Why does Obamacare reduce Medicare benefits?
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UPDATED: Mar 19, 2020
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- The Affordable Care Act introduced new revenues through higher premiums for high-income Medicare beneficiaries
- Obamacare reduced Medicare payments to some health care providers and hospitals
- Due to a reduction in waste, fraud, and abuse, the Affordable Care Act extended Medicare through 2029
- According to Obamacare Facts, nearly 8.2 million seniors saved close to 11.5 billion on prescription drugs since 2010
- Although Obamacare made changes to Medicare, the Affordable Care Act did not replace Medicare
Before the introduction of the Affordable Care Act, the federal government made payments to Medicare Advantage plans that were 14 percent higher than traditional Medicare programs.
Under Obamacare, payments to Medicare Advantage plans were reduced over the course of six years, bringing the average federal payments in line with regular Medicare programs.
In addition, Medicare is not part of the Health Insurance Marketplace created by the Affordable Care Act. Therefore, anyone covered under Medicare continued to receive benefits when the federal government enacted Obamacare.
Expanding Medicare Benefits
The Affordable Care Act expanded many Medicare benefits by giving recipients the following services:
- free preventative screenings, including colonoscopies and mammograms
- free annual wellness checkups
- a 60 percent discount on Medicare Part D covered brand-name prescription drugs in some circumstances
Before the ACA, many people on Medicare had to make a copayment for preventative screenings and in some instances paid a percentage of the total bill.
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The Affordable Care Act, Medicare and the “Donut Hole”
The “donut hole” in Medicare is a gap in Part D prescription drug coverage. When a Part D Medicare recipient enters the donut hole, they must pay the full cost of their prescriptions along with paying their monthly premiums.
Once the recipient’s out-of-pocket costs and the prescription drug plans costs exceed $3,310, the recipient enters the donut hole. When the costs reach $4,850, prescription drug coverage resumes.
Under the Affordable Care Act, Medicare recipients who were in the donut hole received a reduction in the cost of their prescription drugs.
Additionally, the ACA will eliminate the donut hole entirely by 2020, and until that time, seniors who receive their prescriptions under Medicare Part D receive a seven percent reduction in their copayments each year on generic drugs.
Seniors in the donut hole also receive a discount on brand-name drugs from the manufacturers each year.
Medicare Reform Under Obamacare
Due to a reduction in waste, overpayments, and fraud, the ACA extends the Medicare trust fund through 2029.
The Centers for Medicare and Medicaid Services reports the ACA will save beneficiaries nearly $4,200 over the course of 10 years due to decreases in the costs of health spending and lower drug costs.
Although the ACA reduced the amount of money paid by the federal government to Medicare Advantage Plans, the law eliminated excess spending on Advantage plans without cutting any of the benefits offered by the plans.
Repealing the ACA – What it Means for Medicare
The Congressional Budget Office (CBO) stated that a repeal would result in an increase in Part A and Part B spending. A repeal could also lead to higher Part A copayments and deductibles along with higher Part B deductibles and premiums.
The CBO also estimates that a repeal of Obamacare would lead to increase payments to Medicare Care Advantage plans to levels prior to the enactment of the Affordable Care Act.
The end result would be an increase in the overall spending on Medicare totaling an estimated $350 billion over 10 years.
Repealing Obamacare would end the free preventative screenings for diseases such as cardiovascular disease, breast cancer, diabetes and colorectal cancer.
A repeal of the Affordable Care Act may also reduce revenues to the trust funds that keep Medicare Parts A and B solvent. A repeal would lead to the elimination of the 0.9 percent payroll tax on the earnings of higher-income workers.
Currently, individuals who earn more than $200,000 and couples who earn more than $250,000 pay the tax.
The ACA has several quality incentive programs designed to reduce the efficiency of Medicare.
A repeal of the payment and delivery systems under the ACA could lead to an increase in Medicare spending. The CBO reports the payment and delivery reforms would save the federal government an additional $34 billion from 2017-2026.
A full repeal of Obamacare would eliminate those savings.
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