Premium Support Models Increase Costs for People with Medicare
According to a new Kaiser Family Foundation (KFF) report, up to 59 percent of Medicare beneficiaries would pay more for Medicare under a premium support model than they do in the current Medicare program. Premium support models, such as the Romney-Ryan Medicare plan, would replace Medicare’s guaranteed set of benefits with a voucher that people could use to purchase private health insurance or coverage through Original Medicare. Using data from the Centers for Medicare and Medicaid Services (CMS), the KFF report examines potential implications for beneficiaries, assuming a premium support model was fully implemented in 2010. As Kaiser warns, its study is not an analysis of any particular proposal, but rather an illustration of the consequences that a premium support system would have for Medicare beneficiaries.
Assuming current coverage preferences, the study shows that most Medicare beneficiaries (59 percent) would have paid more out-of-pocket under a premium support model in 2010. For example, 53 percent of beneficiaries enrolled in Original Medicare and 88 percent of those enrolled in private Medicare Advantage (MA) plans, would have paid higher premiums than they did under the current system. These higher premiums would not have been equally distributed throughout the country. According to the report, more than 90 percent of Medicare beneficiaries in Connecticut, Florida, Massachusetts and New Jersey would have paid higher Medicare premiums in 2010 under a fully-implemented premium support system. In contrast, less than two percent of beneficiaries in Alaska and the District of Columbia would have paid higher premiums.
While policymakers, including Presidential candidate Mitt Romney and Vice Presidential candidate Paul Ryan, claim the goal of premium support proposals is to save the government money, these models do so only by increasing out-of-pocket health care expenses for older adults and people with disabilities. Policies that aim to save money in the Medicare program should be based on solutions that preserve access to affordable health care and protect beneficiaries from shouldering additional costs, especially considering that over half of people with Medicare live on annual incomes of $22,000 or less, and already spend, on average, 15 percent of their incomes on health care costs.
Read the KFF report, “Transforming Medicare into a Premium Support System: Implications for Beneficiary Premiums.”
New Payment Policies Control Medicare Costs
The Affordable Care Act strengthens Medicare’s financial outlook without decreasing beneficiaries’ access to services or increasing out-of-pocket costs. The Congressional Budget Office (CBO) recently estimated that the ACA will reduce Medicare spending by $716 billion over ten years beginning in 2013. These savings will be achieved through delivery system reforms and efforts to minimize waste, fraud and abuse in the Medicare program. For instance, the ACA aims to gradually reduce overpayments to Medicare Advantage (MA) plans and will provide bonuses to private plans that earn high performance ratings. A new report from the Commonwealth Fund examines the potential impact of these MA payment policies, had they been fully implemented in 2009.
Prior to the ACA, the federal government paid MA plans more per enrollee than it cost to provide care under Original Medicare. In 2009, payments to MA plans exceeded projected spending for the same beneficiaries in Original Medicare by an average of 14.2 percent, or over $1,200 per enrollee. According to the Commonwealth Fund report, if the new MA payment policy enacted under the ACA were used in 2009, average reimbursements to private plans would have been equal to spending in Original Medicare—saving the Medicare program $12.7 billion total in excess payments made to MA plans.
In addition, new MA payment policies will adjust reimbursement rates to private plans based on their performance on quality measures. These changes intend to promote the efficiency of MA plans and improve the quality of care their enrollees receive. The Congressional Budget Office (CBO) estimated that this policy will save Medicare $132 billion over 10 years. As the national dialogue on the federal deficit continues, policymakers must explore changes that build greater efficiency in the Medicare program—such as the MA payment reforms described here—as opposed to reforms that merely increase costs for people with Medicare.
Read the Commonwealth Fund report, “Realizing Health Reform’s Potential.”
If your Medicare private health plan (Medicare Advantage plan) is ending on December 31, 2012, you should have received a letter from your Medicare Advantage plan by October 2, 2012, stating that the plan will no longer be available next year. You can decide whether you want to sign up for another Medicare Advantage plan or change to Original Medicare.
If you want to join another Medicare Advantage plan, you can sign up for a new plan between October 15, 2012 and February 28, 2013. It is best to sign up for a new plan by December 31, 2012 so you can get coverage beginning January 1 of next year. If you wait until January or February to enroll in the new plan, your coverage will start the first of the month after you enroll. You will have Original Medicare with no drug coverage until your Medicare Advantage plan coverage starts.
If you want to enroll in Original Medicare, you will be automatically enrolled by December 31, 2012 if you do not enroll in a Medicare Advantage plan. Your Original Medicare coverage will begin on January 1, 2013. If you do not have other prescription drug coverage, such as through your retiree benefits, you should consider enrolling in a stand-alone Part D plan that covers all of your medications.
From October 2, 2012 to March 4, 2013, you may sign up for a Medigap plan if you choose to have Original Medicare. Medigap policies help pay for gaps in Original Medicare coverage. Under federal law, if you are 65 or over, you will have a special right to buy a Medigap policy because your Medicare Advantage plan is ending. During this time, you have the right to sign up for a Medigap, and insurance companies cannot impose a pre-existing condition waiting period.
Learn more about your options if your Medicare Advantage plan is ending at www.medicareinteractive.org, or call our helpline at 800-333-4114.
Social Security and Supplemental Security Income (SSI) benefits will increase by 1.7 percent in 2013, announced the Social Security Administration (SSA) earlier this week. Also known as a cost-of-living adjustment (COLA), the increase will begin in January 2013 for people receiving Social Security benefits and on December 31, 2012 for those receiving SSI.
Read SSA’s press release.