medicare and health reform

legislation's provisions intended to reduce medicare spending, cut costs for enrollees, improve service delivery

President Obama signs health reform bill"Keep your hands off
my Medicare."

There is perhaps no quote more memorable – nor more contentious – from the recent health reform battle. During the debate, reform critics warned that the ailing Medicare system would be further weakened by government efforts to restructure it. Reform supporters countered that although the program was critical to millions of Medicare-eligible Americans, it could not continue without dramatic restructuring.

In the end, reform prevailed, and the federal government quickly prepared to unroll a raft of changes to the 45-year-old program. A federal summary of the changes reveals a long list of reforms intended to contain Medicare costs while increasing revenue, improving and streamlining its delivery systems, and even increasing services to the program. So what changes are ahead for Medicare:

cost savings through medicare advantage

The new law will trim fat from Medicare by restructuring payments to Medicare Advantage. In 2011, the law will freeze the benchmark for the maximum amount paid for MA plans in each county. Then, in 2012, the government will actually begin phasing in payment reductions to Medicare Advantage.

In 2012, the government will also begin rewarding plans with higher quality ratings. And in 2014, Medicare Advantage plans will be required to maintain a medical loss ratio – the percent of premiums that actually goes back to care of customers – of 85 percent.

focus on prescription drugs

One of the most feared financial drains on enrollees is Medicare's prescription drug "donut hole." The issue was addressed immediately by the new law, which began phasing in coverage so that enrollees will pay only 25 percent of "donut hole" expenses by 2020, compared to 100 percent now.

Within months of the bill signing, Medicare began sending $250 rebate checks to anyone caught in the "donut hole." And by 2014, Medicare will provide additional relief by lowering the out-of-pocket amount enrollees pay before they reach the catastrophic coverage set by Medicare Part D.

In 2011, Part D enrollees will get added relief through federal subsidies for generic drugs purchased within the coverage gap and a 50 percent discount on brand-name prescriptions from pharmaceutical manufacturers. And in 2013, the program will begin phasing in subsidies for brand-name drugs.

Starting in 2011, the law will freeze the income threshold for income-related Part B premiums at 2010 levels. The law will also reduce the Part D premium subsidy for individuals with incomes above $85,000 and couples with incomes exceeding $170,000.

free preventive services

There's good news for those who believe in an "ounce of prevention." Starting in 2011, enrollees will have access to free preventive care from Medicare, with free "annual wellness visits," personalized prevention plans, and some screenings, including mammograms.

new funding for medicare

The health law will change the tax code as a way to increase revenue for the Medicare program. In 2013, the Medicare payroll tax will increase by .9 percent (from 1.45 to 2.35 percent) for individuals earning more than $200,000 and for married couples with income above $250,000 and who file jointly. Starting in 2013, the law will also eliminate the tax deduction for employers who receive Medicare Part D prescription drug retiree drug subsidy payments.

support for primary care physicians

In 2011, Medicare will make strides to increase – or at least maintain – the number of physicians and surgeons in underserved areas by providing a 10 percent bonus payment to primary care physicians and general surgeons who practice there between 2011 and 2015.

cost containment

The law includes roughly a dozen cost-containment provisions scheduled to begin between 2010 and 2015.

Many of the provisions involve incentives to health care providers, including payment adjustments to facilities based on productivity, and incentives for providers who demonstrate lowered Medicare spending. Starting in 2012, the law imposes payment reductions to hospitals with high numbers of preventable hospital readmissions and – starting in 2015 – to facilities with hospital-acquired conditions.

In 2014, the law will cut payments by 75 percent to disproportionate share hospitals (DSH), which treat significant populations of indigent patients. The payments would later be increased based on the hospitals' percentages of uninsured patients and uncompensated care.

Beyond those incentives, Medicare will form a Center for Medicare and Medicaid Innovation, which will test payment methods and delivery systems that lower costs and improve quality in the system. And in 2014, a Payment Advisory Board will be formed to make legislative proposals based on recommendations to reduce Medicare spending.

The legislation also already includes a controversial ban on new physician-owned hospitals with the intent of limiting possible conflicts of interest and practices that would put heavier burdens on traditional hospitals.

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