PROPOSED MEDICARE CHANGES: PROS AND CONSAug 5th, 2012 | By Sharon Shaw Elrod MSW EdD | Category: Social Security & Medicare
One of the top ten concerns of senior citizens is Medicare. Discussions about proposed changes in Medicare are a little baffling, and not easy to understand. SCJ will make an honest attempt here to describe the proposals and offer references for the pros and cons.
- One proposal would change the way Medicare pays for benefits. There are two ways Medicare now pays for benefits; one is traditional Medicare, with the federal government paying medical providers directly and at a pre-determined amount for each service you receive. The second is Medicare Advantage, with the federal government paying a pre-determined annual amount to the MA plan for your care. The new plan (Ryan Plan) allows seniors a pre-determined sum of money (voucher) to buy coverage from competing private plans or a revised version of traditional Medicare. Pros: This plan puts Medicare on a budget to reduce taxes and hold down spending. You receive a voucher to purchase your health care plan. You pay the premium difference from your own pocket for what the plan allows and what the actual cost is. Cons: The value of the voucher is not tied to actual health care costs but some unrelated economic index. We’ve already tried this kind of plan (Medicare Advantage, introduced a decade ago) and the hoped-for savings from trying the privatizing system have not materialized.
- Raise the Medicare eligibility age to 67. Currently, the Medicare eligibility age is 65 (excluding those younger with disabilities). Pros: More seniors are living longer and health spending continues to rise. Raising the eligibility age reduces federal spending on Medicare. Cons: This proposal increases other health care spending (employer health plans and Medicaid); uninsured seniors would pay full costs longer. Medicare premiums increase with fewer seniors sharing costs.
- Raise Medicare payroll tax. The Medicare payroll tax (2.9% of earnings, shared by employer and employee equally) funds hospital insurance (Medicare Part A). Pros: Increasing the payroll tax by .5% for employers and employees equally covers the long-term deficit projected in Medicare Part A. Cons: Raising the payroll tax increases taxes on working Americans and increases tax burden on future generations. Workers not earning enough money to pay income taxes would have to pay this tax increase.
- Raise Medicare premiums for higher-income Americans. Most seniors pay monthly premiums for Part B Medicare (medical services generally provided in a doctor’s office or medical facility such as a lab), outpatient care and prescription drug coverage (Part D). The cost split for these services is about 25% beneficiary and 75% Medicare funds. The proposal is for people over an adjusted gross income of $85k single or $170k married would pay higher premiums. Pros: The easiest way, and in the opinion of Senior Citizen Journal.com to be most fair, is to raise the premiums more for higher income Americans. Cons: Higher-income Americans already pay more into the Medicare program, and they pay more for Medicare Part B and D coverage. If increased taxes make them drop out, health care gets more expensive for everyone.
- Change Supplemental insurance. Some people with Medicare buy private supplemental insurance to pay for what Medicare does not cover. The proposal is to limit medigap (supplemental) insurance coverage and require seniors to bear more out-of-pocket costs. Pros: Because people with supplemental insurance pay less out of pocket, they tend to use more Medicare services. This plan would decrease the taxpayer burden. Cons: There isn’t any research that says raising supplemental insurance premiums or reducing benefits keeps seniors from using health care services. Most of us cannot tell whether or not a service is necessary. However, there is evidence that postponing necessary services and not using preventive health care services causes health problems that are more expensive to fix in the future.
- Redesign copays and deductibles. The proposal is to have only one deductible for Parts A and B traditional Medicare (currently they have separate deductibles) plus an out-of-pocket limit on medical expenses. Pros: This proposal would simplify Medicare benefits and is projected to save up to $110billion over the next 10 years. The out-of-pocket limit provides financial protection for people with more disease and reduces the need for supplemental insurance. Cons: Some might pay less but those who use fewer services or are in the hospital longer would pay more out of pocket.
- Add copays for some services. This proposal would add copays to services such as home health care, first 20 days in skilled nursing facility, blood work and diagnostic tests. Pros: Additional copays would discourage unnecessary use of these services. Over 10 years, copays could save billions of dollars for Medicare. Cons: Seniors without supplemental insurance could pay a lot more for these services and might not be able to afford them. Again, not getting care when needed results in higher costs later on.
Readers are encouraged to read the entire AARP article, written by Patricia Barry, AARP’s Medicare expert. A discussion of the pros and cons by experts is also enlightening.