How the Health Care Bill Impacts Retirees

From John Curry, April 22, 2010

By Emily Brandon
usnews.com, April 5, 2010

http://www.usnews.com/money/personal-finance/retirement/articles/2010/04/05/how-the-health-care-bill-impacts-retirees.html

The health reform bill, signed by President Obama on March 23, increases the services Medicare provides and reduces some prescription drug costs for seniors. The legislation also creates a voluntary long-term care insurance program and changes the ways doctors and hospitals are paid for providing services to Medicare patients. Here's a look at how the Patient Protection and Affordable Care Act will impact retirees.

Free preventative care. Patient cost-sharing for preventive services such as cancer screenings will be eliminated on Jan. 1, 2011 for Medicare beneficiaries. Government payments to doctors for preventative services will be increased. Coverage of an annual wellness visit that includes a comprehensive health-risk assessment and a personalized prevention plan will also be added to the services covered by Medicare. "It gives people an incentive to get a preventative service that they might not otherwise have done," says Jack Hoadley, a health policy analyst at Georgetown University. "Getting things taken care of early and regularly will cut the overall cost."

Prescription drug rebate. Most Medicare part D prescription drug plans have a coverage gap--often called the donut hole--during which beneficiaries must pay the entire cost of their prescription drugs. The gap begins once a senior has spent $2,830 on prescription drugs in 2010 and lasts until catastrophic coverage kicks in when a patient has spent $4,550 out-of-pocket on medications. The new legislation provides a $250 rebate to Medicare beneficiaries who reach the Part D coverage gap in 2010. "More than 3 million people with Medicare have spending in the donut hole and those seniors will see an immediate reduction in their out-of-pocket costs," says Tricia Neuman, director of the Medicare Policy Project at the Kaiser Family Foundation.

Donut filling. The donut hole will be gradually filled in before completely closing in 2020. Beginning in 2011, pharmaceutical manufacturers will be required to provide a 50 percent discount on brand-name prescriptions in the Medicare Part D coverage gap and in 2013, federal subsidies for generic prescriptions will also be phased in. The out-of-pocket amount that qualifies an enrollee for catastrophic coverage in Medicare Part D will also be reduced beginning in 2014 through 2019 until the donut hole is completely eliminated in 2020.

High-income retirees pay more. High-income retirees already pay higher Medicare Part B premiums than other Medicare recipients. While most retirees who signed up for Medicare in 2010 paid $110.50 each month, premiums for wealthier retirees ranged from $154.70 for individuals earning between $85,000 and $107,000 annually to $353.60 monthly for single tax filers with income topping $214,000 annually. These income thresholds typically increase each year, but the new legislation freezes the income thresholds from 2011 through 2019 at 2010 levels. "They are freezing the income threshold so, given inflation, it will start to affect more people over time," says Hoadley. Medicare Part D will now also charge high-income beneficiaries higher premiums. The health bill reduces the premium subsidy for individuals with income above $85,000 and couples who earn more than $170,000 annually.

[See How to Pick the Best Medicare Part D Prescription Drug Plan.]

Early retiree coverage. The health bill creates a temporary reinsurance program for employers that provide retiree health insurance coverage to former employees age 55 and older who are not yet eligible for Medicare. Starting 90 days after the bill is enacted until Jan. 1, 2014, companies that provide health benefits to early retirees and their spouses and dependants will qualify for reimbursement of 80 percent of the health costs between $15,000 and $90,000. These payments must be used to reduce costs, such as premiums or deductibles, for employees and retirees in the health plan. "Maybe this will help to slow down when the employer decides to raise that co-pay," says Hoadley.

Long-term care insurance program. The new legislation will establish a voluntary long-term care insurance program called Community Living Assistance Services and Supports (CLASS). Citizens who pay premiums into the program for at least five continuous years become eligible for payouts for community living assistance services if they become unable to perform the activities of daily living for a period of 90 days or more. The payouts will average at least $50 per day, vary based on the functional ability of the participant, and will have no lifetime maximum.

Medicare Advantage plans. Many provisions of the health legislation change how Medicare Advantage plans work. New rules prohibit Medicare Advantage plans from imposing more expensive cost-sharing requirements than those charged for traditional Medicare. Rebates for Medicare Advantage plans will be reduced beginning in 2011, while high-quality Medicare Advantage plans will receive bonus payments. "It's hard to say how plans will respond to changes over time but they are likely to make adjustments once the payment changes take effect," says Neuman. "Medicare Advantage plans are required to cover Medicare benefits, so any cuts to Medicare Advantage plans will be extra benefits such as contributions toward eyeglasses or fitness club memberships." Beginning in 2014, Medical Advantage plans will be required to spend at least 85 percent of the health insurance premiums collected on providing health care to their customers.

[See New Medicare Online Application Launched.]

Changing payment structure. The health bill changes the ways doctors are paid for the services they provide Medicare recipients. For example, hospitals with excess numbers of preventable patient readmissions will receive reduced Medicare payments for the services provided beginning in 2012. And beginning in 2015, hospitals will receive 1 percent lower payments if patients develop hospital-acquired conditions. "Patients will not see the cuts that are made to providers," says John Holahan, director of the Urban Institute's Health Policy Center. "My guess is it will largely be absorbed." Rewards will also be offered to doctors who work in the public interest. For example, primary care physicians and general surgeons who choose to practice in areas of the country with health professional shortages will receive 10 percent Medicare bonus payments beginning in 2011. The idea behind these payment changes is to reward care that helps seniors get and remain well. "I have no reason to suspect that my mother's quality of care will diminish," says Jonathan Skinner, a professor of economics at Dartmouth. "I have not warned my mother."