Getting serious about health reform, part two – Medicare

As the GOP goes about repealing and replacing ACA, they’ll have to carefully consider how  Medicare will be affected, because it absolutely will be.

Briefly, reimbursement, senior drug benefits, hospital funding, and private Medicare Advantage programs were all altered by passage of ACA. Outright repeal of ACA will, according to most experts, result in higher Medicare costs in the future.

The GOP will have to walk a very narrow and tortuous path between increasing the deficit, something unacceptable to many legislators, and reducing benefits thereby angering its key constituency – seniors.

Not only did ACA make substantive and far-reaching changes to Medicare, but Medicare, Medicaid, group health and individual coverage are all inextricably linked. Reimbursement mechanisms and drivers, systems connectivity and protocols, coverage determinations and benefit design are related to, and influenced by, other payment sources.

Among the changes ACA made to Medicare are:

• transition from strict fee for service to value-based purchasing
• close the drug benefit’s “donut hole” (big out of pocket costs for recipients)
• restrain increases in Medicare Advantage premium increases until the MA programs’ performance is on par with Medicare
• fund ongoing and much-needed research

There’s been little detail from the incoming administration about future plans, however Speaker Paul Ryan’s “A Better Way” has a plan to address Medicare. It relies on privatization.  While Ryan’s website is outdated (still referring to the SGR), the “A Better Way” Plan, and recent press statements, provide some details on Ryan’s thinking about “repeal and replace”.

Before we jump into that, a word about ACA’s impact on Medicare. If ACA is repealed, there will be financial fallout for Medicare. In fact, as currently implemented, ACA’s passage has helped Medicare‘s viability.

Per Fact Check;

The law [ACA] both expanded Medicare funding — adding a 0.9 percent tax on earnings above $200,000 for single taxpayers or $250,000 for married couples — and cut the growth of future spending…The trustees’ 2010 report estimated that the ACA had added 12 years to the life of the Part A trust fund.” [emphasis added]

ACA also reduced some reimbursement (payments for imaging is one example), which many Republicans defined as “cutting” Medicare. That played well with seniors then, as most were highly protective of the system they’d been paying into for decades.

So, if ACA is repealed in its entirety, Medicare’s costs are going up.

Ryan’s solution

While there’s little in Pres. Elect Trump’s platform addressing Medicare, other GOP stalwarts have weighed To his credit, Speaker Ryan wants to improve Medicare’s future financial position; he proposes to do so by:

1. Raising the eligibility age to 67 by 2020, and
2. Dumping the current CMS-run system in favor of giving seniors vouchers they will use to buy coverage from private insurers. (currently private insurers administer the Medicare program under contract from CMS)

Financially, baby boomers MAY come out OK on the second point (except for those of us who are going to have to rely on the post-ACA private insurance market for two more years). But the Millennials and Gen Exers may well be looking at higher out-of-pocket costs if elected officials decide Medicare vouchers are just too expensive.

However, all seniors would be affected by a privatization of Medicare, and therein lies (one of) the issues.  Medicare is almost universally well-regarded and jealously guarded by seniors

• 77% of seniors say Medicare is “very important” (that’s higher than the military)
• more than 2/3rds say Medicare needs to make some changes to remain viable – but the overwhelming favorite “change” (87%) is for the Feds to negotiate drug prices
• 75% of Medicare recipients believe it is working well

Most telling for Speaker Ryan, only a quarter of respondents thought Medicare should switch to the key plank of the Ryan plan – premium supports.

Reports indicate the GOP is going to move aggressively on repealing ACA and replacing it with something else.  Given the demographics of Trump/GOP voters (mostly older), their favorable views of today’s Medicare, and their lack of enthusiasm for higher premiums or cost share, this is going to be quite the challenge.

It will also be a clear indicator of how serious the GOP is about “reform”.

What does this mean for you?

The first 100 days are going to be quite interesting- watch for the battle between those focused on their core constituency and those seeking to fundamentally change health care.