Implementing Health Care Reform — Why Medicare Matters | Health Care Reform Center

By Robert A. Berenson, M.D.

Despite the major achievements of the Patient Protection and Affordable Care Act in providing health insurance for more than 30 million Americans and regulating objectionable insurance-company practices, its opponents alleged throughout the health care reform debate that it would negatively affect Medicare beneficiaries. Although nothing in the law (now being referred to simply as the Affordable Care Act, or ACA) grants government the authority to ration care for these patients — to “pull the plug on Granny,” as Senator Charles Grassley (R-IA) put it — Medicare is in fact central to the legislation. Indeed, more than half of the $938 billion price tag mostly for expanding coverage for low-income individuals will be paid from decreased Medicare spending,1 which will also extend the solvency of the Medicare Part A trust fund by 12 years, to 2029.2

A new Center for Medicare and Medicaid Innovation within the Centers for Medicare and Medicaid Services (CMS) will develop, test, and implement new payment approaches supporting innovations in the organization of health care delivery, such as medical homes and accountable care organizations, to help contain Medicare and Medicaid spending and to serve as models for commercial insurers. But the currently projected savings come from two main sources: reduced payments to private Medicare Advantage plans and reduced payment updates for hospitals and most other providers. A phased elimination of the substantial overpayments to Medicare Advantage plans, which now enroll nearly 25% of Medicare beneficiaries, will produce an estimated $132 billion in savings over 10 years. Since health plans have used the extra payments to enhance benefits packages and entice beneficiaries to leave traditional Medicare, the reductions will not be painless; payment cuts in the Balanced Budget Act of 1997 led to health plans’ withdrawing from Medicare and benefit cuts that made plan offerings less attractive, which together resulted in a 25% reduction in private-plan enrollment. CMS Chief Actuary Richard Foster projects that the ACA cuts will cause a decline in Medicare Advantage enrollment of one third by 2017.2 The Medicare Payment Advisory Commission (MedPAC) has been calling for such fee reductions for years,3 to keep Medicare Advantage from undermining traditional Medicare.
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