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Affordable Care Act & Medicare

The Affordable Care Act makes significant changes to our health care system, especially in Medicare, that will greatly impact American seniors.

Affordable Care Act & Medicare

To The Point

There are always misconceptions about Medicare, but with the roll-out of the Affordable Care Act’s health insurance exchanges, the confusion is at an all time high. So before I get into how Obamacare will impact Medicare, I would like to clear up two misunderstandings about the Affordable Care Act in regards to Medicare.

  • 1Medicare participants are not required to use the health exchanges in any way. The Medicare program is completely separate.
  • 2Medicare participants are considered insured under the Patient Protection and Affordable Care Act. As a result, will not be subject to the Affordable Care Act’s Tex Penalty.

Obamacare’s Impact on Medicare

The potential changes Obamacare will make to Medicare must be viewed in the overall context of the Medicare program. Medicare’s financial future is already uncertain and the Affordable Care Act’s long term impact has been debated by Republicans and Democrats since the law was signed in 2010. Unfortunately, we won’t know the long term affects for a while. Below, are potential impacts we may see in the short term.

Less Plan Options

Obamacare significantly reduces payments to Medicare Advantage (MA) plans. Medicare Advantage plans are attractive to seniors because they offer more comprehensive coverage than traditional Medicare by capping out-of-pocket costs and offering drug coverage. In addition, MA plans often have little to no premium. With a reduction in payments to these plans, carriers are likely to offer less plans, if any at all.

Higher Part D Premiums

Obamacare gradually reduces prescription drug out-of-pocket costs in the coverage gap, commonly referred to as the “donut hole,” until the gap is completely phased out in 2020. While this will help a number of seniors who face the gap, it will increase the cost of the Part D benefit, a portion of which will be passed on to the beneficiaries.

Less Access To Physicians

Doctors are already leaving the Medicare program, due to ever-increasing government regulations and the uncertainty regarding reimbursement rates. The Centers for Medicare and Medicaid Services released information that 9,539 physicians who had accepted Medicare opted out of the program in 2012, which is significantly more than the 3,700 who dropped out in 2009¹.

In addition, Obamacare gives new powers to make additional cuts in Medicare through the Independent Payment Advisory Board (IPAB). IPAB is comprised of 15 unelected officials given the task of meeting a newly created Medicare spending target. If spending exceeds the target, the board is to make recommendations to Congress to rein in spending. Congress must accept its recommendations or enact reforms with equivalent savings. One of the only significant tools available to IPAB to reduce Medicare spending is to cut physician reimbursement rates². It is likely that more physicians will choose to leave the Medicare program in coming years.

New, Higher Taxes

Obamacare will also cause seniors to pay higher taxes. The higher taxes on prescription drugs and medical devices will become more significant as they rely more on those very products. Older people, of course, have higher health costs than younger people, but the existing “above the line” tax deduction for medical expenses has been raised from 7.5 percent to 10 percent of adjusted gross income making it even more difficult to take these deductions (the reduced tax deductibility of medical expenses is waived for seniors only from 2013 to 2016). In addition, older people have had to time to accumulate wealth, and therefore have larger investments than younger people, so high-income seniors will be more heavily affected by the new 3.8 percent Medicare tax imposed on unearned or investment income.

References

At Your Service…

Affordable Care Act Overview and Guide

We are here to help every step of the way. If at any time you have questions about a health plan, a qualifying life event or just want to double check something, ChooseMyPlan can help you find health coverage that fits your needs, as well as see if you qualify for a government subsidy to help pay for it.