What the Medicare doc fix means for your pocketbook

The Medicare “doc fix” is in. The question now: What will it mean for seniors’ pocketbooks?

President Obama recently signed the most significant Medicare legislation in years–a plan to fix a Medicare formula that threatened to slash payments to doctors every year. The law achieves several positive Medicare reforms, but it will increase some costs for enrollees. The changes are set to be phased in over a period of years, so it’s worth understanding the reforms if you’re already signed up for Medicare, or will be enrolling during the next decade. The reforms also may change the math on one of the most basic Medicare enrollment decisions–whether to use traditional fee-for-service Medicare or Medicare Advantage, the all-in-one managed-care alternative.

The doc-fix issue had become a case of bad Kabuki theatre that needed to be yanked off the stage. Doctors regularly faced the threatened payment cuts while waiting for the inevitable kicking of the can down the road by Congress. The cuts were mandated under a formula called the Sustainable Growth Rate (SGR) that became law in 1997; the idea was to keep growth in physician payments in line with the economy’s overall growth. Instead, it created annual uncertainty and animosity among physicians. This year, for example, payment rates would have been slashed 21% if Congress had not taken action.

The new legislation contains several important reforms, including:

Replacement of the SGR with a new formula that rewards physicians who meet certain government standards for providing high-quality, cost-effective care. The new formula aims to move Medicare away from rewarding doctors for the quantity of services they provide.

Addressing concerns about Medicare beneficiaries’ access to physicians. The fear has been that doctors would simply get tired of the ongoing threat of reduced payments and stop accepting Medicare patients. It’s worth noting that this reform heads off a potential future problem–not one that is present today. The Medicare Payment Advisory Commission (MedPAC), the independent research and policy organization that advises Congress on Medicare, reports that current Medicare enrollees aren’t experiencing significant problems with access to care.

Making permanent a 100% subsidy of Part B premiums for certain low-income Medicare beneficiaries (the Qualifying Individual program). The program covers the Part B premium for beneficiaries with incomes ranging from 120% to 135% of the federal poverty guidelines, and who have modest assets.

But the plan comes with a significant price tag. It will increase federal deficit spending by $141 billion from 2015-25, and it calls for savings to the government by boosting premiums for high-income seniors ($34.7 billion in savings) and by prohibiting Medigap from covering the Part B deductible for new enrollees beginning in 2020 ($400 million in savings). The plan also will mean somewhat higher Part B premiums spread across the entire base of seniors.

If you’re enrolled in Medicare–or will be in the years ahead–here’s how the law could impact your pocket book.

Medigap

Most Medicare enrollees have some type of coverage that limits the program’s cost-sharing requirements. According to the Kaiser Family Foundation (KFF), 23% of all Medicare enrollees buy private Medigap policies; 35% have employer- or union-sponsored supplemental coverage; and Medicaid augments Medicare coverage for low-income seniors (19% of all enrollees).

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