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Health Reform: What Are the Changes to Medicare?

March 24, 2010 at 12:00 AM EDT
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Gwen Ifill talks to NPR reporter Julie Rovner about how changes to Medicare, including new taxes and adjustments in prescription drug coverage, under health care reform may impact Americans over the age of 65.

GWEN IFILL: We have also invited House Minority Leader John Boehner to discuss the new health care bill.

So, what does the new law mean to you? We continue our series tonight with the changes it will bring to Medicare coverage.

Julie Rovner, who covers health care for National Public Radio, joins us to help explain.

Welcome, Julie. Welcome back.

JULIE ROVNER, health policy correspondent, National Public Radio: Thanks.

GWEN IFILL: Let’s start by talking about prescription drug coverage. Obviously, there was a problem they were trying to fix. What was that?

JULIE ROVNER: This is sort of some unfinished business from the last big health care bill, the 2003 Medicare prescription drug law. This is called the doughnut hole.

It is a gap in coverage for most people. After you spend a little over $2,000 on prescription drugs, there is no coverage until you get up over $6,000. So, people have to continue to pay premiums, but they have to pay for all of their own drugs until they get to that catastrophic benefit.

And that is really frustrating for the, oh, 3.5 million or so seniors who fall into that doughnut hole every year. So, there has been a lot of anxiety about that and a desire, particularly by Democrats, to try to close that doughnut hole, although it is expensive.

GWEN IFILL: So, there are two kinds of fixes which are — exist in this law. I keep calling it a bill, but it is a law now. What is the short-term fix?

JULIE ROVNER: Well, actually, the — the short-term fix is in the reconciliation bill that’s still being debated in the Senate. But one presumes that that will pass.

And the short-term fix is a $250 rebate for everyone who falls into the doughnut hole starting this year, in 2010. And then there will be a beginning of the closing of that doughnut hole. Next year, for example, there will be — seniors will get a 50 percent discount on their brand-name drugs. And, then, slowly, over time, by the year 2020, the — the benefit will be the same within the doughnut hole as it is for that first couple of thousand dollars in drugs. There will be a 25 percent co-pay.

Now, I should point out that not ever drug plan operates the same way. They don’t all have the 25 percent co-pay on that…


JULIE ROVNER: … first couple of thousand dollars. So, it may differ.

But the fact that the doughnut hole is being closed means that everyone who buys one of these prescription drug plans will get more benefits, and there won’t be a doughnut hole for them. So, it may not work exactly the same way.

GWEN IFILL: If not immediately, certainly eventually.


GWEN IFILL: So, what do Medicare recipients, people who get Medicare now, lose? Do they lose any of their traditional benefits?

JULIE ROVNER: No. There will be no — no one who will lose any traditional benefits. There may be some people who may lose some extra benefits, but — but, no, there is no cutback on any of the guaranteed Medicare benefits in this law.

GWEN IFILL: But there is something called Medicare Advantage, which many have taken to treat as part of their traditional benefits. Explain what that is.

JULIE ROVNER: This is also left over from that same Medicare 2003 prescription drug law.

The Republicans who passed that law, with mostly, although not exclusively, Republican support, wanted to move more people into private drug coverage that would compete with government drug coverage. And so there was already private plans — there were already private plans serving Medicare patients, but they wanted there to be more plans.

So, they began to overpay those plans, basically give them more money. Now it is about 14 percent more than the government spends to take care of Medicare patients, in hopes that more people would sign up for those plans. And that’s exactly what happened. A lot more people signed up for those plans, and they get extra benefits with that extra money. They get vision care and hearing care and…


GWEN IFILL: But it is expensive.

JULIE ROVNER: It is — well, of course it is expensive, and it is coming out of the taxpayers’ pocket, because it is about extra money.

GWEN IFILL: So, does that go away now?

JULIE ROVNER: The extra benefit — the extra money goes away, and, with it, probably the extra benefits.

GWEN IFILL: People want to now also know now who pays for all of this, and — and how? So, let’s talk about taxes. Do taxes go up?

JULIE ROVNER: Taxes go up for people who pay for Medicare, not necessarily for Medicare recipients. Everyone now pays the — the 1.45 percent payroll tax. And that does not stop. Unlike Social Security, you continue to pay that on all of your income.

For high-income people, people who earn over $200,000 if they’re individuals, or $250,000 for couples, that that tax will go up to 3.8 percent. There will also be a new tax on unearned income, again, but only for those high-income individuals. So, if you make less than $200,000 as an individual, less than $250,000 as a couple, there will be no new taxes for Medicare.

GWEN IFILL: But if you make more than that, if you fall into that high-earning category, and you spend — when you say unearned income, you mean investment income.

JULIE ROVNER: That’s correct.

GWEN IFILL: Then you start to pay higher taxes…

JULIE ROVNER: That’s correct.

GWEN IFILL: … to pay for part of this. OK.

OK. Well, explain some of the other benefits. There’s supposed to be physician reimbursements which are increased. Does that really happen in this law?

JULIE ROVNER: No, it does not. That’s one of the big things.

Now, there are sort of short-term changes and long-term changes. And, short term, there are some cuts to some reimbursement for providers. They have basically agreed to these cuts because they want to see — they know that they’re going to get more people insured, so they will see that money back.

In the long term, there are changes to the way health care is delivered, not as many as some people would like to see, but there are some. The one thing that is not in here, though, is that there’s this scheduled 21 percent cut to doctors. This has been a lingering problem, really over the past decade. It is not addressed.

GWEN IFILL: We heard John McCain talking about it on the floor today.

JULIE ROVNER: Yes, that’s right. And that is not addressed in this bill. It was originally addressed in the House bill.

Everyone knows Congress has to take care of it, and they’re going to have to pay for it. And that’s not in this bill.

GWEN IFILL: Twenty-one percent cut to doctors, what do you mean by that?

JULIE ROVNER: That would be an actual cut to what doctors get paid to take care of Medicaid patients. It is a formula flaw. It’s going to have to be fixed. It’s not in this and it — and needs to be addressed. And that is something that — that needs to be addressed really aside from what is being done in this law to address the Medicare issue.

GWEN IFILL: There is also something in this law called wellness benefits, which I assume is — means regular checkups? What does it mean?

JULIE ROVNER: Yes. There — actually, there will be no co-payments or deductibles for preventive care. That is a new benefit for Medicare. There will be annual physicals for Medicare patients. So, that’s another new benefit for Medicare patients.

GWEN IFILL: So, right now, a Medicare patient gets — could get an annual — a physical paid for one time?

JULIE ROVNER: That’s right, when they join Medicare.

GWEN IFILL: But now an annual mammogram, cancer screenings, are those included?

JULIE ROVNER: Those are. Well, those have always been — been Medicare-covered benefits. You won’t have to pay anything, though. You used to have — either meet your deductible or have a co-payment. Those will now be free and covered by — by Medicare. Plus, you will have an annual checkup.

GWEN IFILL: Is there any way to know, on balance, whether people — most Medicare recipients gain or lose from these changes?

JULIE ROVNER: Well, there — certainly, people — anybody who falls into the doughnut hole and has prescription drug benefits will gain from this. And certainly those who avail themselves of the preventive care will benefit from this.

And probably — and, certainly, the — the people who — there have been lots of complaints about the cuts to providers. With the exception of the doctor issue, which will be dealt with separately, most of the provider cuts probably will not affect most of the beneficiaries, unless they’re in those Medicare Advantage plans and seeing those extra benefits go away.

GWEN IFILL: And they are the definitely ones who lose out.

Julie Rovner, thanks so much.

JULIE ROVNER: You’re welcome.