Medicare and the Health Act

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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  • Padraig

    I am just sick of the politicians, mostly on the right, who keep attacking the health care bill that President Obama signed. The attacks I see are all blatantly and demonstrably based on lies and are meant to confuse the public in an attempt to gain political advantage. It is not limited to just one party. My congressman is Dan Lipinski, a conservative Democrat, and he just sent out a mailer (paid for by my tax dollars!) and he included an article attacking the health care bill for costing too much, despite the fact that the CBO (a nonpartisan arm of the House reponsible for providing accurate accounting of the costs and benefits of bills like this) clearly demonstrated that this health care bill will not only help make health insurance accessible to nearly all Americans but will also reduce the deficit. It’s time we got the truth from politicians. The health care bill is a good law, especially for those of us with diabetes, who must rely on access to health care in order to stay alive!

  • Bill

    There are things that are good and things that are bad about the new health care. One of the bad things is that the IRS is now Big Brother and the tax code has been modified to allow the IRS to impose the fines if you don’t have insurance. The other thing is that now a small business owner has to file a 1099 form for any cumulative expenses in excess of $600.00 annually. What do these things have to do with Health Care? The tax fairness act that is currently in the Senate will take away the ability to pay insurance premiums with pre tax dollars. This reduces your take home pay. Also the tax fairness act places a cap on FSA accounts of 2500.00 and does not allow pretax payments to that as well. So again reducing your take home pay. The cost of my insulin, Doctors, eye care, foot care and heart medicine now costs me $4000.00 per year since my company no longer provides the care it once did. They raised the deductible, and the premiums before the fix could go in and now I am going to be one of those people that have to decide between food and insulin. I am not old enough for medicare and the last insult is that my health insurance is considered a “cadillac” plan and I will have to pay a fine for that… So whose back does the reducing of the deficit ride.? Additionaly the CBO revised their figures as to cost and they have stated that the cost to the American people will be higher than originally stated.
    These are not scare tactics, they are cold hard facts that any reasoning person could find out if they took the time to investigate this on their own rather that take the word of politicans that are corrupt anyway. My congress person, sent me a rah rah speach rather than address these questions. She asked don’t you trust me after she said she had not read the bill. One thing is certain, there will be no death panels … those ‘
    of us who can’t use medicare now and have serious health problems will die before we can. I suppose that is a good way to get rid of the genetically inferior in this country.

  • Donna C

    If you want to know how the new health care bill will affect you, go to the website of Senator Tom Coburn, a physician. He and his staff have put together a comprehensive analysis of the bill and its effects.

  • Bill

    I already know, and I have described them in my previous post.

  • Bill

    Another thing, the hnorable Senator does not include the change to section 501C of the tax code authorizing the IRS to monitor your compliance with the new law and extracting the fine if any as if it were income tax …. subject to the same penalties…. It also does not cover the 1099 issue either …. I recieved one of these rah rah letters from my congress woman when I asked her. They will not tell you the truth about the entire Bill….. I am going to lose a lot of expendable income next year and it gets progressively worse as it goes along.

  • Donna C

    To the Bill whose comments are shown above: You are obviously well informed. My suggestion (to read Senator Coburn’s analysis of the new healthcare law) was not directed to you. It was directed to those who are not well informed.

  • Dr. Kenneth Rehm

    I am interested to know the effects of the new healthcare changes on diabetic foot and wound care.

  • Peter

    I would take everything Senator Coburn says with a grain of salt. He has a very specific ideological perspective and is far from being an honest broker.

    We have to pull together. The bill needs to be improved. There needs to be some viable competition to the insurance industry. We already have death panels, they are called medical insurance companies. The mandate is necessary to prevent those of us who see the worth of the change and participating in good faith from having to underwrite someone who doesn’t get in until they require more services. At which time they will become disabled and we’ll be supporting them lock, stock and barrel.

    With all of the folks who have lost their jobs and with that they have lost their health insurance. These people will be able to find insurance coverage. As diabetics, we live closer to the edge than the average citizen. I know so many who are uninsured and have to absorb the cost of their medical supplies on their own. That is morally wrong. We will all benefit from these changes.

    I am not a total fan, but I see the need for a different way of doing things. I’m very irked that in 2014 they will limit my flexible spending account to no more than $2400. I blow through the $5000 my employer lets me deposit in my FSA without a problem. We have some expensive habits and supplies aren’t cheap either. That reduction by more than half is going to smart.

    The way I look at it is, I need to give to get. I am reaping benefits already. Much of our preventative care and lab work will be completely covered by our existing plans. Kids can’t be denied coverage based on pre-existing conditions. Next year, no pre-existing conditions for anyone. That is progress.

    Funding for prevention and research regarding diabetes is a win-win. There’s a lot of good that’s going on. Why not a Medicare buy-in? I’d rather pay my insurance premiums to someone who isn’t going to make money if they get to rescind my policy.

    Health insurance for profit is a ridiculous idea. It’s not a profitable business. United just posted spectacular earnings. They exceeded Wall Street expectations. That’s money that did NOT go toward health care or to make anyone feel better. Medical Loss Ratios mean making the policyholders pick up more of their health care costs. That ain’t right.

  • Peter

    Section 501c of the IRS tax code:

    Exemption Requirements – Section 501(c)(3) Organizations

    To be tax-exempt under section 501(c)(3) of the Internal Revenue Code, an organization must be organized and operated exclusively for exempt purposes set forth in section 501(c)(3), and none of its earnings may inure to any private shareholder or individual. In addition, it may not be an action organization, i.e., it may not attempt to influence legislation as a substantial part of its activities and it may not participate in any campaign activity for or against political candidates.

    Organizations described in section 501(c)(3) are commonly referred to as charitable organizations. Organizations described in section 501(c)(3), other than testing for public safety organizations, are eligible to receive tax-deductible contributions in accordance with Code section 170.

    The organization must not be organized or operated for the benefit of private interests, and no part of a section 501(c)(3) organization’s net earnings may inure to the benefit of any private shareholder or individual. If the organization engages in an excess benefit transaction with a person having substantial influence over the organization, an excise tax may be imposed on the person and any organization managers agreeing to the transaction.

    Section 501(c)(3) organizations are restricted in how much political and legislative (lobbying) activities they may conduct. For a detailed discussion, see Political and Lobbying Activities. For more information about lobbying activities by charities, see the article Lobbying Issues; for more information about political activities of charities, see the FY-2002 CPE topic Election Year Issues.