Many Americans have much to gain with the pending health reform legislation: the 45 million uninsured Americans; the 25 million underinsured people; those currently with health insurance paying high premiums and cost-sharing; and even the 44.8 million Americans with Medicare coverage, America’s single payer health insurance program for the elderly and disabled. While health reform benefits may be obvious for those without insurance and those who are forced to declare bankruptcy due to medical costs, not all Medicare beneficiaries believe health reform will benefit them. According to a Kaiser Family Foundation poll, 37% of beneficiaries believe Medicare will be negatively affected by health care reform, and 34% of beneficiaries think they’ll personally be worse off.
Some of these ideas stem from misleading mailings, notices, and web communications that several Medicare Advantage (MA) plan sponsors have been sending to their enrollees. For example, one plan sponsor sent a letter incorrectly claiming that proposed health care reform legislation would cut enrollees’ Medicare benefits when in fact neither the House nor Senate bills would reduce benefits provided under the Original Medicare program--benefits that all Medicare Advantage plans must offer to their enrollees. Instead, the proposed legislation seeks to cut overpayments of $170 billion in subsidies to MA plans. Plans are paid on average 14% more per beneficiary than it would cost to cover these beneficiaries in Original fee-for-service Medicare, according to the March 2009 Medicare Payment Advisory Commission (MedPAC) report. This overpayment has totaled nearly $44 billion between 2004 and 2008, an average of more than $1,100 for each beneficiary enrolled in an MA plan. While MA plans can choose to reduce any extra benefits they provide (such as free fitness classes or discounts for gym membership), they cannot cut benefits required under the Medicare program. (See a press release and recent news article for more info on this miscommunication issue). And in fact, the health reform legislation would provide many specific improvements to the Medicare program for beneficiaries as well as improve Medicare’s long-term solvency.
This article provides: 1) an update on the recently passed House bill HR 3962, Affordable Health Care for America Act, that is similar to new legislation to be debated in the Senate; 2) an outline of key Medicare improvements included in the bill; and 3) a resource list of reports and websites on health reform as it relates to Medicare beneficiaries. It is important to understand that if the Senate passes a health care reform bill, that bill and the House bill would go to a conference committee where the provisions of both would be negotiated and merged into final legislation that both the House and Senate would have to vote out of their respective houses before sending on to the President for his signature.
Current Actions & Summary of HR 3962
On November 7, 2009, the House voted 220-215 to approve the chamber's 1,990-page health care reform bill. The Congression Budget Office’s (CBO) estimated the bill would cost $1.1 trillion over 10 years and reduce the federal deficit by $104 billion.
HR 3962 would ensure insurance coverage for 96% of U.S. residents and would: create a public insurance option with physician reimbursement rates negotiated between doctors and the government; create a new insurance exchange; expand full Medicaid to those at 150% of the federal poverty level who are not on Medicare and are younger than 65 years, including those receiving Social Security Disability Insurance (SSDI) payments in the 24 month Medicare-waiting period; and allow families with incomes up to 400% of the federal poverty level to qualify for federal subsidies to purchase health insurance on the exchange. Starting in 2010, health insurers would also be:
- Prohibited from denying coverage based on pre-existing conditions;
- Banned from placing lifetime caps on coverage;
- Forbidden from dropping policies once a person becomes sick;
- Required to reveal and justify premium increases to regulators;
- No longer be exempt from federal antitrust restrictions on price fixing and market allocation.
In addition, the House bill would begin closing the Part D donut hole immediately, reducing the gap by $500 in 2010 and having the gap completely closed by 2019, versus 2024 in the earlier version. The Secretary of Health and Human Services (HHS) would be required to negotiate drug prices on behalf of Medicare beneficiaries; Part D plans sponsors would have the option to further negotiate prices down for their plan enrollees as well.
According to the CBO’s review, the bill would reduce the number of non-elderly U.S. residents who are uninsured by 36 million in 2019. It would still, however, leave 18 million U.S. residents without insurance coverage, roughly 6 million of whom would be undocumented immigrants. Insurance companies would also not be prohibited from basing their premiums on age, although both House and Senate bills attempt to cap those rates in various ways, leaving some people not yet eligible for Medicare unable or unwilling to pay those higher premiums. Some people may decide to pay any penalty imposed for not having insurance if that penalty is less than the premiums they would otherwise pay.
Medicare spending is projected to rise at an annual rate of 6% under this legislation as opposed to the 8% it has been for the past decade. Payment changes for Medicare and Medicaid would reduce projected spending by $426 billion over the next 10 years.
To prevent large deficit increases, the House bill plans to cut more than $400 billion from Medicare Advantage plans over the next 10 years, bringing their funding in line with the costs of Original Medicare. In addition, individuals whose annual adjusted gross income is above $500,000 and married couples whose annual adjusted gross income is above $1 million would be subject to a 5.4% surtax starting in 2011. This is one of the main revenue sources under the bill and is expected to raise $460.5 billion over 10 years. The tax initially would be levied on 0.3% of taxpayers but that percentage would increase as the threshold is not indexed to inflation. The House bill would also levy a 2.5% excise tax on the sale or lease of medical devices.
Key Medicare Improvements Included in HR 3962
As HR 3962 is a massive, comprehensive piece of health care legislation for all Americans, this section highlights the key provisions related to Medicare and Medicare beneficiaries. See the bill’s full text (PDF) for more information. Note that the scheduled 21% cut to physician payment is not addressed in this bill. Another bill, HR 3961, addresses this situation.
Medicare Benefit Changes:
- Provides Medicare coverage for all federally recommended vaccines, as of January 1, 2011. Also mandates that all Medicare-covered vaccines will be covered under Part B. This ensures every beneficiary has access to vaccines and should eliminate cost-sharing.
- Waives deductibles and coinsurance for Medicare-covered preventive benefits as of January 1, 2011. This is in line with the legislation’s overall focus on prevention of health conditions.
- Requires Medicare to cover immunosuppressive drugs indefnitely for kidney transplant recipients. Immunosuppressive drugs are currently covered for 36 months.
- Extends the Qualified Individual (QI) program through 2012. This program pays the Part B premium for beneficiaries with incomes between 120%-135% of the federal poverty level (FPL).
- Increases the asset limit used for determining beneficiaries’ eligibility for the Medicare Savings Programs (MSPs) and for Part D low-income subsidy (both full and partial) to $17,000/individuals and $34,000/couples effective January 1, 2012. Also indexes the asset limit to inflation in following years.
Medicare Advantage (MA) Plan Enrollment & Consumer Protections:
- Starts and ends the annual coordinated election period (ACEP) for MA and Part D plans 2 weeks earlier (November 1 through December 15) to provide the Centers for Medicare & Medicaid Services (CMS) and plans additional time to process enrollment applications beginning in 2011.
- Eliminates the 3-month Medicare Advantage (MA) Open Enrollment Period (OEP) which is January through March of each year beginning in 2011. During this period, beneficiaries currently have a one-time opportunity to enroll in, disenroll from or switch to another MA plan.
- Prohibits plans from imposing cost-sharing amounts that exceed those under Original fee-for-service (FFS) Medicare, beginning in 2011. Also extends current law to prohibit MA plans from imposing cost-sharing amounts on dual eligible beneficiaries that exceed those under fee-for-service Medicare or Medicaid, including Qualifed Medicare Benefciaries (QMBs). Permits cost-sharing under MA plans to take the form of coinsurance, copayments, or per-diem rates.
- Allows benefciaries to select a different Medicare Advantage plan outside of the annual coordinated election period if they are enrolled in a plan where enrollment is suspended. Allows the Secretary to consider the health or well-being of an individual in determining other exceptional circumstances in which a benefciary could change plans outside this election period.
- Limits enrollment in chronic care special needs plans (C-SNPs) to either the annual coordinated election period or when an individual is diagnosed with a disease or condition that qualifes them for a C-SNP, beginning in January 2011. Extends the ability of chronic care or institutional SNPs to restrict enrollment to defined special needs populations from January 2011 to January 2013, and to January 2016 for SNPs serving dual eligibles.
- Addresses the 14% overpayment of MA plans, in part, by eliminating the stablization fund set-aside for regional MA plans, and extends permanent authority to the Health and Human Services (HHS) Secretary to adjust payments when MA plans claim their beneficiaries have higher health care needs than claims data establish.
- Phases down payments to MA plans beginning 2010 to equal the costs of Original fee-for-service Medicare by 2013.
- Enhances penalties for MA and Part D plans that provide false information or violate marketing rules, effective January 1, 2010.
- Allows states to impose monetary penalities against MA organizations, Part D plan sponsors, or agents/brokers of the organizations or sponsors for marketing requirement violations, except if the Secretary of HHS already initiated such action for a violation. Similarly, the Secretary is barred from initiating action if the State already initiated action for the violation.
Part D Prescription Drug Benefit Reforms:
- Begins closing the coverage gap immediately by increasing the initial coverage limit in 2010 by $500. (The initial coverage limit is the point after which a person enters the ‘donut hole’ or coverage gap.) The coverage gap would be completely eliminated by 2019.
- Requires drug manufacturers to provide to Part D plan sponsors, and the beneficiaries enrolled in their plans, a 50% discount off the negotiated price of covered brand-name drugs dispensed to beneficiairies in the coverage gap, effective January 1, 2010. The discount amount is counted towards the true out-of-pocket (TrOOP) threshold (which triggers the catastrophic beneft).
- Allows Part D plans to waive or reduce drug copayments to encourage beneficiaries to switch to generic drugs, effective Janurary 2011.
- Prohibits any formulary changes that reduce coverage or increase cost-sharing after the plan marketing period begins, effective January 1, 2011. Two exceptions for formulary changes are if the FDA finds a drug to be unsafe and it is taken off the market, or the drug is replaced by a generic that is theraputically equivalent to the brand-name.
- Counts the costs incurred by AIDS Drug Assistance Programs (ADAP) and the Indian Health Service (IHS) in providing prescription drugs to a benefciary enrolled in a Part D plan toward the enrollee’s true out-of-pocket (TrOOP) costs. Effective January 1, 2011.
- Applies Medicaid rebates for dual eligibles and beneficiaries with the low-income subsidy in Part D plans, effective January 1, 2010. This means drug manufacturers must provide Medicaid rebates on all covered outpatient drugs dispensed to these Part D enrollees for which their Part D plans made payments.
- Eliminates Part D cost sharing for non-institutionalized full-beneft dual eligibles who would require institutional care without the provision of home- and community-based care under Medicaid (i.e. beneficiaries using In Home Supportive Servicess – IHSS). Effective January 1, 2011.
- Allows the LIS beneft to be retroactive to the effective date of when one was first qualified for LIS assistance. For benefciaries automatically enrolled into a Part D plan, the effective date is the date on which the individual is entitled to benefts under Medicare and Medicaid.
- Allows the Secretary to use an “intelligent assignment” process for automatic enrollment of full-beneft dual eligibles who do not enroll in a Part D plan. This process takes into account the drugs the individual uses, the plan’s prior authorization requirements, and the overall quality rating of the plan. This policy is effective for contract years beginning in 2012. Directs the Secretary to use an “intelligent assignment” process to facilitate the enrollment of LIS-eligible individuals who do not enroll in a Part D plan during the special enrollment period after LIS eligibility is determined; effective for determinations made in January 2011 and thereafter. Individuals may decline or change such enrollment.
New in HR 3962 is the inclusion of several demonstration and pilot projects emphasizing Medicare’s reimbursement for coordination of care services for beneficiaries with chronic conditions. Types of coordination to be reimbursed include follow-up services designed to prevent avoidable hospital re-admissions, such as pre-and post-discharge planning services, care coordination, medication orders, and translator/interpreter services, and more home-care primary care options to prevent unnecessary hospital admissions.
HR 3962 also addresses language access issues for beneficiaries with limited English proficiency (LEP) by:
- requiring the Secretary of HHS to study to what extent language services are available to beneficiaries with LEP and establish Medicare payment for such language services;
- establishing a demonstration program to reimburse providers for language services; and
- requiring the Institue of Medicine (IOM) to study the impact of language services on access to care, quality of care, and reduction in medical costs and errors.
Key Medicare-Related Articles and Websites on Health Care Reform
As the health care reform debate moves forward, stay informed and learn the facts on how this will affect the Medicare program and beneficiaries. Below is a resource list of articles and websites with such information. Note that: 1) this is not an exhaustive list, and 2) nothing is yet final (though it’s definitely getting closer!)
- Strengthening the Health Insurance System: How Health Insurance Reform Will Help America’s Older and Senior Women — a report on HealthReform.gov that identifies problems with the status quo for older women and women senior citizens and outlines some proposed solutions to those challenges that will result from health insurance reform.
- News release from the US Dept of Health & Human Services on a report about how health insurance reform would affect seniors.
- How is health care reform good for Medicare beneficiaries?— an article from Center for Medicare Advocacy.
- President Obama’s 4-Minute Video Summary of Health Care Reform.
- Seniors Ignore Health Care Reform at Their Own Peril — an article from the National Committee to Preserve Social Security and Medicare (NCPSSM).
- Medicare Advocacy Organization Challenges Misleading Claims on Health Care Reform -- National Committee Launches Seniors' "Truth Squad" — an article from NCPSSM addressing some of the most egregious myths like “death panels.”
- Medicare Advantage Plans Undermine Traditional Medicare and Shortchange Beneficiaries — article from NCPSSM.
- Reform Must Strengthen Medicare for America’s Older Adults — a National Council on Aging (NCOA) press release.
- Countering Health Reform Misinformation — an article from Center for Medicare Advocacy.
- An official government website on health reform: America’s Seniors and Health Insurance Reform: Protecting Coverage and Strengthening Medicare.
- MedicareWorks — a website sponsored by the Center for Medicare Advocacy designed to help people stay informed and reach out to their elected officials in Congress to ensure positive change happens in our nation’s health care reform.
- Kaiser Health Reform Gateway: Health Care Reform and Health Insurance Reform Analysis, Data and Information — a part of the Kaiser Family Foundation website. This webpage has online tools and resources such as an updated side-by-side comparison of health reform proposals, a history of health care reform in the U.S., a tool illustrating how premium subsidies work in health reform plans, an issue brief on how health reform affects immigrants, and a tutorial on the process of health care legislation.