Just like any other bill that’s ever been passed by any president, Democrat or Republican, the Affordable Care Act, also known as “Obamacare” has it’s good parts and it’s bad parts. Almost every time I do a Medicare 101 program, one of the most commonly asked questions is, “How does Obamacare affect Medicare?”
This is obviously a very hot topic as it relates to Medicare eligible seniors, and with the new health insurance market places taking effect on October 1st, I thought I would take some time here and go over exactly what impact “Obamacare” has on Medicare. There is a lot in this bill, but for now, I’m going to focus on the components that should show the biggest cost savings in Medicare.
The first thing you need to understand is that Medicare is not a part of the new health insurance marketplaces. The marketplaces are for individual coverage, not Medicare, or Medicare Advantage.
Despite rumors and speculation that Medicare will be destroyed or gutted by “Obamacare”, it will actually improve Original Medicare, and prolong the life of the Medicare Trust Fund which has most recently been reported by several outlets to have been extended to 2029 with the recent improvements which have already begun to lower the costs.
Several things in this bill make these improvements possible. Let’s take a look.
Obamacare Eliminates Excessive Payments to Private Insurers (Medicare Advantage)
The government gives money to private insurance carriers who offer Medicare Advantage products, and some prescription drug plans. These payments to the private insurers who offer these Advantage products have been, and will continue to be reduced and possibly eliminated. Basically, the government has been overpaying private insurance companies, which in the end drives up the cost for everyone in Medicare, even those who aren’t receiving their benefits through a private plan (Advantage Plan).
The government pays Advantage plans on average 14% more for providing coverage to Medicare Advantage beneficiaries than it would pay for the same beneficiary in the traditional Medicare program. Crazy right?
There is no evidence that these overpayments improve the quality of care, especially when the insurer, not the beneficiary, determines how these payments are used — and this includes marketing, profits and administrative costs.
The insurer also has the flexibility to determine cost-sharing, like co-pays, deductibles and co-insurance, so not only might an Advantage plan beneficiary not get the full payment back (in the form of improved healthcare), but they could ultimately end up spending more out of pocket in cost-sharing, than if they were covered by traditional Medicare.
By “cutting the fat” off of the subsidies to private plans, Obamacare aims to hold the private insurers accountable for their spending, and to lower their administrative costs, and spend more of their profits on improving their plans. This is expected to save the Federal government, taxpayers, and Medicare beneficiaries well over $100 billion over the next 10 years, extending the life of the Medicare trust fund, ensuring that trust fund dollars are spent on improving health care, not supporting the profits of private insurance companies.
Obamacare will make healthcare for Medicare beneficiaries more affordable
Under Obamacare, preventative care is now free. This is huge! Previously, Medicare beneficiaries had to pay 20% of preventative services and evidence suggests that many seniors avoided these preventative exams due to the cost. This of course leads to more expensive treatments later if the condition is not found early enough, meaning that it actually costs the system more money.
Obamacare will eliminate any deductibles, co-pays, or other cost-sharing related to preventative care. Please note that is has to be truly preventative, and cannot be related to an existing health condition otherwise it will not be coded as preventative and thus, there could be some cost-sharing involved.
Obamacare will also eventually eliminate the donut hole which is a big deal considering that the average drug costs for someone in the “donut hole” are $4,080 per year. I often tell people, especially those on multiple brand name, or non-preferred brand named drugs, that the drug plan is where you spend your money in Medicare. I’ve met with people who were on 4 or 5 brand name drugs and they hit the donut hole after just a couple months. Not good. Eventually Obamacare will close this coverage gap completely (2020).
Coordinating Care Better
Your doctors try hard to give you high quality care, but it can be a challenge to juggle information, even in a managed care type of environment. Medicare wants to ensure that all doctors have the resources and information they need to coordinate your care.
The goal of coordinated care is to make sure that patients, especially the chronically ill, get the right care at the right time, while avoiding unnecessary duplication of services and preventing medical errors. You’ll benefit when your doctor, health care provider, or hospital coordinate your care, because they will be working together to give you the right care at the right time in the right setting.
Through the use of Accountable Care Organizations (A.C.O.) and Comprehensive Primary Care Initiative, Medicare beneficiaries will have access to better coordinated care. A.C.O.’s consist of a group of medical professionals (doctors, hospitals, practitioners, long term care facilities, etc.) who work together to provide better coordinated care for seniors.
How Accountable Care Organizations Work (A.C.O.)
- Local health care providers and hospitals volunteer to work together to provide you with coordinated care.
- The doctors and other providers who are helping care for you will communicate with each other, and partner with you in making health care decisions.
- You may spend less time filling out medical history paper work because your doctors may already have this information in an electronic health record.
- You’ll likely have fewer repeated medical tests because your doctors and hospitals will share information and coordinate your care.
- You’ll be in the center of care, and your doctors will be better able to keep you informed, and to keep listening and honoring your choices.
- Unlike HMOs, managed care, or some insurance plans, an ACO can’t tell you which health care providers to see and can’t change your Medicare benefits.
How ACOs share information
- Your doctors use data from Medicare to help improve how they provide care. For example, your doctors will get your medical information from Medicare to help them to know your medical history, including your medical conditions, prescriptions, and visits to the doctor, and give you the right care at the right time in the right setting.
- Doctors, hospitals, and other health care providers working together in an ACO are able to read your medical records, along with other office staff authorized to help coordinate your care.
- The privacy and security of your medical information is protected by federal law. You’ll continue to get the same rights enjoyed by all people with Medicare.
What is the Comprehensive Primary Care Initiative?
The Comprehensive Primary Care Initiative is a partnership between Medicare and other insurance programs and organizations to help selected primary care providers and their practices provide additional resources to improve the quality of care. Primary care practices can use these resources to make improvements to their practice, like hiring new staff and updating technology to better coordinate their patients’ care.
When should I get it?
If your primary care doctor or practice is participating in this initiative, you’ll get a notice in the mail. The notice will also tell you that Medicare will share some of your personal health information with your doctor’s practice so they have the most up-to-date information about your health. This includes information about the care you get from other doctors or health care providers. If you don’t want Medicare to share this information, the letter will tell you what to do.
Who sends it?
Primary care practices participating in the initiative.
What should I do if I get this notice?
There are no additional steps you need to take to keep getting care from your usual providers.Your current Medicare benefits, services, rights and protections won’t change, and you’ll still have the right to use any doctor or hospital that accepts Medicare, at any time.
Preventing Fraud, Waste, and Abuse
Fraud, waste, and abuse raises the costs for all seniors and taxpayers. Beneficiaries pay the costs of Medicare dollars lost to fraud through increased premiums. In September 2009 the Department of Health and Human Services and the Department of Justice announce the largest health care fraud settlement in history. Pfizer agreed to pay $2.3 billion for illegal marketing practices. This historic settlement returned over $1 billion to Medicare, Medicaid, and other government insurance programs.
Obamacare will increase funding to fight fraud and abuse in Medicare, increase penalties for those found guilty, and impose tougher screening of providers to prevent those who have abused the program from providing care to beneficiaries in the first place. Current proposals to reduce fraud and abuse are expected to save over $1 billion over the next 10 years.
Making long-term care services more affordable
There is a persistent long-term care gap in Medicare. It is estimated that 70% of people 65 or older will spend some time at home in need of long-term care services, which cost on average $18,000 per year. Many seniors cannot afford long-term care insurance, meaning that the only way they would have coverage is by paying for it out-of-pocket.
Contrary to popular belief, Medicare does not pay for true long-term care (custodial care).
Obamacare has created a new voluntary long-term care services insurance program which will provide a cash benefit to help seniors and people with disabilities obtain services and support that will enable them to remain in their homes and communities.
Eliminating the physician payment cuts
The physician payment reimbursement system that was originally created in 1997, has been somewhat flawed since it’s inception.
Today’s problem is a result of yesterday’s efforts to control federal spending – a 1997 deficit reduction law that called for setting Medicare physician payment rates through a formula based on economic growth and known as the “sustainable growth rate” (SGR). For the first few years, Medicare expenditures did not exceed the target and doctors received modest pay increases. But in 2002, doctors reacted with fury when they came in for a 4.8 percent pay cut. Every year since, Congress has staved off the scheduled cuts. But each deferral just increased the size – and price tag – of the fix needed the next time.
The formula also reinforces what many experts say are some of the worst aspects of the current fee-for-service system – rewarding doctors for providing more tests, more procedures and more visits, rather than for better, more effective care. In an Oct. 14, 2011, letter to lawmakers, the Medicare Payment Advisory Commission (MedPAC), which advises lawmakers on Medicare payments, called the formula “fundamentally flawed” and said it “has failed to restrain volume growth and, in fact, may have exacerbated it.”
While Democratic and Republican leaders say they do not want Medicare physicians’ payments to be cut, there is often disagreement about how to offset the costs of a fix. Obamacare aims to find a permanent solution to the physician payment cuts, while freezing the current cuts, until this solution is implemented.
As I mentioned earlier, no bill is ever perfect. There are 10,000 people each day in our country who turn 65, a majority of whom enter the Medicare program for their health benefits. Something had to be done to reign in the costs. The Affordable Care Act is a program that will not solve every problem right away, however over time, I’m confident that the steps mentioned above will have a real impact and strengthen Medicare as a whole.
If you think this article has been helpful, please leave a question or comment below, and please share the article as well. Don’t forget, we have a few Medicare 101 programs coming up, so feel free to contact our office if you are interesting in attending. The number to call is 610-692-3200. The Annual Election Period begins October 15th, so if you need help with your drug plan selection for 2014, see this article on how to find the best medicare part d drug plan in 5 minutes.