Today the U.S. Senate approved a tidal wave of changes. Among these new initiatives are: guidelines for paying doctors; increases in premiums for the wealthy; Part B changes, including for preventive care services; coverage changes for Medicare Advantage (private plans); and the closing of Medicare Part D’s coverage gap (or the donut hole).
Dollars for Doctors: Improving Medicare’s Payment Process
One of the most important decisions to emerge involves sweeping changes to how doctors will be paid by Medicare. Since 2003, this has actually been a major problem for both political parties. Over the last 12 years, there have actually been 17 short-term Congressional bills passed to block cuts in Medicare doctors’ fees under the existing law.
First established by Congress in 1997, the current payment formula links Medicare spending on doctors’ services to overall economic growth. However, Medicare spending has regularly exceeded the targets. In 2014 alone, Medicare spent $70 billion to pay doctors and some other health care professionals; this represents 12 percent of all Medicare spending. And 98 percent of all Traditional Medicare (Parts A and B) enrollees visited at least one physician service last year.
This excess is supposed to be recouped in subsequent years through cuts in payment rates for doctors. Had this law not passed, doctors would have faced a 21 percent cut in Medicare fees. Therefore, they would have had to accept fewer Medicare patients. But under this new law’s formula, doctors’ payments will increase by one-half of 1 percent every year through 2019. After that, doctors will receive bonuses or penalties based on government performance scores. These scores will be based on the value of the provided care, rather than on the volume of patients seen.
In addition, the Children’s Health Insurance Program (CHIP) has been extended through 2017. Established in 1997, CHIP is a joint federal-state program that has a cost of about $13 billion. Offered through Medicaid and separate CHIP programs, that provides health insurance for 8 million low-income children. These children’s families earn too much money to qualify for Medicaid.
Bipartisan Approval and Dissent
This vote passed 92-8 in the Senate and 392-37 in the House of Representatives. The bill was drafted as the result of negotiations between House Speaker John A. Boehner and Representative Nancy Pelosi, the Democratic leader. Senate majority leader Mitch McConnell, Republican of Kentucky, said the bill was “designed to ensure that seniors on Medicare don’t lose access to their doctors.” And Senator Ron Wyden of Oregon, the senior Democrat on the Finance Committee, called the bill “a milestone for Medicare.”
President Obama also endorsed the bill, stating that it “could help slow health care cost growth.” The passing of this bill was a big issue for the President and many health policy experts. Their envision a health care system that utilizes payment based on the quality and value of care, rather than just the volume of services. The American Medical Association, a major advocate for the bill, demanded that Congress “fix Medicare now.”
But not everyone voted for this new bill. Before it passed, six proposed amendments were rejected in the Senate. On the Democrats’ side, some (including Sen. Wyden) felt it would have been more effective to extend CHIP for four years, rather than two. Democrats also wanted to increase funding for women’s health care. Meanwhile, Republicans wanted to repeal a provision of the Affordable Care Act (ACA) requiring most Americans to have health insurance. They also wanted to avoid budget deficit increases by forcing Congress to pay for the Medicare bill.
One stumbling block was the new bill’s costs. Only one-third of the costs would be covered, while the remaining $141 billion, representing costs from 2015 to 2025, would be added to federal budget deficits. According to the nonpartisan Congressional Budget Office (CBO), new spending would total $211 billion over 10 years. However, payments to hospitals, nursing homes and home health agencies would be reduced, saving Medicare more money. Regardless, many fiscal conservatives still weren’t happy about these new costs.
Increased Premiums For Some Members
These increased costs do have to be paid, though. Under the new bill’s guidelines, certain wealthier Medicare members — those with incomes exceeding $133,500 for individuals (higher for couples) – will face higher premiums beginning in 2018. And high-income seniors already paying between 50-65 percent of total Medicare premium costs, depending on income, can expect premiums to rise by 15 percent, to 65-80 percent.
In 2020, these higher premiums will begin targeting supplement insurance policies, like Medigap. These private plans typically cover most of Medicare’s deductibles and copayments. Medigap policies help pay some costs not covered by Original Medicare (Parts A and B).
But under this new bill, Medigap will no longer cover the Part B deductible. Currently, new beneficiaries pay $147 per year for this deductible. However, this won’t apply to: current Medigap enrollees, those purchasing Medigap supplements up to 2020 or those with employer plan or first dollar Medicare and employer plan coverage. With “first dollar” plans (like Medigap), deductibles and copays are paid and beneficiaries have no out-of-pocket costs.
Medicare Standard premiums for Part B costs, which cover doctor visits and related care, will also increase. According to the CBO, this coverage is expected to increase by $10 per month by 2025. At that time, the CBO predicts the current Part B premium of $104.09 will reach $181 a month.
Moving On to Medicare Advantage
Faced with rising premiums, many enrollees may decide to explore a Medicare Advantage managed-care alternative. The Kaiser Family Foundation estimates that 30 percent of Medicare enrollees currently have Medicare Advantage plans, and since 2004, enrollment has tripled. These private plans, also known as “Medicare Part C” or “MA Plans,” provides managed care options (HMOs, PPOs and PFFSs). They contract with Medicare and pay a fixed amount to provide benefits.
This new bill may cause Medicare Advantage enrollees to lose certain benefits, such as free Medigap coverage and vision benefits. And until now, other Medicare members were paying higher premiums to fund expensive MA costs. But as the new law eliminates these overpayments, Medicare Advantage may have to remove some benefits.
As Medicare Advantage plans must offer at least the same coverage as that of Original Medicare (Parts A and B, members will still receive essential services. These plans may have lower premiums than traditional Medicare. They’re allowed to include copays and deductibles for hospital and physician visits and prescription drugs, as well. Some MA plans will be awarded efficiency and performance bonuses from the federal government. So, this may actually have the benefit of eliminating weaker, less-effective MA providers.
But even with the bill’s passing, it’s not a permanent solution. Paul Spitalnic, the chief actuary of the Medicare program, believes that after 2025, the bill could lead to “a payment reduction for most physicians.” He continued: “If not addressed by subsequent legislation, we expect that access to and quality of physicians’ services would deteriorate over time for beneficiaries.”