Since passage of the Affordable Care Act (ACA), Republicans have accused Democrats who voted for health care reform of "cutting" Medicare. At the same time, Republicans in the House of Representatives have supported three Republican budget resolutions, introduced by House Budget Committee Chairman Paul Ryan (R-WI), that retain the same savings in Medicare spending while repealing the Affordable Care Act's Medicare improvements.
The Affordable Care Act
The Affordable Care Act (ACA), health care reform legislation that was signed into law by President Obama in March 2010, includes provisions that will reduce previously-projected Medicare spending by $716 billion over ten years, from 2013 to 2023. (Congressional Budget Office, cost estimate for the repeal of the ACA, pg. 13).
This slowdown in Medicare spending comes mainly from reducing the rate of increase in payments to hospitals and other providers. Their payments will continue to rise each year but at a slower rate than before passage of the ACA. Additional savings are achieved by freezing and then gradually reducing payments to private Medicare Advantage plans to bring them in line with traditional Medicare. Previously, private plans were being paid as much as 14 percent more per beneficiary than it would cost to provide care in traditional Medicare.
The Affordable Care Act does not cut any of Medicare's benefits. Rather the savings are being used to pay for benefits that are improving health care and saving money for millions of Medicare beneficiaries. These benefits include preventive screenings and services, and annual wellness visits and personalized prevention plans with no out-of-pocket costs, as well as discounts on prescription drugs in the Part D coverage gap known as the "donut hole" which will be closed by 2020.
Because of the Medicare savings in the ACA, the projected solvency of the Medicare Part A Hospital Trust Fund has been extended by eight years, from 2016 to 2024, and beneficiaries' Part B costs are lower than projected. In 2012, for the first time ever, the Part B deductible decreased from $162 to $140 per year; and the Part B monthly premium of $99.90 was over $6.00 lower than was projected in the 2011 Medicare Trustees Report. The 2013 Part B monthly premium - $104.90 – is also lower than previously projected by the trustees.
The Affordable Care Act is reforming Medicare without dismantling the program or increasing costs for beneficiaries. The ACA also offers new incentives for providers to transform Medicare into a system that pays for quality rather than the quantity of services provided. And it strengthens Medicare's financing by increasing efforts to reduce waste, fraud and abuse. By building on the reforms in the ACA, Medicare can be strengthened and preserved for beneficiaries today and in the future.
The Ryan/GOP Budget
The Republican Budget Resolution, H. Con. Res. 25, which passed the House of Representatives on March 21, 2013, assumes the same Medicare savings that are included in the Affordable Care Act (ACA). This means that the 221 Members of Congress, including all but 10 Republicans, who voted for it also voted for the $716 billion in Medicare savings. However, they also voted to repeal all other provisions of the Affordable Care Act including the Medicare improvements. Instead of using the savings to strengthen Medicare and expand benefits, they would use the $716 billion in Medicare savings to reduce federal spending and to increase tax breaks for wealthy Americans.
In addition to retaining the ACA's Medicare savings, supporters of the Republican Budget Resolution voted for Chairman Ryan's plan to privatize Medicare and achieve savings for the federal government by ending traditional Medicare and shifting rising health care costs to seniors. Beginning in 2024, when people become eligible for Medicare they would not enroll in the current program which provides benefits. Rather, they would receive a voucher, also referred to as a premium support payment, to be used to purchase private health insurance or traditional Medicare through a Medicare Exchange.
Under Chairman Paul Ryan's budget resolution, the annual growth in Medicare spending is limited to the gross domestic product (GDP) + 0.5 percent, a rate likely to be lower than the growth in health costs. If spending exceeds this amount, beneficiaries would be subject to additional out-of-pocket costs since their voucher likely would not cover the cost of traditional Medicare or the private plan that includes their doctors.
Chairman Ryan's budget resolution calls for private plans to provide benefits that are at least actuarially equivalent to the benefit package provided by fee-for-service Medicare, which gives private insurance companies incentives to tailor their plans to attract the youngest and healthiest seniors. This would leave traditional Medicare with older and sicker beneficiaries whose higher health costs could lead to higher premiums that they and others would be unable or unwilling to pay, resulting in a death spiral for traditional Medicare. This would adversely impact people age 55 and older, as well as people currently enrolled in traditional Medicare, despite Chairman Ryan's assertion that nothing will change for them.
In addition to privatizing Medicare over time, the Ryan budget would increase the age of eligibility for Medicare from 65 to 67 by increasing it two months per year from 2024 to 2035. The Ryan budget also calls for repealing provisions in the Affordable Care Act, which will make insurance available and more affordable for 65 to 67 year olds. Without the guarantees in the ACA, such as requiring insurance companies to cover people with pre-existing medical conditions and to limit age rating, it would be very difficult and expensive for older people who would no longer be eligible for Medicare coverage to purchase private insurance.
Government Relations and Policy, March 2013