In a little more than 10 years, or 2028, Medicare Part A Health Insurance Trust Fund is projected to cover about 87% of the costs for hospital care, skilled rehabilitation and home health as well as hospice care. Without changes to the payroll taxes that are collected, it is projected that only 79% of the claims will be paid by 2040. By 2090, the fund will again be able to pay 86% of the claims.
Medicare Part B (physician and other services) and Part D (prescription drugs) are funded with beneficiaries paying 25% of the costs and general revenues covering the other 75% of costs. By law, these two parts of Medicare will always be able to pay claims.
The Affordable Care Act (ACA) was designed primarily to provide health insurance for adults age 18-64, rather than to Medicare beneficiaries.
But Medicare beneficiaries realized several significant benefits with the passage of the ACA. Most notably, ACA provided a funding stream for individuals whose prescription drug costs are so expensive they reach the coverage gap (or the donut hole). With funding support from the pharmaceutical industry, by 2020 Medicare beneficiaries will be responsible for only 25% of the cost of prescriptions in the donut hole with the balance of costs covered through Medicare and the prescription drug plans.
A second benefit that Medicare beneficiaries realized was access to preventive services such as mammography, prostrate screenings, colonoscopies, and much more. Most of these services are covered at 100% by Medicare.
The ACA also provided for changes in the way that Medicare Advantage plans are reimbursed. While the per member per month rates were reduced, Medicare Advantage plans were incentivized to improve quality measures to be eligible for additional revenues.
The American Health Care Act (AHCA) bill proposes some changes to Medicare. One of the proposals is to pay a flat fee each year to Medicare providers for each beneficiary. The individual who needs more services than are covered by the flat fee, would have to pay the balance of costs out of pocket.
The proposed reimbursement is somewhat similar to how health plans are paid for individuals who enroll in Medicare Advantage. For individuals who are in traditional fee-for-service with a Medicare Supplement, the increase in out of pocket costs might be substantial, causing hardship for many beneficiaries on fixed incomes. It is unclear whether Medicare beneficiaries could purchase health insurance to help with the costs of care not covered under the capitated payment to providers.
By shifting more costs to the beneficiary, Medicare will be saving money. The proposed bill is not clear on how low income seniors on Medicare and Medicaid who are not able to pay for care would have their benefits covered.
Another proposal is to combine Medicare Part A and Part B into one section. The benefit of this might be a change in improving the funding mechanisms, requiring individuals to pay only one deductible, and streamlining administrative processes.
The last proposal is to raise the age at which beneficiaries are able to receive Medicare from 65 to 67 which is the full retirement age for future retirees.
The public debate affecting these changes is important based on the Trump leadership team. Seema Verma, recently appointed as the Director of the Centers for Medicare and Medicaid Services (CMS), does not have any experience with Medicare. Mick Mulvaney, R-South Carolina, a staunch conservative and leader in the Tea Party as well as a leader in the government shut-down in 2013, is now the head of the Office of Budget and Management. One of his goals is to reduce the $20 trillion national debt, which will most likely require reduction in Medicare costs.
Although President Trump has indicated that is does not want to make any changes to Medicare and Social Security, his desire to implement tax reform will almost certainly have to include reductions in Medicare costs. Pressures from the Tea Party (or the Freedom Caucus) to balance the budget in 10 years will also require some changes in Medicare. Speaker of the House Paul Ryan suggests that more than “half of the money that the government borrows is to pay for Medicare”; although this is not necessarily true.
Medicare beneficiaries are encouraged to share their support and/or concerns for changes with their Congressional representative and senators. Beneficiaries who have questions or want to share their concerns, can call 303-333-3482.
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