Medicare, the national insurance program administered by the federal government, provided health insurance to 48 million Americans in 2010. On average, it covered about half the health care costs for enrollees.
Since the passage of the Patient Protection and Affordable Care Act of 2010, speculation has swirled about the sustainability of the program and possible changes it might undergo.
Medicare insurance is divided into four parts: Parts A and B, which includes hospital care and outpatient care in an open-network system; Part C, which is Medicare Advantage, the entity’s own network in which the government pays for private health coverage; and Part D, which covers prescription medications.
State Sen. Jim Wilson, D-Tahlequah, receives Veterans Administration health benefits and is also a Medicare recipient. He is a proponent of PPACA, and said the law would not expand coverage, but will require recipients to receive “better treatment.”
“My wife and I are both on Medicare Part A, but we will continue to use Health Choice, the group plan for state employees, until the end of November, when I am no longer a state employee,” said Wilson. “I have been looking at our options for Part B, Part D and supplemental plans over the last couple of weeks in preparation [for retiring from being a state employee].”
Traditionally, Medicare pays for 80 percent of expenses incurred under Parts A and B, and recipients buy supplemental insurance to help with the remaining 20 percent.
“Typically, these supplements, with a $2,000 deductible, cost $23 to $40 per month, per person, depending on age,” said Wilson. “Without the deductible, you can figure an additional $115 to $220 per month – again, depending on age. Adding Part D [for prescription medications] costs another $30 to $50 per month. You are also liable for the $100 premium to Medicare, which is usually deducted from Social Security. Depending on age, you could easily spend $250 per month, per person, out of pocket. This does not change with PPACA.”
Wilson pointed out Medicare is structured to pay for “medically necessary” treatment, and is preferable to private insurance.
“PPACA is not expanding Medicare coverage per se,” said Wilson. “It is, however, going to require people get better treatment. For instance, Medicare spends $165 million per year in Oklahoma for hospital readmissions due to mistakes and poor followup. The real value of PPACA is Medicare will finally be paying for how well the patient does, instead of the number of unnecessary procedures.”
On March 20, 2010, the non-partisan Congressional Budget Office and the Joint Committee on Taxation issued cost estimates of PPACA as amended by the Reconciliation Act. The analyses indicated that provisions in PPACA will reduce direct spending by $511 billion over between 2010 and 2019, with Medicare accounting for about $390 billion of the reduction.
According to a report by the Congressional Research Service, in March each year, the Medicare Payment Advisory Commission makes update recommendations to Congress on Medicare’s different systems. To do that, MedPAC staff examines the adequacy of the Medicare payments for efficient providers.
“Several provisions in PPACA are consistent with MedPAC recommendations to provide adequate incentives to produce appropriate, high-quality care at an efficient price,” states the report. “For example, a provision in PPACA requires the establishment of a national, voluntary pilot program that will bundle payments for physicians and hospitals as well as post-acute care services with the goal of improving patient care and reducing spending. Another provision establishes rewards for accountable care organizations that meet quality-of-care targets and reduce costs per patient relative to a spending benchmark.”
Wilson said he’s seen positive examples of this realignment here in Oklahoma.
“As an example, we have seen in Oklahoma that by reducing payments to hospitals by $1,600 and doctors by $200 for unnecessary cesarean or induced deliveries, the Health Care Authority, which is the Medicaid administrator, has achieved statistically healthier results for newborns carried to term,” said Wilson. “It’s all about the money. I think Medicare is ripe for this kind of improvement - pay for good and don’t pay for bad. Fully one-third of the [Medicare] cuts come from the Medicare Advantage program, which is nothing more than giving insurance companies at 14 to 17 percent premium for administering Medicare. It does not do away with Medicare Advantage, but does freeze payments and reimburses on better results instead of volume.”
Traditional Medicare insures those qualified with Part A to pay for in hospital services and Part B to pay a premium of about $100 per month to Medicare. Unlike private insurance, Medicare pays for anything that is “medically necessary.” In 1997, Congress passed the Balanced Budget Act, which created Part C, or Medicare Advantage.
“The original idea was the private sector could better control costs,” said Wilson. “The purpose was to allow insurance companies to make money from Medicare without risk. They were required to furnish the same services as traditional Medicare, but did not have to honor the same co-pays, giving them flexibility. After 15 years, we’ve learned we get virtually nothing for the extra cost. The private sector cannot save money, because Medicare operates with about 2 percent overhead, while private insurance in Oklahoma can make up to 40 percent overhead by law. PPACA restricts that percentage to 20 percent for small groups and 15 percent for large groups, saving consumers from more excessive overhead for salaries, advertising, etc.”
Wilson said the remaining two-thirds of the Medicare cuts will come from reimbursement to hospitals and other providers.
“One of the best-kept secrets is the providers generally agreed to these cuts, because PPACA will ensure more paying customers, ceasing the necessity of managing risk by charging some people too much just to pay for those who can’t pay,” said Wilson. “In Oklahoma, each insured person, or her employer, currently pays almost $1,000 extra per year just to compensate for the uninsured. That’s almost $4,000 for a family of four. That’s $4,000 in payroll cost that can’t be used for raises or other employee benefits.”
Wilson said another “secret” is that most hospitals and providers want PPACA to survive.
“It’s the insurance companies that are pushing back; even though they will have a bunch of new customers, they don’t want to give up their excessive margins,” said Wilson.
Following the passage of PPACA, Medicare enrollees will now be offered additional wellness and prevention benefits, including wellness visits, cancer screenings, cardiovascular screenings, diabetes screening and self-management training, glaucoma screening, HIV screening, immunizations, medical nutrition therapy for beneficiaries with diabetes or renal disease, tobacco-use cessation counseling, screening for depression in adults and intensive behavioral therapy for obesity.
Tahlequah physician James Maddison, D.O., is a nephrologist, meaning he primarily treats patients with kidney diseases. Hethinks it is too early to tell how PPACA will affect Medicare coverage overall.
“A major portion of my practice, being a nephrologist, is on Medicare,” said Maddison. “Medicare is a significant player in the patient mix that I see. It’s too early to know how Medicare coverage and reimbursement will totally be in play. In Tahlequah, with the relationships involved with Davita [a dialysis unit] and Tahlequah City Hospital, I only see good service and continued care provided for our patients. Medicare changes might even focus on level of care and service that patients receive, and I am sure the service patients receive with TCH, Davita and Tahlequah Medical Group will continue to exceed expectations.”
Overall, Maddison said he believes PPACA will improve citizens’ health.
“The spirit and intent of the ACA is to extend high-quality care and coverages to more and more people and families,” said Maddison. “This should continue to drive better health for Americans. The conventional wisdom of preventive care should reduce and address chronic conditions before they come into play, rather than curtail treatments.”
Also, over the next 10 years, recipients of Part D - or prescription drug services – will find the “doughnut hole,” or coverage gap, will close.
Right now, patients pay out-of-pocket for monthly Part D premiums, and pay 100 percent of their drug costs until they reach the $310 deductible amount. After fulfilling the deductible, a patient will pay 50 percent for brand-name drugs and 86 percent for generic drugs, while the Part D plan pays the rest, until the total spent on an individual’s drugs reaches $2,830. Once the patient reaches $2,830, he has reached the “doughnut hole,” and will now be responsible for the full cost of his drugs until the total “catastrophic threshold” of $6,440 is reached, which is $3,610 annually. After hitting this annual limit, patients are only responsible for a small amount of the cost – usually 5 percent of the cost of the drugs thereafter, which is known as “Medicare catastrophic coverage.”
Starting in 2013, under PPACA, patients will pay less and less for brand-name, Part D prescription drugs in the coverage gap. By 2020, the coverage gap will be closed, meaning a patient will only pay 25 percent of the costs of his prescription drugs until he reaches the annual out-of-pocket spending limit.
Wilson believes PPACA will provide higher levels of efficiency across the board, whether a person prescribes to private health insurance, Medicare or Medicaid.
“Concerns people have about a ‘board of bureaucrats’ deciding treatment, or about ‘limiting treatment,’ are unfounded,” said Wilson. “There will be an effort to use ‘best practices,’ and improve quality - both goals actually reduce costs while improving outcomes. Right now, insurance companies frequently require ‘pre-qualification’ or deny treatment or refuse to write policies or cancel policies - so why would we want to continue this system? As we discuss PPACA, we need to be aware every other industrialized country provides health care for their entire populations with better outcomes at 50-60 percent of our cost. Since health care consumes almost 18 percent of our economy, it is likely there are inefficiencies and, quite frankly, bad players involved in the zeal for big bucks. With decent management, we could shave $1 trillion from the $2.5 trillion cost, which is an amount equivalent to our deficit, while doing a better job of healthcare delivery.
“PPACA saved the insured money, insures the uninsured, immediately extends the life of Medicare by eight years, and most importantly, improves everyone’s health care.”
What you said
The Daily Press polled online readers, asking if they believe Medicare and Medicaid expenditures should be increased or decreased, and reminding readers Medicare generally funds health care for seniors and retirees, and Medicaid funds health care for the poor, including the working poor.
Of 158 respondents, 49 percent, or 78 voters, said both Medicare and Medicaid should be increased. Twenty-five percent, or 39 voters, said Medicare should be increased; Medicaid should be decreased.
Eleven percent, or 18 respondents, said both Medicare and Medicaid should be decreased.
Nine percent, or 15 voters, said both Medicare and Medicaid should maintain the same.
Three percent, or five voters, chose none of the given options or were undecided, and 2 percent, or three voters, said Medicaid should be increased and Medicare should be decreased.
To read the first six reports in the Patient Protection and Affordable Care Act series, visit http://tinyurl.com/cabtssb, http://tinyurl.com/bn8xrmm, http://tinyurl.com/chn x2m5, http://tinyurl.com /8ttvlns, http://tinyurl. com/blvqct7, and http:// tinyurl.com/9ryk925. To read about specific Medicare provision in PPACA, visit http:// assets.opencrs.com/rpts/11-148_20100421.pdf.
Read the law yourself
To read the entire text of PPACA, visit http://www.gpo.gov/fdsys/pkg/BILLS-111hr3590 enr/pdf/BILLS-111hr 3590enr.pdf.
The eighth in an ongoing series about the Patient Protection and Affordable Care Act will examine changes to Medicaid under the new law.