The Future of Medicare: Cutting Through the Noise


An even larger than usual amount of information has been circulating  recently regarding the future of Medicare, with the issue taking center stage as the 2012 elections loom. In fact, most everyone who finds their way to this blog has seen such information in some form. Unfortunately, not all of the information out there is accurate. Given the high stakes for this vitally important safety net program and those who depend on it, it’s worth recapping the answers to two key Medicare policy questions that have dominated the discussion in recent months:

1. By reducing Medicare spending by $716 billion over 10 years, does the Affordable Care Act (ACA) hurt seniors?

No. The ACA does not cut any services or benefits from Medicare. None. In fact, the ACA improves Medicare services by providing access to preventive benefits like potentially life-saving screenings with zero out-of-pocket costs and by gradually eliminating the “donut hole” coverage gap in Medicare Part D prescription drug coverage.

In fact, the ACA slows the growth in Medicare spending by changing the way payments are made to providers. For one, the ACA curbs the extra payments that for-profit HMOs (Medicare Advantage plans) receive in excess of the traditional Medicare rates. For another, the ACA alters the way Medicare pays for certain complex services, paying for the coordinated delivery of care rather than paying separately for each contributing piece of it.  Those are the kind of common-sense changes that ACA opponents would be hailing, if it wasn’t the ACA making it happen. They malign and misrepresent these efforts for political gain. Politics is the only reason you’re hearing “Obamacare” and “Medicare cuts” in the same sentence.

2.  Would the so-called House Republican budget (often called the Ryan budget) proposal, which seeks to replace the current Medicare program with a voucher system, “end Medicare as we know it?”

 For many, yes. Under the budget blueprint approved by the House, starting in 2023, Medicare would become a “premium support” program, which provides vouchers to seniors to purchase either a private health insurance plan or a traditional Medicare plan. By design, the voucher amount would not keep pace with costs. As a result, seniors would be stuck paying the difference, which would continue to increase over time.

Based on Congressional Budget Office estimates, this cost-shifting alone would increase total health costs paid by a senior who qualifies for Medicare in 2023 by an average of $32,900 (8% of their lifetime Social Security benefits) and by $225,200 (42% of their lifetime benefits) for a recipient who  qualifies in 2050.

To make matters worse, that’s not even the full price tag. After factoring in a conservative guess about how much more Medicare costs will rise due to decreased bargaining power and higher administrative costs and profits, seniors qualifying for Medicare in 2023 would actually incur an additional $59,500 in health costs, while those qualifying in 2050 would pay $331,200 more!

That would certainly seem to put the Medicare coverage that seniors rely on now out of reach for many or most. For them, Medicare as we know it would end.

Finally, the claim that the proposal would only affect those qualifying for Medicare after 2022 is also inaccurate. Repealing the ACA would increase total health costs of today’s65 year-olds by $11,000 on average, mostly due to higher drug costs and Medicare premiums. Proposed cuts to Medicaid, which pays for long-term care, would only add to that total.