InsuranceThought — Blogs About Insurance

With the approval of the healthcare overhaul including approximately $455 billion in spending cuts for Medicare as well as other federal healthcare programs in the next 10 years, many have questions about how the reform will affect the Medicare program for the elderly.

Will Medicare experience a cut in benefits?

Most of the spending cuts will be in Medicare Advantage, which is a program that utilizes private firms like UnitedHealth Group and Humana to provide Medicare benefits. Traditional Medicare will not suffer from cuts in budget. What will likely be cut is some of the extra coverage that Medicare Advantage private firms offer as these subsidies are brought more in line with the cost of traditional Medicare benefits. The plan will bring Medicare Advantage rates to a halt in 2011 and will then be gradually reduced; this gives the companies some time to adjust to the change in rates.

Will there be changes to the Medicare Benefit bill?

Yes, Medicare will be increasing reimbursements for primary care physicians as well as begin to pay from annual wellness visits. Health analysts believe that regular wellness checks will help improve the overall health of the elderly, thus providing better coordination of care.

The Medicare drug prescription program is being improved, closing the “donut hole” – a significant gap in coverage of prescription medication coverage. In 2010, those who fall into the donut hole will receive a rebate of $250. They will get a 50 percent discount on brand-name drugs in 2011. By the year 2020, the donut hole will be closed covering 75% of prescription costs.

How will Medicare achieve savings?

The goal of the legislation is to capture productivity savings within the healthcare system to save Medicare dollars. It will provide Medicare with the ability to test payment systems that seem to promote better efficiency and coordination of care while at the same time improving or maintaining quality of care.

The hope is that the program will save billions of dollars by not duplicating services and providing the coordination of care those with chronic conditions need. Essentially, the aim is to reform systems in a way that will reward the quality, rather than the quantity, of services.

An independent payment advisory board will be established to make recommendations on how Medicare can extend financial solvency and how to save money in the program.

More money will be put into preventing Medicare fraud as well.

What will happen to the Medicare payroll tax?

The bill will cause taxes to be increased from 1.45% to 2.35% for those who earn $200,000 or more per year and for couple earning $250,000 or more. Som investment income for those in the high-income groups will also be subject to this tax.