Understanding what changes to expect
The Affordable Care Act (ACA), also known as Obamacare, made significant changes to the healthcare industry in the United States starting in 2010. Several of these changes centered on the social insurance policy of Medicare, including the way that Medicare is administered and distributed. Sorting through Medicare policies can be challenging enough, without the addition of new health insurance regulations.
We wanted to help our readers gain a better understanding of the way that the Affordable Care Act affects this long-standing federal program. In the following sections, we’ll outline some of the most important changes to Medicare, as well as how these changes affect you as a beneficiary. Just to quickly set your mind at ease, Obamacare does not negatively impact your Medicare benefits. This detailed article explains why that is.
Medicare and the Healthcare Marketplace
Confusion abounds when it comes to Obamacare. One of the things people fear most is that their insurance will change drastically if they enroll in a plan through the federal health insurance exchange or Marketplace. The Marketplace exists to help uninsured Americans find affordable plans through a variety of providers, including private and government-sponsored.
However, the Marketplace has nothing to do with Medicare. In fact, you don’t need to use the Marketplace at all to find coverage if you are enrolled in Medicare or will enroll in the future. As a Medicare beneficiary, you don’t have to worry about signing up for a plan on the Marketplace or adhering to its open enrollment guidelines.
The new health insurance exchange website makes it easy for people to find insurance. But Medicare beneficiaries will use the same system they’ve always used to enroll in an insurance plan. Beginning three months before your 65th birthday, or your 25th month of disability if you qualify for Social Security benefits, you can sign up for Medicare by:
- Visiting the Social Security website
- Calling your local Social Security office
- Making an in-person appointment with a representative at your local Social Security website.
- Enrolling in a Medicare Advantage plan with a private insurance carrier.
You can’t use the Marketplace to buy insurance. In fact, you’re not allowed to double up on insurance using the Marketplace if you have Medicare.
Does Your Medicare Coverage Meet the Affordable Care Act’s Individual Mandate?
Under the ACA, every eligible American citizen needed to obtain health insurance or face a penalty fine issued by the IRS during their annual taxes. Known as the “individual mandate,” it played an important role in the funding and ongoing sustainability of Obamacare.
Fortunately, if you had Medicare Part A, then you met the individual mandate requirement up until this year, and you didn’t need to do anything else to prove your compliance. Medicare Part B alone did not count.
In 2019, the individual mandate gets repealed thanks to the Tax Cuts and Jobs Act of 2017. Starting January 1, 2019, the penalty fee for not having health insurance gets zeroed out, which effectively voids the mandate. So you won’t need to worry about meeting that requirement anyway in the future.
You can use the Marketplace to find insurance before you’re eligible for Medicare. Up until your 65th birthday, you must have health insurance either through your employer, your spouse or through a private carrier or a state, federal or private exchange. After you turn 65, the rules change.
It’s illegal for an insurer to sell you a plan through the Marketplace if you’re eligible for Medicare. Plus, Medicare coverage will most likely be less expensive than a private plan anyway. As you approach your 65th birthday and your initial enrollment period of seven months, plan to cancel your health insurance, if you’ve signed up for coverage on the Marketplace.
And if you think you need more coverage than Medicare affords? There are other options available to senior citizens and people with certain medical conditions within the Medicare system. You could enroll in a Medicare Advantage Plan or buy Medigap supplemental insurance. However, you can’t continue to enroll in a plan on the Marketplace if you have Medicare or qualify for Medicare. You can keep your Marketplace coverage if you already have it prior to enrolling in Medicare. But you will lose tax credits and other financial assistance through the Marketplace when you enroll in Medicare Part A.
Essential Healthcare Benefits for All Americans
One of the biggest concerns among Medicare beneficiaries is that Obamacare will alter their existing coverage, so that they won’t enjoy the same benefits as before. In reality, the Affordable Care Act seeks to strengthen health insurance across the board, including Medicare. Under the law, Medicare beneficiaries should actually see better coverage and protections in some areas.
Does this mean that premiums and prices will increase? We’ll discuss the cost of Obamacare later, but suffice it to say that the benefits may outweigh the cost for many senior citizens. The ACA promises “10 essential benefits” to every insured American, and this promise extends to Medicare beneficiaries.
What are the 10 essential benefits that every insured American will receive under the new law? In essence, these benefits count as “minimum coverage,” or the idea that everyone with insurance is entitled to certain types of coverage, without needing to pay exorbitant out-of-pocket costs and high co-payments. Along with the coverage that you already enjoyed under your previous Medicare policy, you now have access to the following covered services, as part of the 10 essential benefits provision:
- Ambulatory services and outpatient care
- Emergency services
- Lab services, including testing
- Maternity care pre- and post-labor
- Mental health services
- Pediatric services
- Prescription drugs
- Preventative visits and screenings
- Rehabilitative care and equipment
- Surgery and hospitalization
You’ll note that some of these services are unnecessary for certain people. For instance, you may not need maternity care, pediatric services or emergency services. One of the arguments against the minimum coverage provision is that some people will pay for services they never use. This is a valid argument, but the cost associated with providing these benefits to every insured American is distributed equitably throughout the insured population. In other words, people who pay into the system through insurance will reap the benefits that they need, while giving others the coverage they need. Your granddaughter may not need rehabilitative care, but she may need maternity care one day.
There’s an inherent cooperative mentality built into Obamacare that helps ensure appropriate coverage for everyone who subscribes to the system. Imagine if Social Security relied entirely on dollar-for-dollar contribution totals, as many who argue against the minimum healthcare requirements often do. It would result in the top 10 percent having an excellent baseline level of Social Security benefits. Meanwhile, the remaining 90 percent, who have, in total, paid in the most to support Social Security, would be left with very little.
For some Medicare beneficiaries, the cost of coverage will increase according to need. However, Medicare premiums are not expected to rise significantly as a result of the Affordable Care Act. You will probably find that you pay the same amount for your health insurance as you did prior to the implementation of Obamacare. As mentioned above, we’ll discuss the change in premiums in a later section.
Perhaps the biggest improvement to Medicare under the ACA is that Medicare beneficiaries now have better access to potentially lifesaving preventive services and treatments. One of the benefits included under minimum essential coverage is the ability to see your doctor for yearly screenings and wellness checkups.
As we age, we tend to need more rigorous care in preventing a variety of diseases and illnesses. Yearly screenings could help keep the population healthier. This would help keep older Americans and even those without coverage from getting sick. More frequent and in-depth screenings may also reduce certain outbreaks and other medical issues.
The new standard of care for seniors
In many ways, the Affordable Care Act improves the standard of care that those with insurance receive. And, it helps to prevent the spread of diseases and other medical conditions to people without insurance. Medicare beneficiaries, in particular, gain valuable advantages, like being able to afford brand name prescription drugs or getting yearly colonoscopies to detect early forms of cancer. Obamacare seeks to help people stay healthier for longer by making better coverage an affordable option; this goal extends to Medicare beneficiaries. And despite the emphasis on better medical treatments and prevention, the new standard of healthcare doesn’t affect how you sign up for or receive your Medicare benefits.
As mentioned above, those with Medicare now have greater access to preventive care. You may be wondering how preventive care now differs from the care provided prior to Obamacare. Let’s take a look at some of the ways in which the ACA raises the standard of care for Medicare beneficiaries.
- Meet Demetrius. As a Medicare beneficiary for the last five years, Demetrius is already familiar with what Medicare covers and how his medical claims get filed.
- Demetrius is fairly healthy, but he does need to visit the doctor more frequently than some men his age, because he has a family history of diabetes and stroke.
- Under the old healthcare system, Demetrius’ premiums and out-of-pocket costs for routine doctor’s visits may have skyrocketed due to the heavy frequency and his potential for a pre-existing condition. Add to this the fact that Demetrius constantly received lengthy statements outlining his benefits and forms from various providers outlining their charges.
- The ACA mandates that patients be given clear and concise explanations of their benefits. Plus, payments have been bundled for greater clarity.
- Demetrius can now see his doctor regularly, without fear of getting hit with hefty fines. And, he can clearly read and interpret his medical bills and explanations of benefits.
In this scenario, life improved for Demetrius. He was still able to see his usual doctor, but now he had the added benefit of being able to receive more consistent preventive care. Like thousands of seniors in a similar situation, Demetrius won’t have to struggle to read extensive medical jargon. His statements will be readable and concise from this point forward. Obamacare does not affect Demetrius’ choice in providers.
Not only does Demetrius benefit from these changes, but his doctor will see some improvements, as well. Demetrius’ doctor could get some assistance when it comes to care coordination, which will help her provide consistent treatments for Demetrius. Care coordination allows doctors and other providers who participate in Medicare to coordinate treatment. In turn, this allows patients to experience consistent care, while ensuring that they don’t receive duplicate or erroneous treatments. In Demetrius’ case, his doctor could receive additional resources to make sure that Demetrius sees the right specialist if he develops any symptoms of diabetes.
It’s important to note that the new standard of care affects nonprofit hospitals, in addition to patients and providers. Nonprofit hospitals have long been considered charitable organizations, because they often provide care to people who don’t have insurance and write off the balance as charity. Under the Affordable Care Act, nonprofit hospitals must try harder to maintain their status. In general, charitable hospitals must:
- Create a written document with their policies on financial assistance for emergency medical care
- Place a cap on the cost of medically necessary services for people who qualify for financial assistance according to the hospital’s written policy
- Reasonably assess whether a patient is eligible for financial assistance, based on the hospital’s written policy, before instigating an aggressive collections process against that person
- Complete a community health needs assessment (CHNA) once every three years, along with a strategy for implementing any community health needs
Nonprofit hospitals are being held accountable for their status as a charity, just as for-profit hospitals are being held to a new standard of care. The Affordable Care Act strives to demand greater accountability, increase patient rights and provide a better standard of care throughout the American healthcare industry.
Medicare Part D: Closing the gap of prescription drug coverage
If you have Medicare Part D prescription coverage, then you may be familiar with the concept of the coverage gap or “donut hole.” The coverage gap happens when a person reaches the limit for covered prescriptions, but has to wait until he gets to the other side of the “donut” or coverage period to get covered prescriptions again.
Some people never fall into the hole, while some fall into it quickly. Whether you fall or not depends largely on the type, brand and amount of medication you take each month. The ACA wants to reduce the financial burden of Medicare beneficiaries who fall into the donut hole by providing limited cost assistance.
How does the cost assistance work? Essentially, Medicare will now pay for about half the cost of brand name prescription drugs for people in the donut hole. Each year, the amount that you have to pay for prescriptions while you’re in the coverage gap will decrease. By 2020, the Medicare donut hole will be closed for all intents and purposes. In fact, the donut hole has closed for brand name drugs as of 2019, a full year earlier than anticipated. The gap for generics is still slated to close in 2020. Here’s an example of how this will work:
- Vera takes a brand name blood thinner, such as Plavix to prevent stroke because she has a family history of heart disease. Each month, she gets a 30-day supply filled for about $215 at her local pharmacy.
- Despite the fact that she pays for Medicare Part D, Vera’s prescription costs quickly push her into the Part D donut hole. Here, she’ll have to wait until she reaches the spending limit for the year. For 2019, the out-of-pocket spending limit for Medicare Part D is $5,100; in 2018, it was $5,000.
- Under the old regulations, Vera would have had to continue to buy her monthly Plavix prescription at retail cost until she reached the spending limit. Thanks to the ACA, Vera will only have to pay 25 percent of the cost while she’s in the donut hole; this is a decrease from 2018 when it was 35 percent.
Because the gap closed early this year, this means that Vera’s $215 prescription turns into a $54 prescription; these significant savings will help Vera afford the medicine she needs to live.
What happens if Vera switches to the generic form of her drug? Clopidogrel as a generic drug is about a tenth of the cost of Plavix, but combined with other prescriptions generic drugs, can add up quickly. The ACA also reduces the financial burden of generics, but the percentage is lower until 2020. For example, in 2019 Vera would have to cover 37 percent of the cost of generic Clopidogrel, whereas she only had to cover 25 percent of the cost of the brand name drug. In essence, the Affordable Care Act helps seniors gain more affordable access to the drugs they need. It also helps them avoid high out-of-pocket costs while they’re in the Medicare Part D coverage gap.
Medicare Budget Cuts Under the Affordable Care Act
For some people, the idea that the Affordable Care Act will be cutting approximately $716 billion from Medicare is frightening. The number can seem astronomical, but in reality, this number represents a total budgetary cut over a span of about a decade.
The government isn’t cutting $716 billion all at once from a single source. Rather, lawmakers hope to minimize spending and reduce waste and fraud by millions over the next 10 years. Trimming the fat where it needs to be trimmed helps regulate Medicare in a way that’s sorely overdue. In this section, we’ll highlight some of the ways that budgetary cuts will benefit Medicare.
For starters, let’s look at a detailed breakdown of the impending budget cuts. Keep in mind that these cuts will take place gradually, so that Medicare beneficiaries don’t experience drastic premium increases at the outset. Here are a few of the intended cuts to different aspects of Medicare:
- Hospitals will absorb approximately $260 billion.
- Medicare Advantage will receive $156 billion less in funding.
- The home healthcare industry will see $66 billion in cuts.
- Skilled nursing will lose approximately $39 billion in funding.
- Hospice services will be cut by about $17 billion.
Again, these cuts will happen over a span of 10 years. By 2022, lawmakers hope to cut a significant portion of Medicare funding, so that they can redistribute these funds back into the system more effectively. Critics for this measure point out that such radical budget cuts could have a much deeper impact for the average Medicare beneficiary than has been reported so far. However, the plan is to minimize personal impact, while forcing inflated providers to make necessary changes. You’ll also note that these amounts don’t add up to $716 billion; there will be additional cuts as needed to make up the difference.
One of the secondary goals of the Affordable Care Act is to reduce the national deficit. One of the ways this can be accomplished is by cutting spending where spending can be cut. In the case of Medicare, certain practices and procedures have long been seen as unnecessarily costly. The combination of waste elimination and more rigorous fraud detection and prevention helps reduce the burden of Medicare on the national budget. In turn, these measures also may help reduce the overall national deficit over the next 10-20 years. Additionally, drastic budget cuts help extend the viability of the Medicare Trust funds to at least 2029; this is 12 years longer than previously anticipated.
A high number of baby boomers are heading into retirement and Medicare eligibility. Therefore, lawmakers needed to consider the long-term effects of the budget and the way that Medicare receives and distributes its funding. The baby boomer generation is larger than previous generations. As such, it requires much more significant healthcare in terms of yearly physicals, screenings and medical procedures. The budgetary cuts proposed by the ACA attempt to address and resolve this looming financial issue. Plus, redistributed funds help make Medicare more sustainable for future generations.
Medicare Tip: Medicare Part C, also known as Medicare Advantage, is coverage that combines Parts A, B and D in one plan. Additional, excellent information can be found at MedicarePartC.com.
Changes to Medicare premiums and payments
We mentioned above that some people will have to pay a higher premium for Medicare coverage under the guidelines of the ACA. Obamacare works on the premise that those who can afford a greater share of healthcare’s financial burden will do so through higher premiums. In general, Medicare remains largely unaffected by this premise. However, there are always exceptions to the rule.
Some Medicare beneficiaries will be charged an additional fee for certain portions of their coverage. We’ll discuss the changes to premiums and payment methods in this section. That way, you won’t be surprised if you receive a different bill from what you’re used to.
Medicare Part A is free for most Medicare beneficiaries. Medicare Part B and Medicare Part D require premiums, and since 2007, people with higher incomes have had to pay more for premiums. The individual threshold for standard Part B premiums is $85,000 per year. This means that if you earn less than that then you will only have to pay the standard premium of $135.50 per month for Part B coverage, in 2019. If you earn more than $85,000 per year as an individual, then you’ll pay a higher percentage.
The rate actually doesn’t change under the ACA. You may just experience higher premiums due to the increased benefits you’ll be receiving under the new law. Additionally, Medicare Advantage beneficiaries may see some changes in their coverage due to cuts in Medicare Advantage’s funding. While your insurer may be given incentives to offer you more coverage, the insurer may decide to drop unfunded coverage from your plan instead.
Along with the premium changes and increases, you may begin receiving statements that are “bundled” together, rather than spread out according to service. In an effort to streamline the payment process on Medicare’s end, Obamacare wants to bundle statements together. That way, Medicare pays the provider in one lump form, instead of the traditional “fee-for-service” method. For example, let’s say that you have an outpatient procedure done at your local hospital. In the past, you may have received several statements for each individual aspect of the procedure. Now, the statement will be bundled into one convenient form.
The financial changes to Medicare can be viewed in both a positive and negative light. But the primary goal of Obamacare is to help maximize the efficiency of the organization, while helping to protect the people it serves. Lower-income seniors will still be able to get the help they need to offset the cost of care, while people with higher incomes can expect to contribute a greater percentage of their resources to the system.
Medicare and Obamacare – Our conclusion
There do seem to be many changes coming to Medicare as a result of the Affordable Care Act. However, these changes are aimed at improving the system and making sure that it remains a viable way to provide health insurance for senior citizens and those with certain disabilities or terminal conditions.
Over the next decade, lawmakers hope to reduce and eventually eliminate wasteful spending and fraud. This could help strengthen the Medicare system and keep it intact for future generations. Only time will tell how effective healthcare reform will be for a system as complex as Medicare.