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Possible Changes in Affordable Care Act Benefits for Medicare Recipients

March 3, 2017

Possible Changes in Affordable Care Act Benefits for Medicare Recipients

As an AARP member, I recently read an important article for seniors in the January-February AARP Bulletin - "Why Medicare Matters" [see Sources below].  This article resonated with me and I wanted to share, with friends and family, some important Medicare facts regarding health care coverage for all seniors.

As you may be aware, there are efforts in Washington to repeal the Affordable Care Act (ACA), otherwise known as Obamacare.  However, many seniors and retirees may not realize that the ACA also provides benefits that Medicare recipients stand if it is repealed or replaced with a drastically-different iteration.

In addition to the repeal of the Affordable Care Act, our legacy social safety net programs (Medicare, Medicaid, and Social Security) may be in jeopardy, too.  

It's important to understand the impact an ACA repeal will have on health care coverage – including possible increases in one's overall health care costs.  These changes may include replacing ACA benefits with tax credits and substituting a voucher system (Premium Support plan) for Medicare.

The most-recent draft of the proposed replacement plan, "Patients' Protection and Affordable Care Act" (February 25, 2017) by Speaker of the House, Paul Ryan and the new Secretary of Health and Human Services, Tom Price does not specify how it will impact the lives of seniors.  Many other replacement options have been put forth by members of Congress, and will be subject to the process of "winnowing" it down to a final plan.  

The maximum dollar amount mentioned for the tax credit and voucher in the Ryan/Price plan is approximately $4,000 per person. This tax credit would be based on age, not income.  This provision may mean that Medicare recipients will be responsible for thousands of dollars of additional out-of-pocket costs, and be vulnerable to significant health risks. 

Currently, 57 million Americans are covered by Medicare, with an additional 20 million covered under ACA.  In addition, through the ACA Medicaid expansion, approximately 68 million Medicaid beneficiaries -- many of them low-income seniors -- were covered as of 2016. 

There are distinct contrasts in the current Medicare program and the plan proposed by Paul Ryan / Tom Price.  According to the AARP article I read, “Medicare is currently a ‘Defined Benefit program’, where Medicare guarantees a certain level of health coverage. Medicare pays 80 per cent of costs associated with doctor and hospital visits; the patient is responsible for the additional 20 per cent, including co-payments, annual deductibles, and premiums.  Paul Ryan's plan is a ‘Defined Contribution’ program (Premium Support) instead of a guaranteed level of health coverage.  A dollar amount would be set for Medicare Beneficiaries to pay premiums on the insurance they would buy from the market place (private insurers).” 

Under a defined contribution plan, costs would grow exponentially based on potential health care premium payments under the proposed plan.  In my case, that would mean that I would pay substantially more than what I currently pay for Medicare coverage, including my supplemental (Medigap) plan and Medicare D plan. My supplemental plan is the most comprehensive; it covers my deductible, and 100 per cent of my health costs, excluding drugs.

Drugs are costly too, and will likely be much more expensive in a new plan if the coverage gap (known as the donut hole) is not phased out as ACA provides.

We do not know how the new plan will convert the cost of premiums and other typical health care costs.  More importantly, we also do not know the level of health coverage that will be guaranteed. 

In 2009, I was covered under my employer's retiree plan – actually a relatively-expensive one then, double what I pay now for Medicare coverage.  When I inquired about purchasing coverage from the insurer directly, I found that an individual health plan from the marketplace would have cost at least three times my current premium.  If I had had a pre-existing condition, it would have been even more expensive.

How does Congress expect $4,000 to cover health care premiums, let alone deductibles, co-pays, drugs and other costs, particularly with chronic illnesses?  This is a reality check for those who are no longer working, and living on fixed incomes, especially if you have to rely on your own funds lasting another 20 years or more.

Many people over the age of 50 require individual health coverage, but are not yet Medicare-eligible. With the current ACA, that age group has the opportunity to purchase reasonably-affordable coverage.  If Congress approves the proposed replacement plan, out-of-pocket costs would be greater.  With the repeal of ACA, lifetime caps / limits may be reinstated, and high-risk pools may be created to capture those with chronic illnesses, heart disease, and cancer, paying much more for their health care. 

In the past, insurers have charged older customers significantly higher premiums than those paid by younger ones.  As a result, "Age Bands" were introduced through ACA, stipulating that insurers could charge their older recipients no more than three times the amount they charged younger ones. Under the new plan, this formula would be increased to five times

I think it is incumbent on every adult to see how the repeal of the current ACA, or its replacement, will affect their individual health care and Medicare benefits.

The following key benefits to Medicare recipients provided for in the Affordable Care Act may be removed, or modified, with an ACA repeal or replacement:

1) Free coverage for preventive care.  Yearly "Wellness" visits; mammograms; colonoscopies; screenings for cervical cancer, bone density, cholesterol and other cardiovascular diseases, depression, diabetes, hepatitis C, lung cancer, prostate cancer; as well as flu and pneumonia shots.

2) Reductions in the cost of brand-name drugs and the closing of the coverage gap (donut hole) in the part D drug benefit by 2020.  Prior to the ACA, individuals paid 100 per cent of out-of-pocket costs. With ACA, these costs decreased; in 2017, the same individuals will pay just 40 per cent of the cost of brand-name drugs while in the coverage gap. 

3) The protection of Medicare.  Because of the ACA’s reductions in waste, fraud, and abuse, as well as Medicare costs and the growth in spending, there will be future savings on premiums and co-insurance. The ACA extends the life of the Medicare Trust Fund to at least 2029, reflecting a 12-year extension based on new sources of revenue dedicated to the Medicare program, including an increase in the Medicare payroll tax on earnings of higher income workers. 

4) More support for doctors. Through the ACA’s initiatives that provide better care coordination, doctors may get additional resources that can assure you of more-consistent treatments.

Sources

Benefit information obtained from Medicare and AARP. To see additional benefits and preventive care coverage, please check the Medicare website.

Link to Medicare.gov Website:   https://www.medicare.gov/about-us/affordable-care-act/affordable-care-act.html

Link to "Why Medicare Matters"   http://www.aarp.org/politics-society/advocacy/info-2016/why-medicare-matters-special-report.html

Henry J. Kaiser Family Foundation: KFF.org