Health Reform:Guaranteeing Medicare’s future while protecting older adults and people with disabilities

We don’t have to ask older and disabled Americans to pay more for their health care to reduce the federal deficit. There are smarter ways to strengthen Medicare.

Health care reform slowed the growth of Medicare spending without cutting benefits for older adults and people with disabilities.

Strengthening Medicare and benefiting enrollees

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Declining ObligationsHealth care reform reduced the projected gap in Medicare’s finances, strengthening the program’s hospital insurance trust fund:

Source: Annual reports of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds, 2003-2011.Note: Projected unfunded liability for the Medicare HI trust fund decreased significantly in 2010 as a result of the Affordable Care Act, which enacted payment and delivery system reforms and increased the contribution level for the highest-income workers. In 2011, the long-term projected HI trust fund deficit increased, in part because the recent recession depressed 2010 taxable earnings considerably more than previously expected.

2003 2004 2005 2006 2007 2008 2009 2010 20110

2

4

6

8

10

12

14

16

5.9

8.2 8.6

11 11.612.4

13.4

2.4 3

75-Year Projected Unfunded Liability for Medicare Hospital Insurance (HI) Trust Fund, 2003-2011

Unfunded liability (in trillions of dollars)

Health re-form

enacted (March 2010)

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Keeping Medicare Solvent

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 20110

5

10

15

20

25

30 28 28

23

15 15

12 12 11

8

19

13

Medicare Trustees’ estimate of the period in which the HI trust fund will remain solvent

Projected years of HI trust fund solvency

Source: Annual reports of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds, 1970-2011.

After declining rapidly for nearly a decade, the Medicare trustees’ estimate of the solvency of Medicare’s hospital trust fund shot up after the passage of health reform. The dip in 2011 is related to lower than expected tax revenues caused by a weak economy.

How Did Health Reform Bring Down Medicare’s Costs?Not by cutting benefits or asking seniors to pay more

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Health Reform Tames Cost GrowthHealth reform put the brakes on rapid medical inflation, bringing the projected growth of health care spending to its lowest rate in decades. Although the health reform law will slow both public and private spending, Medicare will remain more cost-effective than private insurance:

a For common benefits. CMS, NEH Web Tables (Washington, DC: 2009), Table 13.b For total benefits. CMS, National Health Expenditure Projection, 2010-2020 (Washington, DC: 2011), Table 17.c Legislation enacted in 1997 included a number of provisions that slowed growth in payments to hospitals, physicians, and other providers and established new payment methodologies for skilled nursing facilities, home health agencies, and other service categories.d The Affordable Care Act reduced projected Medicare spending through payment and delivery system reforms and an increase in the payroll contribution from the highest-income earners.

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Health Reform Rationalizes Payment Rates

Under new rules established by health reform doctors will continue to get pay raises every year, but these raises will be about 1 percent lower than they would have been under prior law. This should save nearly $200 billion over ten years.

Graph taken from Patricia Davis et al., “Medicare Provisions in the Patient Protection and Affordable Care Act,” Congressional Research Service. November 3, 2010

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Health Reform Cuts Waste

According to The Commonwealth Fund, privately managed Medicare Advantage plans cost the federal government 13 percent more than the same care delivered through traditional Medicare. Ending these overpayments and paying private plans at the same rates as traditional Medicare will save $136 billion over the next decade, according to the Congressional Budget Office.

2011 2012 2013 2014 2015 2016 2017 2018 20190

5

10

15

20

25

30

2

6

9

13

1719

2123

25

Reducing overpayments to Medicare Advantage plans will save $136 billion over 10 years

Savings from reductions in Medicare Advantage overpayments

Source: CBO, Cost estimate for the amendment in the nature of a substitute for H.R. 4872, in-corporating a proposed man-ager's amendment made public on March 20, 2010

(in billions)

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Health Reform Fights Fraud and AbuseHealth reform included a number of provisions that strengthen Medicare’s stamp out fraud and abuse, including:• Enhanced oversight protocols, especially in areas identified as

presenting a high risk of fraud.• More funding for anti-fraud measures, such as databases to

share information between various state and federal agencies.• Stiffer penalties for violators and high standards for various

providers

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Health reform is about smart reforms to strengthen Medicare. Health reform cuts excess payments to insurance companies. It cuts spending while improving benefits. Health reform lowers out-of-pocket costs for people with Medicare.

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Health Reform Improves Benefits

Health reform saves money for Medicare enrollees. The biggest change is reform of prescription drug coverage. Before health reform, individuals were responsible for the entire cost of drugs between their drug plans’ coverage limit and a catastrophic cap of $6,154. Health reform phases out this “donut hole” in the coming decade, saving thousands of dollars for enrollees.

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020-$2,500

-$2,000

-$1,500

-$1,000

-$500

$0

Average out-of-pocket savings under the new health reform law

For all people with Medicare

For those who do not reach the "donut hole"

For those reaching the Part D "donut hole"

Source: Healthcare.gov. Estimates from a memo by John Shatto, Director of Medicare & Medicaid Cost Estimates Group, CMS Office of the Actuary, October 5, 2010.

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Health Reform Protects Pocketbooks

Source: Healthcare.gov. Estimates from a memo by John Shatto, Director of Medicare & Medicaid Cost Estimates Group, CMS Office of the Actuary, October 5, 2010.

Older adults and people with disabilities who do not use a lot of drugs also benefit from lower out-of-pocket costs under the new health reform law. Changes to premiums and coinsurance payments will reduce spending for most enrollees.2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

-$300

-$250

-$200

-$150

-$100

-$50

$0

Sources of savings for Medicare enrollees under health reform

Changes in premiums

Reductions in coinsurance payments

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Health Reform Covers PreventionUnder health reform, people with Medicare can now receive preventive medicine without any copays. Services that are now free include:• An annual wellness visit and the

creation of a personalized prevention plan.

• Blood pressure measurements and detection of cognitive impairments

• Discussion of risk factors for various conditions and a 5-year screening schedule.

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It’s important to keep Medicare costs as low as possible for the country and to guarantee health and financial security for older adults and people with disabilities.Health reform, the Affordable Care Act, proved that we can lower costs without cutting benefits or asking people with Medicare to pay more.

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Finishing the JobHealth reform improved Medicare in a number of ways, but there is plenty more that can be done to reduce costs without cutting benefits, including:• Negotiating with pharmaceutical companies to get

the best deals on brand-name drugs.• Reforming the inefficient administrative system for

“dual-eligibles,” people with Medicare and Medicaid, that splits the responsibility for millions of patients’ care between states and the federal government.

• Strengthening Medicare’s ability to control waste and fraud.