Over 49 million Americans rely on Medicare, so it’s no surprise that this program was an especially important issue during the recent presidential election. Now with Obama’s re-election, what does the future hold for Medicare?
This question is on the minds of many baby boomers and retirees who are currently navigating the Medicare open enrollment period, which began on October 15, 2012 and ends December 7, 2012.
The short answer is that President Obama is not proposing a new plan for Medicare, and his strategy will continue to play out in accordance with the Affordable Care Act (ACA), also known as “Obamacare.” The ACA attempts to reduce health care costs in the U.S. and extend the life of the Medicare trust fund, which pays for hospital insurance and is expected to run out of resources by 2024. To counter the deficit, the ACA requires that $716 billion be cut from Medicare, and this will be achieved by cutting Medicare payments to:
- Hospitals and skilled nursing facilities
- Home health care agencies; and
- Medicare Advantage subset programs that are run by private insurers.
The true purpose of the Medicare Advantage program was to reduce costs by creating market competition, but this has not occurred as predicted. Medicare Advantage actually has higher costs than traditional Medicare, and the ACA will decrease payments for the private insurers. However, we do not yet know how cutting Medicare Advantage payments will affect monthly premiums. We also do not know if there will be a decline in the number of doctors who accept Medicare patients as a result of changes to the Medicare Advantage program. Lowering payments to health care providers offers less incentive for doctors to continue treating Medicare patients.
With Obama’s plan, the coverage gap for Medicare beneficiaries taking prescription drugs will be closed. Prior to the ACA, Medicare would pay up to $896 for prescription drugs and then pass the remaining obligation on to the beneficiary. Then once a person spent a total of $4,350 out of pocket on prescriptions, Medicare prescription drug coverage would kick back in.
Also under the ACA, the Independent Payment Advisory Board (IPAB) was created to ensure that the Medicare program cost-saving measures do not adversely affect coverage or quality of care. The IPAB operates in public and makes systemic recommendations and propose
innovations to cut waste, which Congress can overrule. The IPAB does not have any jurisdiction over the treatment of any individual, and it cannot alter Medicare eligibility, reduce benefits or raise premiums. Naysayers have referred to this board as a “rationing board” or “death panel,” with the concern being that the decisions of the IPAB could lead to denied care for current seniors. Again, time will tell how effective the IPAB will be.
President Obama has won a second term and the Affordable Care Act is here to stay. We will continue to monitor the progress of the ACA and its impact on Medicare. In the meantime, our Medicare specialist is available to answer your questions about the ACA and guide you through the Medicare plan selection process during this open enrollment period.
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