This modest reduction is sufficient to put the program on a firmer fiscal ground while allowing enough growth in the program to meet beneficiaries’ needs [6].

Helpful Resources

Resources Used

[1] Medicare Preventive Care

[2] Affordable Care Act news release

[3] Medicare information

[4] Kaiser State Health Facts- Tennessee: Medicare Enrollment

[5] Summary of the Health Reform Law

[6] Helping People with Medicare

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