Many have cautiously waited for the proverbial “other shoe” to drop in the Medicare debate. Recently, it appears to have dropped with President Obama’s announcement of Medicare payment rate cuts for its managed care plans. These cuts will affect around one-quarter of all Medicare recipients. Needless to say, the politicians began their classic back and forth acts. But what does it really mean for the average American Medicare recipient?
Perhaps what was most surprising is that these new proposed reductions were far larger than what the insurance industry and taxpayers were expecting. This past December, the Obama Administration provided some insight, but that insight wasn’t enough.
Medicare
In a bipartisan letter sent on Friday, and penned by Senators Charles E. Schumer of New York and Michael Crapo, an Idaho Republican, is not without its own controversy, especially with lines like, “People in the private plans enjoy better health outcomes and receive higher quality care than their counterparts” in traditional Medicare. It could open a Pandora’s box of other problems and questions, including why the quality of care has to differ at all. That said, Obama has stated in the past that the private insurers were the ones “overcharging massively” for what they provide to Medicare beneficiaries. Either way, those who do not support this latest increase say older Americans are the ones who will feel the pain because politicians are “raiding Medicare Advantage to pay for Obamacare”.
In issuing its proposal on Friday, the administration said it was continuing its effort to “reduce overpayments to Medicare Advantage plans.” The federal health care law eliminated “substantial savings” out of Medicare, according to the Congressional Budget Office, and the money will help offset the cost of subsidizing coverage for people who were uninsured.
Calculating the Numbers
There are a number of formulas or algorithms used to determine federal payments to managed-care organizations, which we know as Medicare Advantage plans. These numbers have grown at a slower pace in recent years and as a result, the reductions will equate to a 1.9 percent cut in 2015. Jonathan Blum, a top Medicare official called it a “historically low growth in Medicare per capita spending” and that was a big factor in determining the proposal.
Obamacare to Blame?
Not surprising that Republicans are blaming Obamacare, but they’re not alone. Emily Shetty, a lobbyist for the Leukemia and Lymphoma Society, encourages lawmakers to treat Medicare beneficiaries carefully. “America’s seniors are feeling the brunt of Obamacare’s tax increases and cuts to Medicare.”
Meanwhile, Representative Dave Camp, Republican of Michigan and chairman of the Ways and Means Committee, told the media on Friday that there were millions of seniors who “rely on the Medicare Advantage program (and) will lose the plans, benefits, doctors and financial protection they currently have.” Most all of those in Congress have encouraged the Obama Administration to not make any cuts, despite the fact that verbiage in the new healthcare law make it clear those cuts were coming.
For those wondering what role, if any, Wall Street will play, there’s precedence.
Already, insurance companies, employers and others on Wall Street are planning to lobby against the cuts. It’s not the first time, either. One year ago, efforts on the part of lobbyists prevented the cuts from taking place and raised the rates instead. Already these groups are saying the higher premiums and increased out of pocket expenses are the next step of these efforts by the Obama Administration aren’t thwarted. Those closest to the president say that won’t happen.
The number of those enrolled in various private Medicare Advantage plans has doubled over the past decade. Currently, there are 15 million enrolled in these private plans. Bipartisan efforts include, so far, 19 Democrats and 21 Republicans.
Wondering about how this might affect you or a loved one? Give us a call today to discuss specifics on how New Hampshire residents might be affected.
Daniel DeBruyckere
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