There are some uncomfortable truths about Medicare changes lurking in the health reform law. Because the pols on both sides of the aisle supported these changes, it’s not surprising that almost no one has been eager to talk about them in campaign ads or otherwise.
Beneficiaries with higher incomes—this year $85,000 for individuals and $170,000 for couples—have been paying higher Part B premiums for some time now. (Part B pays for doctor, lab, and hospital outpatient services.) But the health reform law froze those income thresholds (pdf), meaning that, over time, more and more “wealthier” income people will pay higher premiums. There will be no indexing that would have meant fewer beneficiaries would pay the higher amounts.
That’s not all. The law also requires seniors to pay premiums based on their income for Part D, the prescription drug benefit. Same issue. Those with higher incomes will pay more for their benefits. The law that authorized the drug benefit in 2003 also required the government to partially subsidize the cost of the drugs seniors bought. But health reform now means that the government will reduce what it pays for the drugs of higher income beneficiaries. Again, those with higher incomes will pay more.
“There has not been a lot of attention paid to this,” said one Medicare expert, who did not want to speak on the record. “This could over time undermine the support for the program.” While making those with higher incomes pay more seems reasonable, some experts fear that at some point beneficiaries with higher incomes will prefer to leave the Medicare system and opt for private insurance on their own. That could begin to break up Medicare’s risk pool, with its mix of older and younger seniors, the healthy and unhealthy, and those with more and less retirement income. It is this cross-subsidization that makes the program work. Ultimately, Medicare could morph into a means-tested welfare program, instead of social insurance.
There are some other provisions that are not well-known. But they should be, especially as the press begins to write those perennial stories about Medicare’s open-enrollment season. We think it’s worth discussing these provisions again.
Not only will those with Medicare Advantage plans face greater out-of-pocket costs, so will beneficiaries who remain in the traditional Medicare program and cover Medicare’s gaps with a supplemental policy. The health reform law requires that people who buy Plans F and C, two of the most popular standardized Medicare supplement plans, will eventually assume a greater portion of their medical costs through what’s called “higher cost-sharing.” The National Association of Insurance Commissioners is supposed to come up with new rules for nominal cost sharing, whatever that means. In a few years, it could, for example mean that these plans which now cover the twenty percent coinsurance that Medicare requires for Part B services, might only cover ten percent of the coinsurance. Guess who pays the rest?
And what if seniors don’t like what’s happening to their Medicare Advantage (MA) plan and want to return to traditional Medicare and buy a supplement? That might not be as easy as it seems. Vicki Gottlich, a senior attorney, at the Center for Medicare Advocacy, told us some beneficiaries may be turned down for preexisting conditions and others won’t. If a person joins an MA plan when they first become eligible for Medicare and decides to leave it within twelve months, they can buy a supplemental policy, no matter what their health status is. But if more than twelve months have passed, they will be subject to medical underwriting and may not get the insurance if their health problems are ones a carrier does not want to insure. But if an insurer cancels a Medicare Advantage plan, seniors can buy a supplement even if they have a preexisting condition. Not exactly simple and straightforward.
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