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Health Care Reform Brings Major Medicare Changes

While most of the attention on health care reform has focused on expansion of coverage to the uninsured, tremendous change in the way health care is delivered and paid for is playing out on the Medicare stage.

Commentary by Gina Upchurch,
Executive Director of Durham’s Senior PharmAssist

While many provisions of the Affordable Care Act don’t go into effect until 2014, many of the Medicare payment and delivery reforms began last year and this month.

Gina Upchurch

Gina Upchurch

The political rhetoric around health care reform has made it difficult to separate fact from fiction. However, several facts about Medicare are accepted across party lines:

  • Our population of seniors is growing. Currently in North Carolina, just more than 12 percent of the population is 65 and older; by 2030, that will jump to 18 percent.
  • The cost of Medicare has outpaced inflation for years, although slower than private insurance.
  • All political persuasions understand that the Medicare balance sheet cannot continue bleeding, and we must do something to “bend the cost curve.”
  • Changes in Medicare will affect not only the access and quality of care for current Medicare beneficiaries but also future seniors and people with disabilities.

Bending the cost curve

The Affordable Care Act, often referred to as Obamacare, is designed to slow the rate of previously projected Medicare increases by $716 billion from 2013 to 2022. The Medicare provisions in the Affordable Care Act include savings – mainly by reducing payments to Medicare Advantage plans (privately administered health plans that replace traditional Medicare A and B), paying some providers and hospitals less, and increasing premiums paid by higher-income beneficiaries.

Additionally, the Affordable Care Act created new revenues designated for Medicare: a 0.9 percent increase in payroll tax on wages for individuals earning more than $200,000 or couples earning more than $250,000 a year (from 1.45 percent to 2.35 percent), a 3.8 percent tax on certain unearned investment income for these individuals beginning in 2013, and fees on brand-name drug manufacturers.

Many of the Medicare insurance and health system payment reforms from the 2010 health legislation are already in place. The Medicare Annual Election Period expanded to seven weeks and now runs from Oct. 15 through Dec. 7.

In 2011 and 2012, there have been discounts on brand-name (50 percent) and generic medications for those who fall into the coverage gap or “donut hole.” These discounts expand in 2013 and will continue to grow until 2020, when Medicare beneficiaries will be responsible annually for 25 percent of the cost of medicines covered by their private Part D plan, after meeting a deductible. Those who reach catastrophic spending levels pay five percent of the costs of their covered medicines from that point forward.

Starting in 2011, many preventive screenings and immunizations no longer have co-payments, and providers can now offer – and bill Medicare for – an annual wellness visit for beneficiaries (not to be confused with the one-time welcome-to-Medicare physical). Medicare Advantage plans that have higher quality and outcome ratings will be paid more, and those with lower ratings will be paid less. The web-based rating system is becoming more transparent to the public.

The Affordable Care Act established a new innovations center as part of the Centers for Medicare and Medicaid Services that is testing new care and service delivery models. Several of those large grants and contracts have been awarded to providers in North Carolina.

In addition, Centers for Medicare and Medicaid Services has begun this month reimbursing hospitals for Medicare services based on how well they follow “best practices” or clinical guidelines and how their patients respond to satisfaction surveys. This is known as “value-based purchasing” or “paying for performance.” Some hospitals will be paid less while higher-performing hospitals will be paid more. Beginning this month, Medicare is reducing payments to hospitals that had higher-than-expected readmission rates over the last three years for patients who returned within 30 days of being discharged after pneumonia, heart attack or heart failure. More conditions will likely be added in the future.

These payment revisions are incentives for providers and health systems to place more emphasis on quality of care rather than volume of services or procedures ordered, moving away from the fee-for-service model.

All of these changes aim to both reduce costs and to improve health outcomes. Consumers can now view much of the hospital quality data online and will soon benefit from greater billing transparency, which will more easily identify potential insurance fraud.

With our current health care system, many un- and underinsured individuals seek care only when they are very sick. The system pays for this by charging the insured more than their care actually costs. Health care reform seeks to provide affordable and earlier coverage for more Americans. Preventive services, patient engagement, and incentives for providers to focus on health outcomes shift costs in the right direction.

Medicare’s new payment programs for nearly 50 million Americans are critical to the overall success of reform. Our leaders must make honest attempts to both improve the quality of care that Medicare beneficiaries receive while trying to reasonably find savings. Today’s older adults and younger people with disabilities – and those of the future – deserve a reliable system without being relegated to a retirement filled with worry about their access to health care and how this affects their financial security.


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