With the new administration being keen to make significant changes to the healthcare system,one might assume that changes to the ACA would only affect the 22 million Americans that gained coverage because of it. However, an alternative to the Affordable Care Act would affect all current and future Medicare beneficiaries. In other words, it would impact every single American.
It is not an exaggeration to suggest that the future of Medicare is at stake as new proposals to change the ACA are on the agenda. Few people realize that the ACA contains over 160 provisions that impact Medicare, including protecting the program’s long-term finances and improving benefits. While trying to improve the system is a worthy goal, it should not cost seniors thousands of dollars that they are unable to afford at a critical period in their lives. Let’s look at how commonly espoused Medicare cuts could affect you.
Repeal of ACA = Increased Premiums
In November 2016, House Speaker Paul Ryan said that the Affordable Care Act was causing Medicare to “go broke.” While his assertion that Medicare was spending at an unsustainable level is true, it is incorrect to suggest the program is in any long-term financial difficulty. In reality, the Affordable Care Act helped extend its life significantly. According to a Medicare trustees report published in 2016, Medicare can now pay all of its bills until 2028. Compare this to the gloomy 2009 forecast that suggested the program would run out of money in 2016.
The ACA achieved this via a number of cost-cutting provisions, including reduced federal payments to Medicare Advantage plans. If there is a repeal of the ACA, Medicare spending will increase by approximately $800 billion in the next decade. The Kaiser Family Foundation suggests that the program would have little choice but to increase premiums. You can read a detailed analysis of what the KFF thinks will happen in the event of a repealed ACA here.
Taxes Cut on Very Wealthy = Wholesale Medicare Cutbacks
The ACA offered the prospect of government-subsidized health insurance to millions of Americans. Some of the money comes from taxes on the wealthiest elements of society. For example, there is a 0.9 percent tax on income for single individuals that earn over $200,000 and on couples that earn $250,000 jointly. There is also a 3.8 percent surtax on certain investment income.
At the other end of the earning spectrum, families earning below 400 percent of the federal poverty line (FPL) (currently under $47,550 per annum for a single person and below $85,000 for a family of four) receive tax credits to help them purchase health insurance. If the ACA were repealed and replaced, households earning below $67,000 a year would pay more taxes because of the loss of ACA tax credits. Meanwhile, the top one percent of earners would receive an average reduction of $25,000 a year in tax.
One of two things will happen in the above scenario. We will see either an increase in premiums and deductibles or a reduction in the level of service provided by Medicare. Neither option is good news for the vast majority of Medicare beneficiaries.
Introduction of Premium Support Payments= Higher Out-Of-Pocket Costs
One of Ryan’s ideas to change the existing system is to introduce fixed premium support payments to Medicare beneficiaries to purchase plans. He wants to restrain the program’s growth to reduce its costs, and there is the possibility of increasing the age of eligibility.
The plan involves setting up so-called Medicare ‘exchanges’ where government-run Medicare would compete with private insurers. At present, ACA exchanges only offer private insurance plans. As part of the new plan, beneficiaries receive ‘premium support’ from the government so they can pay for their insurance.
In Ryan’s plan, subsidies link to the price of a specific plan offered by insurers on the exchange. The payment is tied to the recipient’s income so that, if you have a lower income, you receive a larger subsidy. As you get sicker, the subsidy rises to ensure you can access your insurance. If you choose a plan that costs more than the government subsidy, you pay the balance.
While the plan seems reasonable in theory, it falls apart when placed under the microscope. Approximately eight million Social Security beneficiaries are ‘financially incompetent’ and need a representative to manage their cash. Under Ryan’s plan, these vulnerable individuals are asked to navigate a confusing healthcare maze.
The plan also eliminates the guaranteed level of coverage provided by Medicare, including covering 80 percent of doctor’s visits and hospital care. If your ‘vouchers’ don’t cover the level of Medicare coverage you need, or the ongoing costs exceed what you can afford, your only choices are to skip coverage or pay more out-of-pocket.
Plans to repeal and replace the ACA are on hold for now, but ultimately, the current administration is adamant that changes are necessary, especially to the Medicare program, which it says is in need of trimming. The President promised not to touch Medicare, and for the sake of the over 57 million beneficiaries, we hope he remains true to his word.