Wednesday, October 17, 2012

How the Affordable Care Act will Affect Seniors

During this presidential election, both candidates seem to have all the answers about how to improve the healthcare system, and so much attention has been placed on Medicare that some people have begun to panic. In all the political fireballs that have been thrown around about how much each candidate's plan will cost seniors, there has erupted a kind of "mediscare" – that isn't really necessary. 

Making Sense of the Costs


Medicare is a social insurance program that spreads the financial risk associated with illness. The government created Medicare in 1965 in order to guarantee health insurance to certain groups of people who were more vulnerable to medical conditions – such as Americans past the age of 65 or those with disabilities. Before Medicare, for-profit private insurers could hike premiums or deny coverage to people who were older or who had poor medical histories, leaving many people uninsured.

Today, Medicare faces major financial challenges, but any claim that Medicare is going bankrupt is a big exaggeration. Seniors can expect to see changes in Medicare over the next decade, but will not be stripped of coverage. Politicians have proposed a variety of options to balance the Medicare budget, most of which include cutting spending as well as raising taxes.

In order to insure some high-risk Americans who choose to receive services via private plans through Medicare Advantage, the government has been paying extra subsidies to private companies. This, in turn, has created a higher cost for seniors. The $716 billion dollars that the ACA will cut from the Medicare budget can be found in the 14-20% that the government is currently overpaying to private companies.

This reduction will occur over 10 years as the government decreases payments to drug companies, hospitals and other providers; but does not cut payments to Medicare beneficiaries. In fact, the plan promises to lower Medicare costs and premiums through implementing these cuts. Though this approach makes healthcare more affordable to the consumer, some are anticipating that hospitals and clinics will begin restricting its services for Medicare patients.

It is, in fact, Medicare's hospital coverage (Part A) fund that is depleting the most rapidly. Medicare's hospital fund is financed through payroll taxes; and the history of Medicare has seen an almost constant increase on the workforce and employers to maintain the fund. The Affordable Health Care Act will add a new tax on high-income earners that will contribute to the fund. Beginning in 2013, single taxpayers with an income of over $200,000 and married couples with a combined income of $250,000 will pay an additional 0.9% in payroll taxes in contribution to the Medicare fund.

Resources:

A Campaign Full of Mediscare

Whose Plan Destroys Medicare – Obama's or Romney-Ryan's?

A cut or Savings? The $716 Billion Question

Keeping People and Companies Accountable


The Affordable Health Care Act is making changes to protect the consumer from insurer abuses. The ACA requires that insurance companies use 80% of premiums on medical care and quality. Those companies who fail to meet the criteria will be obligated to return the difference to the American public in the form of rebates. This law was created in response to the increasing premium rates that have been fueled by rising administrative costs within the insurance industry, such as marketing and CEO salaries. The law regulates the industry's focus to a contribution to the care of patients and the health of consumers.

The ACA also hopes to bridge the gap in quality of care by providing financial incentives to hospitals. Currently, almost 20% of Medicare patients are readmitted within 30 days, which results in billions of wasted funds on preventable hospital readmissions. Hospitals that reduce these rates will receive some form of financial incentive. An additional measure to promote quality is a new regulation that will require rates of infection developed in hospitals to be disclosed to the public.

Though the ACA works to keep companies accountable, it has no set policy to keep fraudulent claims at bay. Jim Capretta, Director of e21's ObamaCare Watch Project, cited the Government Accountability Organization statistics that reveal the annual cost of fraud and abuse in the Medicare system at $60 billion. Though the Centers for Medicare and Medicaid Services are currently working to develop a system that combats fraud, the GAO has released reports that say progress has been made, but that more needs to be done. Thus, seniors and all beneficiaries of Medicare could expect stricter regulations in terms of identity protection and claim legitimacy in the future.

The ACA also includes an Elder Justice Act that will provide community education programs that will help seniors identify local scams or online fraud. This piece of legislation will also provide for victim assistance for abused or neglected elders. The ACA will provide funding for the prosecution of those who victimize seniors through fraud or by overcharging for services.

Resources:

The 80/20 Rule: Providing Value and Rebates to Millions of Consumers

Does ObamaCare cut or save $716 billion in Medicare? Depends on who you ask

Affordable Care Act: What you Don't Know could Help You

Managing Prescription Costs


A report released in August by the U.S. Department of Health and Human Services cited 5.4 million Medicare patients had saved more than $4.1 billion on prescription drugs in 2011. These savings came from a 50% discount on covered brand-name drugs and a discount on generic drugs. The initiative is the first step of a 10-year course that will provide 100% of prescription drug coverage for seniors on Medicare. This course of action is referred to as "closing the donut hole".

Resources:

People with Medicare Save More than $4.1 billion on Prescription Drugs

Understanding the IPAB Board


Recently, the IPAB Board has come under scrutiny of those who oppose the ACA. This new government agency is the Independent Payment Advisory Board. It was created in accordance with the ACA in 2010, and its primary agenda is to regulate Medicare spending without affecting coverage. The IPAB Board is explicitly restricted from recommending rations to healthcare. It cannot decide to raise premiums, increase deductible, coinsurance or co-payments. It also cannot change eligibility requirements, restrict benefits or make recommendations for revenue accrual.

So what can this board do? The IPAB board will make broad policy decisions that will affect Medicare's overall cost. The board can reduce how much the government pays health care providers. It can reduce payments to hospitals with high readmission rates. The board can also recommend ways to cut wasteful spending.

The IPAB has the big task of keeping Medicare on budget while also keeping the quality of care up to par. The IPAB can, in no way, determine what types of services or treatments are offered by Medicare. The anticipated issue continues to be that by restricting payment to doctors and hospitals, these institutions will lose money and will resist receiving Medicare patients. This means it may become more difficult for patients to find a hospital that accepts Medicare.

Resources:

Paul Ryan said "15 Unelected, Unaccountable Bureaucrats" could "Lead to Denied Care for Current Seniors”

Brenda Watson is a former HR coordinator who currently writes for healthinsurancequotes.org. When she's not writing, you can find Brenda quilting or baking casseroles. To reach Brenda, you can leave her a comment! She loves hearing from readers.

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