Medicare and the Health Act

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During the period leading up to and just after its passage, we covered various aspects of the health-care reform act signed into law by President Obama in March: its support by pharmaceutical companies, its support by the American Diabetes Association, the inclusion of diabetes prevention funding in the bill, and other preventive health funding in the act. Now, a report from the board of trustees of Medicare has the law back in the news.

The report on Medicare’s finances, released last Thursday, predicts that under current law, Medicare will be solvent — that is, tax revenue for Medicare will be enough to cover the program’s costs — until 2029. This is 12 years longer than last year’s report predicted, mostly because of changes made to Medicare in the health-care reform act. Medicare, the federal government’s public insurance program for senior citizens, the disabled, and others, consists of hospital insurance, medical insurance (for doctor visits and non-hospital treatments), and prescription drug coverage. As an article in The New York Times notes, an aging population and the projected rise in the cost of health care — previously predicted to cause payments to exceed tax revenues for the program in 2017 — have been partially offset by spending cuts included in the health act.


According to a Reuters article from earlier this year, most of the savings in Medicare will come from cuts to the Medicare Advantage program, or Medicare Part C. This optional program replaces Parts A and B (hospital and medical insurance) for seniors who choose to enroll in it. Unlike Parts A and B, which are administered by Medicare itself, Part C plans are administered by private health insurance companies. The government spends more per person on Part C enrollees, a disparity that the health-reform law aims to correct. Payment rates to private insurance companies for Part C will be frozen in 2011, then gradually reduced after that. This will most likely result in reduced benefits under Part C plans, which often offer greater benefits that traditional Medicare (Parts A and B). Payment rates for Parts A and B, which cover the majority of Medicare enrollees, are not changed under the law. Further savings, supporters of the law hope, will come from increased spending on detecting fraud and from pilot programs to test different payment systems for Medicare. If a payment system is found to save money by reducing inefficiency and duplication of services, it might be adopted for all of Medicare in the future. Extra revenue will also come from an increase in the Medicare payroll tax, from 1.45% to 2.35%, for individuals who earn $200,000 or more and couples who earn $250,000 or more.

The law also gives all Medicare enrollees some additional benefits. Annual “wellness visits” to a primary-care doctor are now completely covered, and the coverage gap or “doughnut hole” in prescription drug coverage (under Part D, which is optional and requires a separate enrollment fee) will be reduced and later eliminated. This year, Part D enrollees will receive a $250 rebate if they land in the coverage gap, which begins after $2,700 in prescription drug payments and ends once such payments hit $6,154. In 2011, there will be an additional 50% discount on brand-name drugs purchased within the coverage gap, and by 2020 the coverage gap will be closed, with 75% of drug costs covered just as they currently are both before and after the gap in payment.

Are you an enrollee in Medicare Part C (Medicare Advantage)? How do you feel about the cuts made to that program? If you are enrolled in Medicare, are you satisfied with your current coverage? Is it a good idea to reduce some Medicare spending — or to raise some Medicare payroll taxes — to ensure the long-term stability of the program? Do you support the extra benefits included in the bill, or would it have been better to save money by not including them? Leave a comment below!

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