More than two years after the Affordable Care Act (ACA) was signed into law, the conservative crusade against the bill continues. Perhaps the most common attack against the law is that it hurts America’s seniors, specifically by “cutting” or “slashing” $500 billion from Medicare. In reality, ACA’s savings do not have a negative impact on current benefits – and the controversial GOP plan authored by Rep. Paul Ryan (R-WI) actually retained almost all of the spending reductions in the law. ACA also reduces overpayments to Medicare Advantage, a private alternative to the federally run plan, and creates a Senate-confirmed board of experts to find future savings. Meanwhile, conservative critics fail to mention that ACA closes the prescription drug “donut hole,” provides free preventive services to millions of seniors, and extends the program’s solvency.
Affordable Care Act Closes The Prescription Drug “Donut Hole”
“Donut Hole” Is Gap In Drug Coverage For Annual Costs From $2,830-6,440. From CNNMoney: “What’s the donut hole? In addition to a $310 deductible, Medicare beneficiaries pay 25% of their drug costs until the total reaches $2,830 for the year. Then, they fall into a coverage gap. At that point, enrollees must pay all costs out of pocket until their annual expenses exceed $6,440. After that, seniors pay 5% of drug costs for the rest of the year.“ [CNNMoney, 6/7/10]
Affordable Care Act Eliminates Coverage Gap By 2020. The Kaiser Family Foundation explains how the Affordable Care Act closes the “donut hole”:
- In 2010, Part D enrollees with spending in the coverage gap will receive a $250 rebate.
- Beginning in 2011, Part D enrollees who reach the coverage gap will receive a 50 percent discount on the total cost of their brand-name drugs in the gap, as agreed to by pharmaceutical manufacturers.
- Over time, Medicare will gradually phase in additional subsidies in the coverage gap for brand-name drugs (beginning in 2013) and generic drugs (beginning in 2011), reducing the beneficiary coinsurance rate in the gap from 100 percent to 25 percent by 2020. [KFF.org, March 2010]
The Donut Hole Got “Noticeably Smaller” In 2011, Benefitting Over 2 Million Seniors. As the Associated Press reported:
Medicare’s prescription coverage gap is getting noticeably smaller and easier to manage this year for millions of older and disabled people with high drug costs. […]
The average beneficiary who falls into the coverage gap would have spent $1,504 this year on prescriptions. But thanks to discounts and other provisions in President Barack Obama’s health care overhaul law, that cost fell to $901, according to Medicare’s Office of the Actuary, which handles economic estimates. […]
More than 2 million beneficiaries already have gotten some help, discounts that have gone largely to middle-class seniors, because the poor are covered in the gap at taxpayer expense. [Associated Press via Boston.com, 11/27/11]
5.2 Million People Have Benefited From Prescription Drug Savings. From the Centers for Medicare and Medicaid: “As a result of the Affordable Care Act, over 5.2 million seniors and people with disabilities have saved over $3.9 billion on prescription drugs since the law was enacted. The Centers for Medicare & Medicaid Services (CMS) also released data today showing that in the first half of 2012, over 1 million people with Medicare saved a total of $687 million on prescription drugs in ‘donut hole’ coverage gap for an average of $629 in savings this year. […] Coverage for both brand name and generic drugs in the gap will continue to increase over time until 2020, when the coverage gap will be closed.” [CMS.gov, 7/25/12]
Affordable Care Act Expands Preventive Care For Seniors
Medicare Beneficiaries Will Receive Free Preventive Services, Annual Wellness Visits Under Health Care Law. As Kaiser Health News reported: “Starting in January, the new health-care law will make it easier and cheaper for seniors to get preventive care. Medicare beneficiaries will be able to receive for free all preventive services and screenings that receive an A or B recommendation for seniors from the U.S. Preventive Services Task Force. That includes mammograms and colorectal cancer screening, bone mass measurement and nutritional counseling for people at risk for diet-related chronic diseases such as diabetes. Medicare beneficiaries will also get a free annual wellness visit under the new law. The visit will cover a number of services, including a health risk assessment and a review of the person’s functional and cognitive abilities. […] Currently, seniors in traditional Medicare pay 20 percent of the cost for most covered preventive services.” [KaiserHealthNews.org, 8/10/10]
- More Than 25 Million Seniors Have Received Free Preventive Services. The Centers for Medicare and Medicaid Services reports: “According to preliminary numbers, at least 25,720,996 million Americans took advantage of at least one free preventive benefit in Medicare in 2011, including the new Annual Wellness Visit. This represents 73.3% of Medicare fee-for-service beneficiaries.” [CMS.gov, 2/15/12]
Affordable Care Act Savings Do Not “Cut” Medicare Benefits
Affordable Care Act Reduces Future Medicare Spending, But “Does Not Cut That Money From The Program.” According to PolitiFact: “The legislation aims to slow projected spending on Medicare by more than $500 billion over a 10-year period, but it does not cut that money from the program. Medicare spending will increase over that time frame.” [PolitiFact.com, 6/28/12]
- CBO’s July Estimate Updates Medicare Cost Savings To $716 Billion. According to the Congressional Budget Office’s analysis of a bill to repeal the Affordable Care Act, repeal would have the following effects on Medicare spending: “Spending for Medicare would increase by an estimated $716 billion over that 2013–2022 period. Federal spending for Medicaid and CHIP would increase by about $25 billion from repealing the noncoverage provisions of the ACA, and direct spending for other programs would decrease by about $30 billion, CBO estimates. Within Medicare, net increases in spending for the services covered by Part A (Hospital Insurance) and Part B (Medical Insurance) would total $517 billion and $247 billion, respectively. Those increases would be partially offset by a $48 billion reduction in net spending for Part D.” [CBO.gov, 8/13/12]
GOP Plan Kept Most Of The Savings In The Affordable Care Act. According to the Washington Post’s Glenn Kessler: “First of all, under the health care bill, Medicare spending continues to go up year after year. The health care bill tries to identify ways to save money, and so the $500 billion figure comes from the difference over 10 years between anticipated Medicare spending (what is known as ‘the baseline’) and the changes the law makes to reduce spending. […] The savings actually are wrung from health-care providers, not Medicare beneficiaries. These spending reductions presumably would be a good thing, since virtually everyone agrees that Medicare spending is out of control. In the House Republican budget, lawmakers repealed the Obama health care law but retained all but $10 billion of the nearly $500 billion in Medicare savings, suggesting the actual policies enacted to achieve these spending reductions were not that objectionable to GOP lawmakers.” [WashingtonPost.com, 6/15/11, emphasis added]
Affordable Care Act Reduces Overpayments To Private “Medicare Advantage” Program And Lowers Future Spending
Medicare Advantage Is A Private Alternative To Traditional Medicare. According to the Kaiser Family Foundation: “Since the 1970s, Medicare beneficiaries have had the option to receive their Medicare benefits through private health plans, mainly health maintenance organizations (HMOs), as an alternative to the federally administered fee-for-service Medicare program. The Balanced Budget Act (BBA) of 1997 named Medicare’s managed care program ‘Medicare+Choice’ and the Medicare Modernization Act (MMA) of 2003 renamed it ‘Medicare Advantage.’” [KFF.org, November 2011]
“Overpayments” To Medicare Advantage Drive Up Premiums For Medicare Benificiaries. According to the Center on Budget and Policy Priorities: “In 2010, Medicare is estimated to pay private Medicare Advantage health plans between 9 and 13 percent more per enrollee than it costs to cover the same person under traditional Medicare. These overpayments, which average more than $1,100 for each Medicare Advantage beneficiary, cost Medicare nearly $44 billion between 2004 and 2009. Despite insurers’ claims, a large portion of the overpayments benefit insurers rather than provide additional benefits to enrollees. For example, the Medicare Payment Advisory Commission (MedPAC) has found that among private fee-for-service plans — one type of Medicare Advantage plan — less than one-fourth of overpayments go toward additional benefits, on average. […] By increasing Medicare costs, these overpayments also drive up premiums for the 31 million seniors and people with disabilities enrolled in traditional Medicare — by $86 for a couple in 2009. In addition, the overpayments weaken Medicare’s long-term finances.” [CBPP.org, 7/27/10, internal citations removed]
Affordable Care Act Reduces “Heftier Payments” To Private Medicare Advantage Plans. From FactCheck.org: “Whatever you want to call them, it’s a $500 billion reduction in the growth of future spending over 10 years, not a slashing of the current Medicare budget or benefits. It’s true that those who get their coverage through Medicare Advantage’s private plans (about 22 percent of Medicare enrollees) would see fewer add-on benefits; the bill aims to reduce the heftier payments made by the government to Medicare Advantage plans, compared with regular fee-for-service Medicare.” [FactCheck.org, 3/19/10]
Independent Payment Advisory Board: Finding Future Savings – Not ‘Rationing’ Care
ACA Establishes An Independent, Senate-Confirmed Board (IPAB) To Find Additional Savings. As explained by the Kaiser Family Foundation: “The 2010 health reform law (the Patient Protection and Affordable Care Act, also referred to as the ACA) establishes a new Independent Payment Advisory Board (IPAB) with authority to issue recommendations to reduce the growth in Medicare spending, and provides for the Board’s recommendations to be considered by Congress and implemented by the Administration on a fast-track basis. […] As authorized by the health reform law, IPAB is an independent board housed in the executive branch and composed of 15 full-time members appointed by the President and confirmed by the Senate.” [Kaiser Family Foundation, April 2011]
IPAB Proposals Implemented Unless Congress Finds Alternative Savings Or Supermajority Overturns Them. According to the Washington Post: “Beginning with fiscal 2015, if Medicare is projected to grow too quickly, the IPAB will make binding recommendations to reduce spending. Those recommendations will be sent to Capitol Hill at the beginning of each year, and if Congress doesn’t like them, it must pass alternative cuts — of the same size — by August. A supermajority of the Senate can also vote to amend the IPAB [spending] recommendations. If Congress fails to act, the secretary of Health and Human Services is required to implement the cuts by default.” [Washington Post, 5/8/11]
And No, IPAB Cannot “Ration” Care. According to the Kaiser Family Foundation: “The Board is prohibited from recommending changes that would reduce payments to certain providers before 2020, and is also prohibited from recommending changes in premiums, benefits, eligibility and taxes, or other changes that would result in rationing.” [Kaiser Family Foundation, April 2011]
Affordable Care Act Extends Solvency Of Medicare
“The Medicare Trust Fund Will Last Eight Years Longer” Thanks To Health Care Law. The Huffington Post reported: “The Medicare trust fund will last eight years longer than it would have without the passage of last year’s health care law, the program’s trustees announced Friday in a report. The nonpartisan lead actuary for Medicare, Rick Foster, estimated that without the health care overhaul, the program’s trust fund would have run dry by 2016. With the law in effect, Foster projected, the trust fund will last through 2024.” [Huffington Post, 5/13/11]
CBPP: “Medicare’s Financing Challenges Would Be Significantly Greater Without The Health Reform Law.” According to the Center on Budget and Policy Priorities:
Medicare’s financing challenges would be significantly greater without the health reform law (the Affordable Care Act, or ACA), which substantially improved the program’s financial outlook. […]
The 2011 report of Medicare’s trustees finds that Medicare’s Hospital Insurance (HI) trust fund will remain solvent — that is, able to pay 100 percent of the costs of the hospital insurance coverage that Medicare provides — through 2024; at that point, the payroll taxes and other revenue deposited in the trust fund will still be sufficient to pay 90 percent of Medicare hospital insurance costs. (The Medicare hospital insurance program is considered insolvent when revenues and trust fund balances will not cover 100 percent of projected costs.) Over the next 75 years, revenue will cover an average of 83 percent of Medicare’s hospital insurance costs. This shortfall will need to be closed through the provision of additional revenues, program changes that slow the growth in costs, or most likely both. But the Medicare hospital insurance will not run out of all financial resources and cease to operate after 2024, as the “bankruptcy” term may suggest.
The 2024 date does not apply to Medicare coverage for physician and outpatient costs or to the Medicare prescription drug benefit; these parts of Medicare do not face insolvency and cannot run short of funds. [CBPP.org, 7/12/11, emphasis original, internal citations removed]