Editor’s Note: Journalist Philip Moeller, who writes widely on aging and retirement, is here to provide the answers you need in “Ask Phil.” Phil is the author of the new book, “Get What’s Yours for Medicare,” and co-author of “Get What’s Yours: The Revised Secrets to Maxing Out Your Social Security.” Send your questions to Phil.
Medicare’s annual open enrollment period has two more weeks to run until it expires Dec. 7. I would normally focus here on urging you to take advantage of this annual “do over” chance to improve your coverage and perhaps even lower your premiums. If you have private insurance for Medicare Advantage, Part D drug coverage or a Medigap plan, you can use Medicare’s online Plan Finder tools to see if there are better deals out there.
While open enrollment is a big deal, it’s being overshadowed by who else? The Donald-elect. His victory has put our entire health care system in play, if not up for grabs. Will Trump and a Republican Congress follow through on pledges to end the Affordable Care Act? In practical terms, what does this even mean? How might ACA changes affect Medicare and Medicaid?
Further, will House Speaker Paul Ryan have a green light to move ahead with plans to reshape Medicare? At the extreme, there are concerns that Medicare as we know it could be replaced with private insurance that seniors would have to buy, paid for in part – but only in part — by government vouchers of unknown size.
The “I’m right — you’re wrong” school of debate continues to dominate social media discourse on the Affordable Care Act. There are plenty of health care experts who have well-informed and sincere issues with our current health care system. We’ll have to wait and see whether any of them will be appointed to prominent positions in a Trump administration. Here’s the best summary I’ve seen of how the ACA could change.
Most Ask Phil Medicare questions continue to deal with specific problems people face in signing up for and using Medicare policies. But readers are also worried about how “their Medicare” could be changed and what they can do about it:
“I am scared about possible cuts to Social Security, Medicare and Medicaid with him [Trump] winning,” Greg writes. “I have a disability and depend on my Social Security disability check. I also have depended on Medicare and Medicaid. My mother also depends on Social Security retirement, Medicare and full Medicaid. She gets a really low Social Security check. Mine is a little higher, which is why I don’t get full Medicaid … I am not the only one who is worried about it.”
J.B. says, “I’m concerned about Ryan’s plan for the privatization of Medicare. Do you have any thoughts or comments on how this will unfold? Or how to help stop it?”
Paula from Montana: “Will Trump cut Social Security?”
Dennis from Arizona: “Now that we will have a new president with a negative focus on health care, what will happen? I am 70 and currently employed with a good job and good health care. I had planned to retire in March of 2017, but have put everything on hold due to uncertainty. Is my concern a valid concern? What are your thoughts on this issue?”
Lastly, there are Deborah and David. They live in California, but perhaps not for long. “The number of expat retirees are sure to grow over the next six months as a result of the presidential election. We have family in Melbourne, Australia and have plans in place to move there when I retire in early in 2017. The election results increased our resolve for moving as soon as possible … We will start our Medicare next year and maintain it until we move to Australia as permanent residents with medical coverage there. What are the options for stopping all or part of Medicare once we move? What are the options and impacts if we move back in 10 or more years and need to start Medicare again?”
By way of a spoiler alert, I have no idea what will happen nor do I think others do. There are too many unknowns right now. However, when Trump’s key appointments are in place, and both Republicans and Democrats have crafted their health care strategies, these are the important Medicare issues that will be moving front and center:
ACA and Medicare. The Affordable Care Act is largely a good thing for Medicare. I do not know where Speaker Ryan has been getting his “facts,” but his recent statement that the ACA is bankrupting Medicare is just not true. To the contrary, the ACA included additional taxes that higher-income taxpayers have had to pay to Medicare, which has helped fund Medicare’s trust fund, reduced subsidies to Medicare Advantage insurers and mandated other savings.
Before the passage of the ACA, the Medicare trust fund that pays claims for Part A hospital and nursing home expenses had been projected to run short of funds by 2017. The ACA has pushed that date out more than 10 years. Medicare certainly faces financial challenges, but they haven’t been caused by the ACA, and in fact, Medicare would face large revenue cuts if the ACA is repealed.
The ACA includes a substantial expansion in free and reduced-price wellness provisions for Medicare enrollees. It also has been reducing out-of-pocket drug prices in Part D plans through the elimination of the so-called “donut hole” by 2020. These are popular changes that are unlikely to be rolled back.
Who pays for Medicare and how much? Medicare is a terrific program, but there is no denying that there have been big problems with it, and there will be more to come. However, since its creation in 1965, Medicare arguably has been the nation’s most successful effort to help its citizens. Still, providing health insurance to more than 55 million people is not cheap and represents a huge and growing drain on the federal budget. Here’s the current projection of the federal Congressional Budget Office:
In 2016, federal spending for the major health care programs will amount to 5.5 percent of GDP [Gross Domestic Product], CBO estimates: Medicare spending (net of offsetting receipts) will equal 3.2 percent of GDP and federal spending on Medicaid and CHIP [Children’s Health Insurance Program], combined with outlays for the subsidies for health insurance purchased through the marketplaces and related spending, will equal 2.3 percent. In CBO’s extended baseline, federal spending for those programs rises to 8.9 percent of GDP in 2046, about 60 percent greater than it is estimated to be in 2016; net Medicare spending accounts for 5.7 percent of GDP, and spending on Medicaid and CHIP, combined with outlays for the marketplace subsidies and related spending, accounts for 3.1 percent.
When the CBO says these figures are “net of offsetting receipts,” it means that all those payroll taxes for Part A, premiums for Part B and everything beneficiaries pay for other parts of Medicare already have been subtracted from what Washington spends. Whether these rising deficits are “worth it” is, of course, the key question. And while Trump said during the campaign he did not want to touch Medicare, Speaker Ryan is hardly the only powerful voice in Congress that thinks the nation can’t afford to continue spending this much money on Medicare.
I don’t think anything will happen quickly, but the trend lines are clear: Medicare beneficiaries will be required to pay a growing share of their health care bills. Assuming otherwise would be a mistake. Expecting increased efficiency, innovation and other unproven benefits of more private-sector involvement in Medicare also would be a mistake. We’re going to pay for this, one way or another.
What does Medicare cover? Trump says he won’t touch the ACA ban on insurers using pre-existing conditions as a basis for denying coverage or charging people higher premiums. I still think there will some Congressional support for allowing insurers to go back to using pre-existing conditions as an underwriting tool, perhaps on a limited basis. Whatever happens, I don’t see this debate involving Medicare. The program would fall apart if it did not guarantee people access regardless of their health. But I can certainly see Medicare becoming less generous with how much of our health care expenses it covers.
If Ryan’s plan for a voucher system ever came to pass, it likely would lead to a multitiered Medicare system. Lower-income enrollees would get one level of coverage with their voucher and would not be able to afford more. People with more money would be able to augment their coverage with addition policies with private health insurers. This happens now with Medigap plans, which are supplemental policies that help pay for things not fully covered by basic Medicare. But a voucher system would create more pronounced differences in coverage linked to people’s financial resources.
How will private insurance plans change? Medicare Advantage plans already reflect the future shape of Medicare under a GOP administration and likely will benefit from any voucher and privatization efforts undertaken in a Trump administration. Nearly a third of Medicare enrollees already use Medicare Advantage. Dealing with a single insurer for all Medicare claims is easier than dealing with a government contractor for basic Medicare (Parts A and B), a private insurer for a Part D drug plan and yet another private insurer for a Medigap plan.
The plans often are cheaper than basic Medicare and frequently cover more things as well. The reason they can afford to do so is that most plans require enrollees to restrict their health care providers to doctors and hospitals in their plan’s provider network. This is a cheaper way for the plans to offer health care services, and so-called “narrow networks” will likely become more prevalent either to combat rising health care costs or should a voucher system be adopted.
Is it possible to deregulate Medicare? This topic doesn’t get much attention, but it could be the most important practical factor in determining the timing and extent of any changes to Medicare. The air has been thick with talk in Republican circles about getting rid of government regulations and freeing up the private sector to find better and cheaper ways to solve problems. But there is no free market for senior health care in this country. Medicare was created to provide government-run health care. It is hard to see how it even could function without layers and layers of regulation that have evolved over more than five decades. This reality will continue to be a source of frustration for those who would like to deregulate the program and a source of comfort to those who would not.
Details of Ryan’s “Better Way” Medicare proposals. As set forth in a series of proposals released in June, Speaker Ryan would make major changes to Medicare. These include combining Parts A and B into a new fee-for-service program, raising the age of Medicare eligibility to match that of Social Security (now 66 and scheduled to rise to 67 beginning in 2020), creating a premium support program to cap government spending and changing Medigap policies to limit the extent to which they can fill holes in basic Medicare. I will be returning to these items in depth in future columns, but for now, here are verbatim descriptions of these four proposals from the “Better Way” health care proposal:
It would combine Medicare Parts A and B [fee for service Medicare, or FFS] and would have a unified deductible. For example, rather than require the $1,288 deductible for a hospital stay and a separate $166 deductible for a physician visit, the beneficiary would be charged a combined deductible. Further, the policy would institute an annual maximum OOP [out of pocket] cap on the amount of money a beneficiary pays each year. This new feature of the FFS program would create parity between FFS and MA [Medicare Advantage private insurance plans] — as MA plans are required by statute to provide an OOP cap for beneficiaries. Our policy would also institute a 20 percent uniform cost-sharing requirement for all services.
One of the nation’s greatest achievements during the 20th century was the dramatic increase in the average life expectancy, increasing life spans by almost thirty years. As Americans’ health improves, extending their lives, many enjoy the benefits of employment later in life. As recognized by the Social Security program, and in order to further ensure Medicare’s long-term sustainability, our plan would gradually increase the Medicare retirement age beginning in 2020 to correspond with that of Social Security.
“Beginning in 2024, Medicare beneficiaries would be given a choice of private plans competing alongside the traditional FFS Medicare program on a newly created Medicare Exchange. Our plan would ensure no disruptions in the Medicare FFS program for those in or near retirement, while also allowing these grandfathered individuals the choice to enroll in the new premium support program. Medicare would provide a premium support payment either to pay for or offset the premium of the plan chosen by the beneficiary, depending on the plan’s cost. The Medicare recipient would choose, from an array of guaranteed-coverage options, a health plan that best suits his or her needs. This is not a voucher program. A Medicare premium support payment would be paid, by Medicare, directly to the plan or the fee-for-service program to subsidize its cost.
Beneficiaries often purchase Medigap plans because of the certainty these plans bring: predictable copays instead of coinsurance and protection against high out-of-pocket (OOP) costs. The Medicare Payment Advisory Commission (MedPAC) has found that Medicare spending is 33 percent higher when beneficiaries have Medigap insurance and 17 percent higher when beneficiaries have job-based coverage. Our policy would begin in fiscal year 2020. It would restrict Medigap plans from covering cost-sharing below a combined and limit the plan from covering no more than half of the cost sharing between the deductible and the OOP cap.
Lest I forget, here are some specific thoughts on Social Security for Greg and Paula. Congress will have not have much appetite for messing with Medicare and even less when it comes to Social Security. There certainly will be discussion of privatizing the program. But while Democrats are in the minority, their voices will be plenty loud enough to alert seniors, including many Trump voters, of the damages that would occur if such a change was enacted or if benefits were cut.
Further, I have never seen plans to change Social Security, even from scorched-earthers, that have a large effect on benefits for anyone age 55 and older. There could be some heartburn if a new formula was adopted to calculate the program’s annual cost of living adjustment. But even under the current formula, the COLA was zero in 2016 and will be only 0.3 percent in 2017. While higher rates of inflation may be on the way, it will take time for them to get here, so even a stingier COLA would not amount to a meaningful haircut for several years.