The Affordable Care Act and the Future of Medicare

Posted on: Wednesday, September 11, 2013

One of the hoped for consequences of implementing the Affordable Care Act was the protection of Medicare for years to come. Currently, the Medicare trustees estimated that the life of the Medicare Trust Fund will be extended to at least 2024 - an 8 year extension over their previous estimate due to mandated reductions in waste, fraud and abuse. They concluded that, in the three years since the Affordable Care Act became law, slower growth of health care costs is reducing Medicare costs, helping to curb previously skyrocketing premiums and making Medicare stronger.

The nonpartisan Congressional Budget Office estimated early in 2013 that Medicare and Medicaid spending would be 15 percent less in 2020 than was previously projected, thanks to this slower growth. Medicare spending per beneficiary rose by just 0.4% in 2012, while Medicaid spending per beneficiary dropped by 1.9% during the same timeframe. The Department of Health and Human Services, HHS, estimates that more than 6.3 million seniors and people with disabilities on Medicare have saved more than $6.1 billion on prescription drugs since 2010. Primarily, this is the result of the law’s closing of the prescription coverage gap known as “the donut hole.”

After the law was passed, the Affordable Care Act provided a one-time $250 check for people with Medicare who reached the Part D prescription drug coverage gap in 2010. Since then, individuals in the donut hole have continued to receive savings on prescription drugs. In 2013 individuals in the donut hole are estimated to be saving over 50% of the cost of branded drugs. The coverage gap is slated to close in 2020.

Along with savings on their medications, American seniors have also seen greater access to preventive services, such as mammograms, cholesterol checks, cancer screenings, and annual wellness visits, with no Part B coinsurance or deductibles. Again, HHS estimates that in 2012 more than 34 million seniors and people with disabilities with Medicare received at least one free preventive service. Significantly, hospital readmissions in Medicare have fallen for the first time on record, resulting in 70,000 fewer readmissions in the last half of 2012.

This has led to rethinking approaches to reviewing Medicare’s future. There had been concern that health plans might quit participating in the program, or drastically increase premiums because of the proposed cuts to reimbursements. However, plans to cut reimbursements to Medicare Advantage plans by 2.3 percent were reversed on April 1, 2013. Plans will now receive a 3.3 percent increase in 2014.

All of this sounds like good news for our grandparents, parents, and citizens with disabilities. To be fair, though, the report of the Medicare trustees indicates that America’s retirement system needs some significant work. The ratio of Americans over 65 to those of working age is only going to swell over the decades ahead, and this will translate into rising spending on Medicare as a share of national income. It also must be pointed out that the report was issued with an explicit caveat.

“The Board assumes that the various cost-reduction measures—the most important of which are the reductions in the annual payment rate updates for most categories of Medicare providers by the growth in economy-wide multifactor productivity—will occur as the Affordable Care Act requires. The Trustees believe that this outcome is achievable if health care providers are able to realize productivity improvements at a faster rate than experienced historically.”

Should we be encouraged? Clearly. Is there work ahead? Doubtlessly. 

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