Medicare Reform Means Some Seniors Face Benefit Cuts

woman patient doctor officeFirst, the good news: According to a report released by the White House on Monday, America's new health reform law will generate $575 billion in Medicare cost savings over the next decade, allowing the program to survive until 2029. The report says this will result in lower Medicare premiums of nearly $200 a year by 2018.

Part of those savings, amounting to $5.3 billion by 2011, will come from reduced "overpayments" to Medicare Advantage, a system that allows Medicare recipients to receive benefits via private health insurance providers. The savings associated with Medicare Advantage efficiencies will rise to $145 billion by 2019.

Now for the bad news: Seniors enrolled in Medicare Advantage may soon find their that benefits have been cut. Under changes contained within America's new health reform law, reduced payments to private insurers may lead to a reduction in benefits such as dental coverage and free eyeglasses. That could trigger an exodus from Medicare Advantage plans back to traditional fee-for-service Medicare, though at much higher costs.

Shrinking the Subsidies

Since 2003, when the subsidies offered Medicare Advantage were greatly increased, the number of enrollees in such plans -- which are offered by a number of private insurance companies -- has soared. Roughly one in four Medicare recipients is now on a Medicare Advantage plan because of all the extra benefits that were offered.

The issue has become a central concern to many seniors, because the health reform law passed in March makes deep cuts in the subsidy payments Medicare makes to private Medicare Advantage plans. The Obama administration report says Medicare paid Medicare Advantage plans 14%, or $1,000 per person on average, more for health services than traditional Medicare, with "no measured differences in health outcomes." It is those extra payments that will now be eliminated.

Yet in one change to the rules which has not been widely reported, people enrolled in a Medicare Advantage plan will no longer be able to switch to another Medicare Advantage program. Instead, they will have no option but to join the traditional Medicare program if they decide to leave their current plans because benefits have been reduced under the new law.

Peter Ashkenaz, deputy director of media affairs at the U.S. Health and Human Services department of Medicare and Medicaid services, confirmed that as of Jan. 1, people enrolled in Medicare Advantage will have 45 days of open enrollment "to return to the fee-for-service program." But, he added, users will not be able to switch to another Medicare Advantage plan, as they have been able to do for the past decade.

The Challenge of Change

"Obviously if you're taking away subsidies, then [companies that provide Medicare Advantage] plans will have to review what the doing," says David Certner, legislative director for the AARP, formerly known as the American Association of Retired People. "We're likely to see some changes in some of plans."

The AARP, which supported the heath care reform law, also offers Medicare Advantage and Medigap insurance policies to its members. Certner says AARP's position is that its business side should conform to its policy side, and "that we needed to reduce some of these excess payments, but our plans would continue to operate in whatever the regime was."

Certner says the savings outlined by the Administration means the "financial solvency of Medicare is going to be improved by 12 years – that's pretty significant."

But, he added, there are concerns that projected savings in payments to health care providers like hospitals and nursing homes might limit access to those facilities. "Those are not likely to happen as much in the near term," but over longer periods of time they might have an impact, and "that's certainly something we'll be keeping our eyes on."

Mind the Gaps

Joseph Antos, a health care scholar at the American Enterprise Institute, says this change could prove extremely costly to retirees. That's because most seniors on Medicare Advantage don't have so-called Medigap policies, which are private insurance plans that pay the "gaps" in traditional Medicare coverage such as hospital deductibles and doctor co-payments.

Antos says that when patients switch from Medicare Advantage to traditional Medicare, "they will pay much higher premiums than they ever imagined possible for Medigap insurance." The reason is that most people take out Medigap coverage when they turn 65 and are healthy, while those who are older and in poorer health will now have to pay much more.

Antos said that based on the analysis of Richard S. Foster, the chief actuary of the Medicare service, some large hospitals and nursing homes may withdraw from providing Medicare services because the reimbursements are too low to be cost-effective.

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We just can't believe them!

January 22 2013 at 4:51 AM Report abuse rate up rate down Reply

Actually I cannot believe that any congressman would let this pass. I have a friend that has a father that is on Medicare and is a Dialysis in order to stay alive. Well come December 31, 2010 he will not get the Dialysis that he needs and he will die and no other insurance will cover him. I think this is some really unthoughtful forms of population control and to me this COUNTRY sucks.

October 21 2010 at 12:26 PM Report abuse rate up rate down Reply
Audio & Video

Anyone now question why voting numbers are down???
Chattanooga Tazz!!!!!!!!!
I'm and independent I'm running for whatever I can get and I promise to those who vote for me nothing Lol!

August 09 2010 at 5:00 AM Report abuse rate up rate down Reply
Wealth Builder

I'm sure not seeing how this new AOL comment thing is supposed to help keep things civil. There is not much in the way of civility here. It is just the same old folks on here crying about the same old mess, blaming politicians (none of whom give a darn about any of us--either party), and calling the president names. Neither the Republicans nor the Democrats are going to "save" anything. Big business is also not going to "save" anyone. But it is hilarious to watch you all whine and complain. Younger people are definitely watching and learning something from this and what we see is that you went blindly down whatever path of whatever politicians promised you the most stuff without understanding that it had to be paid for. Now you are running to the other side for the same sorry promises that they can't fill. Everyone wants everything and everyone wants it all for free. It is not possible.

August 08 2010 at 10:45 PM Report abuse +1 rate up rate down Reply

It didn't take the passing of Obamacare to stop Medicare fraud and waste. It's been going on out of control for years. What make anyone think the passing of Obamacare will make any difference? It's just more smoke and mirrors by the progressives.

August 08 2010 at 10:17 PM Report abuse +2 rate up rate down Reply

The President is a liar!

August 08 2010 at 9:16 PM Report abuse +4 rate up rate down Reply

AARP IS A JOKE!!!!!!!!!!!!!!!!!!!!!!!!! CROOKS!!!!!!!!!!!!!!

August 08 2010 at 8:43 PM Report abuse +3 rate up rate down Reply


August 08 2010 at 8:39 PM Report abuse +4 rate up rate down Reply
Hi Millionaires

I enjoy Medicare Advantage, HAP Program from Henry Ford and it is outstanding. Yes, I have had an increase in premiums but at this point it is minor. An Opthamologist is $30.00 co pay and any specialist tests are covered within the $30.00. We needed to leave the system due to a deadly illness and did so with complete care and coverage within the Henry Ford Advantage System. It is marvelous.

With Obama Care, having read all that we could, it appears that our premiums will rise to outlandish heights like an additonal $2000 per year per person. That is outrageous. I am giving a gift to illegals while Michelle Obama vacations at my expense in the most exclusive resort in Spain. An average suite is $2500 per day and she brought her friends and rented 60 suites!!!!! And who has to budget?????

Ultimately we will have no choice but be a part of Obama Care and if we don't pay, we are penalized--------more bankruptcies and deaths will be eminent.

Shame on our government, president and congress. This has nothing to do with our citizens. It has to do with control of the people and votes from the illegals.

Shame on our Congress for allowing this to happen. This is not wait and see but it is worse than Nancy Pelosi said, "just vote for obama care and then you will find out what's in it!) It changes with the lawsuits!

August 08 2010 at 8:20 PM Report abuse rate up rate down Reply
obama fools

what a joke party of no.................... you have house senate and have all the power and say party of no wake up your boy is a lier and a fool.............

August 08 2010 at 5:58 PM Report abuse +1 rate up rate down Reply