WASHINGTON, Dec 27, 2006 (U.S. Newswire via COMTEX) --Beginning in 2007, more than one million Medicare Part B beneficiaries will be forced to pay much higher premiums than other seniors in the same program. The Medicare Modernization Act of 2003 (MMA), which established the Part D prescription drug benefit, requires that for the first time in the program''s 41 year history seniors will no longer pay the same amount for the same health care services.
January 01, 2007
Much attention has focused on how Medicare Part D has upset, confused, and even endangered seniors and disabled, by disrupting their access to medicines, making them buy drugs from private companies with inadequate and confusing information, and making the poor pay more than before, while giving the drug companies some $139 billion in additional profits.
But the 2003 Medicare Modernization Act (2003 MMA) threatens Medicare recipients and Medicare itself in ways that are unrelated to the Medicare Drug Program. These issues are explained more fully in a Center on Budget and Policy analysis. (See http://www.cbpp.org/11-18-03health2.htm)
* The Carrot: Before 2010, the MMA gives direct subsidies to HMOs to encourage privatization of doctor visits and other outpatient care. The 2003 Medicare Modernization Act provides some $14 billion in direct subsidies to HMOs to encourage them to develop Medicare Advantage Plans which will fill in the holes left by the Medicare Drug Plan. These are simple gifts to the HMOs. Before the 2003 MMA, HMOs were paid an average of 19% more than traditional Medicare for equivalent medical care; after the 2003 MMA, HMOs are now paid 25% more. These subsidies are expected to increase Medicare HMO enrollment from 15% to 40% by 2010, drawing healthier people out of traditional Medicare.
* The Stick: After 2010, plans for “Premium support” and “Direct Competition” will economically coerce Medicare recipients into private HMOs, endangering Medicare’s long-term financial survival: Starting in 2010, in 6 urban and 4 rural test markets, Medicare recipients will no longer be reimbursed for the health care they use. Instead, they will be issued vouchers and forced to shop for their own Medicare health care, either traditional Medicare or an HMO. HMOs will have lower premiums because they can market themselves to healthy people at gyms, marathons etc, while traditional Medicare will have higher premiums because it must accept both healthy and sick. Healthy people will move to HMOs for lower premiums, while sicker, poorer people who cannot use managed care will stay in traditional Medicare, paying higher premiums. Sicker patients remaining in traditional Medicare will pay the premium increase out-of-pocket since the dollar value of the vouchers will be largely based on HMO premiums, driving people out of traditional Medicare. Higher premiums for higher-income seniors will provide still more incentive for those people to leave Medicare, which over time would leave Medicare as a politically vulnerable program for low-income people. Medicare could go into a death spiral, with fewer and sicker patients paying higher premiums, and receiving less funding as its patient base decreases.
* Capping of federal financing of Medicare services in the future: Medicare outpatient care and drugs are paid by Federal General Funds, whereas hospitalization is paid by employees’ payroll deductions. According to the 2003 MMA, if Medicare actuary’s project two years in a row that seven years later, 45% of Medicare expenses will be paid from Federal General Funds, Congress must immediately freeze Federal General Fund Medicare spending, either by raising premiums or by reducing benefits. This freeze will inevitably be triggered in a few years, because costs for outpatient care and drugs are rising faster than costs for hospitalization. The freeze will almost certainly hit as large numbers of baby boomers are entering Medicare.
* Health Savings Accounts, which will provide tax breaks for the rich and healthy, while providing only catastrophic healthcare for the poor who are forced onto these plans. Health Savings Accounts are issued in conjunction with very high deductible health insurance. Both deposits and withdrawals for medical purposes are tax free, but users cannot have real health insurance. Like “Premium Support,” Health Savings Accounts would draw healthier people out of traditional employer-paid health insurance, and raise its premiums significantly, as much as 100%, according to one study.
Posted by: Michael Lyon | March 11, 2007 at 05:56 PM