(This article was last updated on October 12, 2017)
The [hnd word="Medicare"] program has become inextricably linked with the American health care system over the course of its 50-year history, which means that new laws affect it just as they do every other aspect of modern health care. In the case of the [hnd word="Affordable Care Act"] (Obamacare), new regulations and funding measures have placed Medicare under a particularly sharp microscope over the past six years. The Obama administration has sought to streamline the Medicare program while making it more efficient and viable for future generations. The ACA offers a host of new benefits and protections to consumers who purchase health plans today, but what about Medicare beneficiaries? Let's take a look at how the ACA impacts Medicare in 2018.
Medicare Advantage Rates
Aside from traditional Medicare, seniors have the option to enroll in a Medicare Advantage plan. Since the passage of the ACA in 2010, membership in [hnd word="Medicare Advantage"] has increased by 42 percent, reflecting the popularity of MA plans among Medicare beneficiaries. As of 2016, more than 17.6 million people are enrolled in Advantage plans.
One of the goals of the ACA was to reduce payments to Advantage plans because this version of Medicare accounts for a significant portion of funding. That goal has not been met in the last six years. In fact, a 2016 fact sheet from the Centers for Medicare & Medicaid Services reported that payment rates would increase due to an adjusted risk pool assessment. That year was the final year that benchmark rates for Medicare Advantage were lowered as per ACA requirements. Despite the increase in payment rates, Medicare Advantage is being scrutinized more closely to make it more efficient.
The [hnd word="Centers For Medicare And Medicaid Services"] is using a newer model for setting payment rates in an effort to prevent fraudulent reporting and wasteful spending. Under the older model, it was too easy for health care companies to inflate numbers, making it seem as though their beneficiaries were at higher risks for diseases. Because Medicare Advantage pays providers higher rates for sicker beneficiaries, the system was open to fraud.
The ACA wants to eliminate this threat and pay out fair rates for Advantage beneficiaries. Under the newer model, providers will be encouraged to provide appropriate preventive and diagnostic services that could save Medicare and its beneficiaries a substantial amount of money in the long run.
Closing the Part D "Donut Hole"
One of the biggest changes to Medicare over the next decade will happen in Part D, which is prescription drug coverage. Since Medicare Part D has existed, some beneficiaries have found themselves stuck in what's called the "donut hole," a gap created by the fact that insurance companies place caps on drug spending. Once you meet your cap for coverage but haven't met your out-of-pocket spending cap, you're stuck in the donut hole, where you'll face full prices for prescriptions.
To close this hole, the government included provisions under the ACA to help Medicare beneficiaries pay for their drugs while they're in the gap. In 2016, you'll pay 45 percent of the cost of brand name drugs and 58 percent of the cost of generics while you're in the donut hole. Discounts increase to 60 percent for brand names and 49 percent for generics in 2017. The Medicare website offers a breakdown of the discounts through 2020, at which point the hole will be effectively closed.
Since 2010, about 9.4 million Medicare beneficiaries have saved more than $15 billion in prescription drug costs thanks to the assistance offered under the ACA. That amount equates to an average of $1,598 per beneficiary.
Long-term Benefits for Beneficiaries
If you're wondering whether your Medicare plan qualifies as minimum essential coverage under the law, then don't worry. Medicare Part A counts as minimum coverage, so you won't have to enroll in any additional insurance to meet the law's requirement. However, Part B alone does not count as minimum coverage. If all you have is Part B, then you may have to pay the individual shared responsibility fee unless you get appropriate coverage.
Changes to the Medicare program may feel unnecessary, especially if you suddenly notice a price increase that you weren't expecting or find out that certain medications will no longer be covered under the same cost tier. However, Medicare costs a lot of money to administer. Funding cuts to less efficient portions of Medicare coverage will help extend the program for future generations. Baby Boomers, who have already started retiring and will continue to do so in large numbers over the next decade, represent a substantial portion of the future beneficiary pool.
By saving money now, the government hopes to offset the cost of providing care for a larger population. In addition, new benefits and protections afforded by the ACA help make Medicare more responsible to its beneficiaries. The Medicare Hospital Insurance Trust Fund is projected to last at least thanks to funding cuts and proactive measures against fraud. You'll also receive better care in the form of free wellness checkups and screenings, which help prevent long-term issues from going unnoticed. The end goal is to promote a more financially stable government program that can properly care for its beneficiaries.
This article was last updated on October 1, 2014
Questions About Obamacare And Its Effect on Medicare
Obamacare seeks to reform the healthcare industry in America by providing better coverage and legal protections to millions of citizens, but the goal of the Affordable Care Act can sometimes get lost in translation when it comes to programs like Medicare. Many seniors have expressed concerns regarding the connection between Obamacare and Medicare and if it will negatively impact their benefits. First and foremost let us clear up any confusion, Obamacare will not hurt medicare coverage.
If you participate in Medicare or will be eligible to do so soon, then you probably want to know how the new healthcare law and regulations affect your coverage. Discussions about the impact of the Affordable Care Act on programs like Medicare often leave people more confused than confident in the new healthcare law, which is why we've created the following overview. Whether you are covered by Medicare or you know someone who is, you'll find the following article useful in keeping up with your rights and protections under the law.
Medicare Funding and Cost Distribution
Before we go over the changes to Medicare, we'll take a brief look at Medicare as it exists right now in the United States. For starters, you might be interested in knowing how Medicare gets funded and who operates the program. The U.S. Department of Health and Human Services operates the Centers for Medicare & Medicaid Services or CMS, which is the branch that manages Medicare and oversees Medicaid programs throughout the country. Medicare is funded through two trust funds managed under the direction of the U.S. Treasury: the Hospital Insurance Trust Fund and the Supplementary Medical Insurance Trust Fund. Each fund covers different aspects of Medicare, and both generate funding through taxes, Congressional budgeting and accrued interest.
Over the years, Medicare spending has increased to the point that the program no longer helps as many people as it could with the amount of money it supposedly generates. In other words, Medicare has become inflated due to administrative costs and other expenses that render it virtually ineffective to its enrollees. Obamacare addresses this cost discrepancy by establishing a plan to cut Medicare spending by $716 billion dollars over the next decade. By cutting costs to Medicare in the short-term, lawmakers hope to balance out the effectiveness of Medicare in the long-term. A balanced Medicare spending plan ensures that senior citizens and others who are eligible for the program receive maximum benefits.
Wasteful Medicare Spending Comes To An End
What happens to the $716 billion savings that are taken from wasteful Medicare spending? In essence, the money will be redistributed back into the program to help fund various aspects of Medicare. From Advantage plans to prescription drug costs, the redistributed funds will help offset the cost of care for senior citizens in America. In an effort to ensure the legitimacy of Medicare funding, President Obama has established an Independent Payment Advisory Board or IPAB to oversee the cost of Medicare and curb excessive spending. Members of the IPAB will be appointed by the president and approved by the U.S. Senate to serve terms lasting six years.
The Affordable Care Act also affects how premiums are paid in the sense that the new healthcare law increases the cost of premiums for some Medicare participants and lowers the cost of premiums for others. The discrepancy in premium costs might seem unfair, but the practice is founded on the principle that Obamacare makes insurance more available and more affordable for millions of low-income families. Those who can afford to shoulder the burden of cost will be required to do so. In other words, Medicare participants who earn more money will most likely pay higher premiums than their less affluent neighbors.
One of the biggest expenditures in Medicare comes in the form of drug costs, and you probably know how expensive prescriptions can be if you already participate in Medicare. We'll address the subject of the Medicare "[hnd word="Donut Hole"]" in a subsequent section, but for now we'll point out that Obamacare strives to close the coverage gap that's responsible for inflated prescription costs. Under the ACA, senior citizens and others who enroll in Medicare will have access to prescription drugs at a reduced cost. This benefit could help offset the higher cost of premiums given that Medicare participants may not need to seek medical care as often if they have the right medication.
Improvements To Medicare Under Obamacare
You may have been given bad information when it comes to the impact of the Affordable Care Act on Medicare, and we want to highlight some of the positives of Obamacare in relation to your current or future coverage. For one thing, Obamacare does not replace Medicare at all. In fact, several of the proposed changes included in the new healthcare bill actually may improve how you receive coverage and how much treatment you receive. Under the ACA, all health insurance plans must offer free preventative care as part of the "ten essential benefits" requirement, which means that you can get yearly screenings for conditions like breast cancer or colon cancer at no out-of-pocket cost. Here are a few other improvements:
- Your prescription drug costs may go down. This is due to Obamacare's plan to close the "donut hole" that exists for people who exceed their yearly limits on prescription costs.
- Over the next 20 years, Obamacare will reduce Medicare spending by about $716 billion, and those savings will be redistributed into the Medicare program itself to reduce wasteful spending.
- You're entitled to all of the same rights and benefits as other American citizens when it comes to healthcare. The "ten [hnd word="Essential Health Benefits"]" clause ensures that you receive adequate preventative care as well as mental health care, outpatient services, rehabilitative care and other benefits designed to keep you healthy.
- You will no longer have to delay important wellness visits for fear of reaching your Plan B coverage limits because Obamacare ensures that you receive these wellness visits without needing to pay a [hnd word="Copay"].
- Millions of additional seniors and people with disabilities will be covered under Medicare thanks to the Affordable Care Act.
- Healthcare providers across the country are starting to receive benefits for accepting Medicare, which means that you may have better access to more specialized care and more options when it comes to treatment.
You may have been told that Obamacare will force you to switch doctors, but this isn't true. You will be able to keep your current doctor as long as your doctor complies with the updated regulations under the ACA. In fact, many doctors will receive incentives for accepting Medicare and may also have access to better resources for your care. These resources will ensure that you receive consistent treatments. Not only will you be able to keep your current doctor, but you'll also receive a variety of new benefits that make seeing your primary care physician even better.
Does Obamacare Impact Medicare Part C?
Many people have expressed concern about Medicare Part C, also known as Medicare Advantage. Medicare Part C is an alternative to traditional or "original medicare" and in a short period of time, approximately less than ten years, medicare part C has become the primary preferred way that anyone over the age of 65 manages their healthcare benefits. Medicare Advantage is an excellent supplemental medicare program discussed in greater detail below. However, you don't need to worry about Medicare Advantage because Obamacare seeks to resolve spending discrepancies in this costly program. As it stands, Medicare Advantage costs private insurers more than $1,000 per person. While the ACA does not call for the complete eradication of the Advantage program, it does strive to reduce the spending and redistribute the funding for better use.
In addition to the improvements made to Medicare on a personal level, Obamacare strives to eliminate the fraud associated with the program. Medicare fraud in the United States had gotten out of control in the years preceding the implementation of the Affordable Care Act. Since the new healthcare law went into effect in 2010, the government has recovered approximately $10.7 billion in fraudulent funds. How is the government fighting fraud? Through new technology, enhanced screenings of insurers and providers, stricter sentencing on those who commit fraud, and additional resources, the government is committed to deterring fraud at all levels and making sure that Medicare stays sustainable for more legitimate enrollees.
All of these improvements add up to one larger benefit: Obamacare will strengthen Medicare by reducing wasteful spending and providing better benefits. According to estimates by the Centers for Medicare & Medicaid Services, Medicare beneficiaries will save an average of $4,200 over the next decade thanks to regular wellness visits, covered preventative care, lower prescription costs and the reduction in wasteful spending. In addition, Medicare can continue to function properly only if its trust funds are intact. The reduction of fraud and the appropriate distribution of funding ensure that Medicare trust funds will remain intact until at least 2029.
The Minimum Essential Coverage Requirement
Does Medicare coverage count toward the Affordable Care Act's "minimum essential coverage" requirement? You may have some questions regarding minimum essential coverage, and we want to help you understand what this requirement means so that you can make a more informed decision about your healthcare coverage. Under the ACA, all health insurance plans must provide for certain protections and rights. All plans on the federal and state marketplaces as well as most employer-based plans already comply with the law, but some people have questioned whether Medicare meets the requirement or not. The short answer is that most Medicare plans meet the requirement for minimum essential coverage.
What benefits are included in the requirements? Minimum essential coverage applies to all healthcare plans including Medicare. Here are the ten essential benefits that all plans must offer regardless of insurance provider:
- Ambulatory services like outpatient care
- Emergency services
- Lab services including testing
- Maternity care during and post-pregnancy
- Mental health services
- Pediatric services
- Prescription drugs
- Preventative care like annual health screenings
- Rehabilitative services and devices
- Surgery and hospitalization
As you can see, there are services listed here that you may not need as a senior citizen. For example, women over the age of 65 will unlikely need maternity care, and senior citizens in general will probably not utilize pediatric services. However, certain required services like prescription drugs and outpatient visits will undoubtedly be of value to Medicare beneficiaries regardless of age.
As mentioned above, most types of Medicare meet the requirements for minimum essential coverage, but Part B does not because it's considered supplemental insurance. Under the ACA, supplemental insurance such as dental-only or vision-only plans do not qualify as full coverage. Medicare Part B is grouped with these types of insurance. If you have Medicare Parts A and C, then you meet the requirements for minimum essential coverage. Because you have to have Part A to have Part D, Part D is lumped together with Part A to be considered full coverage. We'll discuss the different parts of Medicare in a later section, but it suffices to say that Medicare Parts A and C fully comply with the requirements of the Affordable Care Act.
If you only have Part B, then you will need to look into other options for Medicare because you'll face penalties for being non-compliant. Obamacare works on the premise that everyone will contribute according to ability, and those who can afford to obtain insurance will be required to do so under the "individual mandate." If you don't obtain insurance when you can, then you'll be assessed a penalty fee for every month that you lack insurance. Currently, the fine for individuals without insurance is the greater of $95 or one percent of your adjusted gross income. This is true even of Medicare beneficiaries provided that they only participate in Part B coverage. If you have Part A or C, then you don't need to worry about the non-compliance penalty. You can learn more about the specific coverage requirements on other sections of this site or by visiting the federal Marketplace website at www.healthcare.gov for detailed guidelines.
Medicare From A to D
As you probably know, there are different parts of Medicare that range from A to D. In this section, we'll briefly touch on the differences between the parts so that you understand the changes being made under the Affordable Care Act. In subsequent pages on this site, you can find more information on Medicare in general. For starters, Medicare actually comes in two forms: Original Medicare and Medicare Advantage. Original Medicare comprises Parts A and B while Medicare Advantage is Part C. Part D is a prescription drug plan that must be added onto Part A or Medicare Advantage if applicable. There's also supplemental insurance under Medicare called Medigap insurance.
Medicare Part A
Medicare Part A is considered hospital insurance and covers medical treatment such as hospital stays, hospice care, home health care assistance and nursing home care.
Medicare Part B
Medicare Part B is considered medical insurance and covers medical services like doctors' appointments, outpatient care, preventative treatments and medical supplies. As stated, Parts A and B fall under Original Medicare. If you enroll in Medicare, then you're automatically enrolled in both parts of Original Medicare. You have to dis-enroll from Part B if you don't want the coverage or don't want to pay the premiums for it. To enroll in Medicare in the first place, you need to be at least 65 years old, meet certain disability requirements, or qualify for end stage renal disease or ESRD.
Medicare Part C
Medicare Part C is simply another name for Medicare Advantage, which basically replaces the need for Parts A and B while adding coverage options and supplemental benefits. Medicare Advantage is not automatic, and you do need to elect this type of coverage if you want the added benefits. Obamacare changes Medicare Advantage in some significant ways. Here are a few of the changes associated with Medicare Advantage under Obamacare:
- The federal government increased the scope of the Advantage program by 0.4 percent, but insurers maintain that increased spending will actually yield lower premiums.
- Advantage plans must charge the same amount as Original plans for services such as chemotherapy, skilled nursing home assistance and services designed for specialized treatment.
- Advantage plans are not allowed to use more than 15 percent of their premiums on costs associated with administrative fees or other fees unrelated to healthcare costs.
Medicare Part D
Medicare Part D is a supplemental prescription drug program that helps Medicare beneficiaries get more affordable prescriptions than they might otherwise get through Parts A and B alone. Likewise, [hnd word="Medigap"] is a supplemental option that you can purchase if you have Parts A and B already. Keep in mind that Parts C and D as well as Medigap are offered through private companies rather than Medicare, and you can't get these options through Original Medicare.
Medicare And The "Donut Hole" Problem
If you're currently enrolled in Medicare, then you've probably heard the term "[hnd word="Donut Hole"]" more than a few times. Over the last few decades, the Medicare donut hole has grown into a serious problem that Obamacare attempts to correct through better spending and the elimination of fraudulent practices. What is the donut hole? The term "donut hole"; refers to the gap that happens when Medicare Part D beneficiaries reach the end of their prescription drug coverage limits but haven't met the spending limits for the year. During the gap, beneficiaries must pay full price for their prescriptions, and these costs can add up to substantial sums if beneficiaries spend a lot of time in the gap. Let's look at an example of the donut hole at work.
- Claudia Smith has a Medicare Part D plan and has already crossed the covered threshold for 2015, which is $2,960.00. This amount is up from 2014, when it was $2,850.00. She needs her usual blood pressure medicine but has trouble affording the out-of-pocket cost. The retail cost for the brand name drug is $100 for a 30-day supply.
- Under the ACA, Claudia can get her brand name blood pressure medicine by paying 45% of the cost (it was 47.5% in 2014). In other words, Claudia will pay $45.00 out-of-pocket for the $100 drug.
- Let's say that there's a dispensing fee for filling the medicine, and the pharmacists charges an additional $5 to dispense the blood pressure medication. Under Obamacare, Claudia will only have to pay 45% of this dispensing fee as well.
- The total cost for Claudia's $105 prescription for the drug and dispensing fee will be around $47.25. The best part is that the total cost of Claudia's transaction plus any manufacturer's discounts will be applied toward her total for the spending cap. In other words, Claudia is now at least $47.25 closer to her spending limit while getting the drugs she needs at a price she can afford.
The Affordable Care Act seeks to rectify the coverage gap situation by closing the Medicare Part D donut hole completely by 2020. By reducing the amount that seniors pay during the gap and eliminating other wasteful spending throughout Medicare, lawmakers hope to close the donut hole for good. If accomplished, this would mean that seniors and other Medicare beneficiaries would receive the drugs they need at affordable prices. The donut hole causes a lot of problems for the elderly in particular because many Medicare beneficiaries are retired or don't work due to disability. With limited income, coverage gaps impose harsh restrictions on the care that some people can receive.
Enrolling in Medicare
We'll discuss enrolling in Medicare in detail on another page, but for now we'd like to encourage you to check out the Medicare website for additional information on eligibility requirements and changes under the Affordable Care Act. Keep in mind that you cannot use the Marketplace to sign up for either Original Medicare or [hnd word="Medicare Advantage"]; you must instead visit your local Social Security office for details to enroll in Original Medicare and can shop online for a Medicare Advantage plan through a private insurance provider during the open enrollment period, which begins on October 15th and ends on December 7th of every year.
The number for the national [hnd word="Social Security Administration"] office is 1-800-772-1213, but you can also call 1-800-MEDICARE for detailed information about the signup process and other facts related to Medicare. Medicare does offer various open enrollment dates throughout the year other than the Medicare Advantage enrollment period previously mentioned, so call within three months of your 65th birthday to make sure you're on the right track. Another excellent resource for information regarding medicare enrollment and the multiple options available can be found at the website www.MedicareEnrollment.com and Medicare.net. The website has every available plan approved by CMS and is truly an unbiased source for information.
Healthcare Coverage Outside of Medicare
If you qualify for Medicare, then you can take advantage of this program to help lower your premiums and get affordable prescription drugs. However, you don't have to enroll in Medicare if you don't like your healthcare options or you want to check out the new federal Marketplace. Just remember that you can't double-dip when it comes to Obamacare. It's illegal for an insurer to sell you a plan on the Marketplace when you already have Medicare. If you want to purchase a plan through the Marketplace, then you'll need to dis-enroll from Medicare and wait until the next open enrollment period, which begins in November 2014 for the 2015 calendar year.
You also can't use the Marketplace as a form of supplemental insurance even if you only have Medicare Part B. In order to fulfill the minimum essential coverage requirements under the ACA, you'll have to enroll in additional plans through Medicare during the program's open enrollment period, which for Supplement Insurance policies runs from October 15th to December 7th. Likewise, you can't pursue other forms of insurance such as [hnd word="TRICARE"]or government assistance programs while you're enrolled in Medicare. Finally, you should note that the ACA allows dependents under the age of 26 to be covered by their parents' insurance; this is not the case with Medicare. If you have Medicare coverage, then you cannot cover your kids using Medicare. Doing so would be considered insurance fraud, and these are the types of practices that Obamacare seeks to rectify.
The Future of Medicare
Will Obamacare fix all of the problems with Medicare? In reality, no single program or law will remedy all of the issues with a broken system. However, the Affordable Care Act seeks to reduce wasteful spending across the board, eliminate fraud and provide better healthcare options for more Americans including senior citizens. These objectives will take time, and as mentioned above the changes to Medicare may take a decade to become fully implemented. During this time, senior citizens can expect better protections under the law and greater access to life-saving health screenings and lower-cost prescription medications. Obamacare alone may not be the solution to Medicare's problems, but it's a good place to start the ball rolling on healthcare reform.