The Facts of Reform- Part One: Medicare

The American Heart Association is continuing to review the Senate health care reform legislation, the Patient Protection and Affordable Care Act. However, we know you’re hearing many confusing and contradictory claims about this legislation, and we’d like to serve as a resource to you in understanding the facts about health care reform.

Question: I’ve heard that the bill will cut Medicare benefits and deprive seniors of the care they need. Is this true?

Answer: Nearly half of all people who have heart disease or stroke are over age 60 so the American Heart Association clearly understands and believes in the need to protect Medicare. Our assessment of the Senate bill, relying on the various sources of objective analysis of its provisions, is that it would not cut Medicare benefits and would instead improve coverage for Medicare beneficiaries. For instance, the Senate bill would eliminate cost-sharing for preventive services for Medicare beneficiaries, provide a new annual “wellness visit” for seniors, and reduce the coverage gap (or “donut hole”) in prescription drug coverage that many Medicare beneficiaries currently face. We’ve advocated for each of these improvements in the Medicare program.

Unfortunately, however, Medicare is growing at an unsustainable rate, and without any action, the Medicare trust fund is projected to become insolvent in 2017. The Senate bill therefore attempts to slow down the rate of growth of Medicare by reducing Medicare spending by about $500 billion over 10 years. According to the Medicare actuary, this will extend the solvency of the Medicare trust fund by up to 5 years. In addition, even with these savings, the non-partisan Congressional Budget Office says that Medicare spending per beneficiary will still increase by 6% every year under the Senate bill.

1. The Senate bill accomplishes the Medicare savings in three major ways:
It reduces Medicare’s current overpayments to the private health insurance companies that offer Medicare Advantage plans. According to the independent commission that advises Congress on Medicare payment policy, Medicare Advantage plans are overpaid, on average, by 14 percent, compared to traditional Medicare fee-for-service. By paying Medicare Advantage plans rates that are closer to what is paid for fee-for-service, Medicare will save $118 billion over the next 10 years.

2. The bill saves nearly $200 billion over 10 years by reducing the annual pay increases that hospitals, nursing homes, and other health care providers receive. But even with this savings, Medicare providers will still receive a slight increase in their reimbursement rates each year.

3. The bill saves about $100 billion over 10 years by reducing waste and inefficiency in Medicare and improving the quality of care that Medicare beneficiaries receive. Medicare currently pays based on the quantity of care delivered, rather than rewarding the quality of care. For example, the independent commission that advises Congress on Medicare policy has estimated that nearly 18 percent of Medicare beneficiaries who are hospitalized need to be re-hospitalized within 30 days. By encouraging the provision of better follow-up care and helping to prevent the need for re-admissions, the Senate bill would save $7 billion over 10 years.