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Q & A: What Seniors Should Know About the New Health Reform Law


Today we sat down with Policy Analyst January Angeles to discuss how the new health reform law strengthens Medicare.

January, let’s start with the concern that some seniors have about the health reform law’s impact on their benefits. A recent poll found that about half of seniors believe the new health reform law will cut benefits that are currently guaranteed to all people on Medicare. Is this true?

No, it isn’t true. And, seniors shouldn’t be worried: the health reform law does not cut the benefits that Medicare is required to cover. And that applies both to seniors in traditional Medicare and seniors enrolled in Medicare Advantage plans, which are the private insurance plans that participate in the Medicare program.

What about Medicare’s finances? Lots of seniors worry that Medicare isn’t on sound financial footing.

I know that many seniors are skeptical. But, the truth is that health reform will strengthen Medicare’s finances. In fact, the board of independent experts tasked with evaluating Medicare’s finances confirms this.

Their new report finds that overall, health reform will extend Medicare’s solvency by more than a decade. More stable finances for Medicare is great news for seniors.

How does the health reform law help stabilize Medicare’s finances?

One key way that the health reform law improves Medicare’s financial health is by taking strong steps to eliminate waste in the Medicare Advantage program. I mentioned Medicare Advantage earlier -- these are private insurance plans through which some seniors get their Medicare coverage.

These private insurers were supposedly brought into Medicare to reduce costs. But, the federal government pays these plans roughly $1,100 more per enrollee than it would pay to cover the same person through traditional Medicare, each year.

These overpayments cost taxpayers $44 billion between 2004 and 2009.

The health reform law will phase down these overpayments starting in 2012 and use some of the savings to provide bonus payments to plans that provide higher-quality care, and to begin to close the gap in Medicare’s prescription drug coverage — what many people refer to as the “doughnut hole.”

But, if Medicare Advantage plans are more expensive, does that mean that seniors in Medicare Advantage get better care than seniors enrolled in traditional Medicare?

Not at all. Right now, some Medicare Advantage plans charge more than traditional Medicare for certain expensive services like chemotherapy and dialysis. They do this in order to discourage sicker people from signing up for their plans – thus boosting their profits.

The new law restricts Medicare Advantage plans' ability to do this. That’s an important new protection for Medicare Advantage enrollees who become sick.

It turns out that a large share of the overpayments goes to padding insurers’ profits rather than providing better care. In fact, in one type of Medicare Advantage plan, less than a quarter of overpayments go toward additional benefits, on average.

Reining in the overpayments to Medicare Advantage plans helps Medicare’s finances, but what about seniors’ pocketbooks?

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.

Reducing the overpayments will keep premiums that other beneficiaries pay lower than they otherwise would be. For seniors, many of whom are living on a fixed income, that savings is a big help.

You can download a podcast of this conversation here or on iTunes.