How changes in Medicare could affect you

By Trudy Lieberman
Rural Health News Service

Shortly before Easter the House of Representatives passed legislation that’s supposed to fix once and for all the formula the government uses to pay doctors who treat Medicare patients. The Senate is expected to agree. The so-called doc fix legislation has been a political hot potato since the late 1990s when Congress tried to slow down healthcare costs by cutting doctor payments. The docs complained when Medicare tried to cut their payments, and 17 times Congress stopped the cuts.

This time was different, though. Democrats and Republicans came together to fix the formula, gave doctors a small raise, and began to change the basic Medicare benefit that has helped millions of seniors and disabled people for 50 years. Changing Medicare from an insurance plan that pays virtually all a person’s medical costs (assuming they have Medigap coverage) has been a long-standing goal of many Republicans and Democrats, too.

The end game is to convert Medicare into what’s known as a premium support or a voucher plan. Under this arrangement the government would give seniors a sum of money to buy whatever coverage they wanted in the open market. The plan would be similar to the subsidies that 8 million or so Americans receive for Obamacare policies. Whether such vouchers will keep pace with medical inflation over the years is unclear. The same applies to Obamacare subsidies.

The current legislation doesn’t go that far yet, but senior advocates see it as a foot in the door. Here’s what it will do:

More means testing of Medicare premiums

The premise of Medicare was that it was social insurance. Everyone paid the same premium and everyone had the right to receive the same basic benefits. But in 2006 Congress changed the law so that individuals with incomes over $85,000 and $170,000 for couples paid more. The House bill changes the rules again so that some people already paying higher premiums will pay more, a measure that could further erode universal political support for the program. The president’s budget proposal would have required higher premiums for even more seniors.

Stacy Sanders, the federal policy director for the Medicare Rights Center, an advocacy group, told me, “This is problematic because eventually middle class people would pay more. If the president’s proposal were implemented today, beneficiaries with incomes around $45,000 in today’s dollars would pay higher premiums.”

Require more skin-in-the game

That means some seniors will have to pay more out-of-pocket. No one who becomes eligible for Medicare in 2020 or thereafter will be able to buy coverage for Medicare’s Part B deductible, which applies to physician and outpatient services. Those who work with seniors worry that’s a first step to totally redesigning the benefit to require more and more skin in the game.

Future changes could mean much higher deductibles (it’s currently $147) and requiring beneficiaries to pay high out-of-pocket maximums before their Medigap insurance kicks in. A few years ago some proposals called for maximums in the $5,000 to $7,000 range.

Those pushing for higher cost sharing for seniors cite an old study from the RAND Corp. that found when patients have to pay from their own pocketbooks, they don’t go to the doctor as often. The theory and the hope is that if Medicare and private supplement plans pay less and individuals have to pay more, healthcare costs will decrease.

But RAND also found patients couldn’t discriminate among necessary and unnecessary care. “You may see savings at the front end, but you’ll pick up the costs at the backend in emergency room use and more hospitalizations,” says Bonnie Burns, a policy specialist with California Health Advocates.

What’s at issue here are future tax increases that may be necessary to fund Medicare, and powerful stakeholders like employers don’t want to pay them. In his blog post Douglas Holtz-Eakin, president of the American Action Forum, a center right policy institute, said the House bill fixes the doctor payment formula and  introduces structural changes in Medicare, adding the two changes balance each other over the next 20 years “without raising taxes.”

Cuts to seniors and lower government payments to hospitals fund part of the doc fix. The rest of the tab is added to the deficit. Apparently it was a price many members of Congress who’ve railed for years against deficit spending were willing to pay to get what one senator called a “down payment” on entitlement reform.

We’d like to hear your experiences with Medicare and how you use your benefits. Write to Trudy at trudy.lieberman@gmail.com.

 The Rural Health News Service is funded by a grant from The Commonwealth Fund and is distributed through the Nebraska Press Assn. Foundation, Colorado Press Assn., South Dakota Newspaper Assn., Hoosier (IN) State Press Assn., Illinois Press Assn., Wyoming Press Assn. and California Newspaper Publishers Assn.

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