Ever since healthcare reform passed, we’ve been receiving a steady stream of messages from seniors who are anxious about what is going to happen to their healthcare under healthcare reform: Is Medicare going away? When will the doughnut hole disappear? Can I add my grandchild to my health insurance policy? I don’t qualify for Medicare yet; can healthcare reform help me find affordable health insurance?
Recently, we’ve been receiving a number of messages from seniors lately and we hear you loud and clear… you love your Medicare Advantage and you don’t want it to go away under healthcare reform. Don’t worry! Medicare Advantage isn’t going anywhere under healthcare reform, but there will be a few changes that you should keep in mind as you plan your health insurance coverage.
What is Medicare Advantage?
Medicare Advantage plans offer seniors their Medicare benefits through private benefits instead of through the original Medicare Part A and Medicare Part B. Although Medicare Advantage health insurance plans are required to offer health insurance benefits at least as comprehensive as traditional Medicare, the benefits they offer do not have to exactly the same. For example, a Medicare Advantage health insurance plan offer less in some benefits, such as skilled nursing facility care, but it may balance that out with lower co-payments for doctors’ visits.
In addition, in establishing the Medicare Advantage program, the federal government has provided subsidies to health insurance plans which offering Medicare Advantage. Some Medicare Advantage plans have used these federal subsidies to limit patient out-of-pocket costs, but many health insurance plans have used the supplemental funds to provide seniors with additional benefits such as dental insurance, vision care, gym memberships and other benefits not offered by Medicare. It’s estimated that these subsidies were approximately $1,100 per Medicare Advantage member last year.
For many seniors, the combination of flexibility and these supplemental health benefits make Medicare Advantage plans highly attractive as a health insurance option.
How Will Healthcare Reform Change Medicare Advantage?
First of all, we want to make this clear: Healthcare Reform is not doing away with Medicare Advantage program.
However, healthcare reform does change the way that the federal government reimburses Medicare Advantage plans. Most importantly, it does away with the subsidies which the federal government first used to establish the Medicare Advantage program ten years ago and which many Medicare Advantage health insurance plans use to offer their supplemental benefits.
These subsidies (which added an additional $14 billion to the Medicare program last year alone) will gradually be reduced until they are eliminated altogether. In 2011, these Medicare Advantage subsidy payments will be frozen at 2010 levels. After that, Medicare Advantage subsidy payments will be reduced an average of 12% per year until they are brought in line with traditional Medicare payments. It’s estimated that these reductions will be the equivalent of about $200 per Medicare Advantage member per year. According to the Congressional Budget Office, by 2019, Medicare Advantage plans will receive a total of $136 billion less than they would have received without these healthcare reform changes.
Although these cuts will not be affecting all plans equally and Medicare Advantage health insurance plans have stated that they will be trying to minimize the impact of these cuts, given their magnitude, it is unlikely that most Medicare Advantage members won’t be affected in one way or the other. However, changes will be gradual and it’s unclear what the long-term effects will be as Medicare Advantage plans continue to compete for business and other healthcare reform requirements (such as having to spend 85% of payments on actual benefits) kick in.
We’ll keep covering these changes as they kick in, so stay tuned!
For more information, visit MyHealthCafe.com:
- Healthcare Reform: Health Insurance and Preventive Healthcare Services
- Healthcare Reform: The Impact of Healthcare Reform on 3 Americans
- Healthcare Reform: Long-Term Care and Healthcare for Seniors
- Healthcare Reform: Will There be Changes to Your Employer-Based Health Insurance or COBRA?
- Healthcare Reform and Domestic Partners: No Changes to Taxes on Health Insurance Benefits