How the Affordable Care Act helps Medicare

One of the more effective criticisms of the health reform law (Affordable Care Act, or ACA) is that it hurts Medicare. It also is wrong.

Effective, in that it has been widely reported that seniors are more likely to express negative views of the ACA than other age groups. (Although the Kaiser Family Foundation’s Drew Altman, citing the group’s most recent tracking polls, writes that seniors’ opposition to health reform “is at least somewhat over played.”)

Effective, but wrong: the ACA actually helps Medicare in three important ways.

First, Medicare’s trustees recently confirmed that because of the ACA, the Hospital Insurance (HI) Trust Fund is now expected to remain solvent until 2029, 12 years longer than under earlier projections, and spending on Medicare Part B as a share of GDP over the next 75 years is down 23 percent relative to the costs projected in the 2009 report. The improvement is due largely to the reductions made by the ACA in the annual “market basket” updates to hospitals and other non-physician providers (productivity “adjustments” that by and large were agreed to by the affected industries), lower payments to Medicare Advantage plans, and increased tax revenue.

The Wall Street Journal’s Health Blog notes the report comes with a caveat: the trustees had to assume that Medicare will continue to pay hospitals and other providers under the reduced rates, which may be politically difficult to sustain over time. And the improvement in the Part B (physician spending) side doesn’t take into account the costs that would be associated with repealing Medicare’s sustainable growth rate (SGR) formula.

Second, the ACA helps Medicare because it adds more benefits, at little or no cost to seniors. Effective on January 1, Medicare will eliminate deductibles and co-payments for most preventive and screening services, and pay for an annual “well” physician examination. Starting this year the ACA begins to phase out the Medicare Part D “doughnut hole” until it disappears in 2012.

Third, the ACA will promote development and pilot-testing of new models of payment and delivery to improve payments for primary care, promote patient-centered care through medical homes, reduce preventable hospital admissions, and create incentives for physicians, hospitals, and other providers to deliver better care, more efficiently. For the most part, the Medicare trustees’ did not include the potential savings from these changes in its report.

Of course, the ACA does not solve all of Medicare’s problems. The program will still need to be reformed to fix the growing gap between the number of workers paying taxes into the program and the number of persons receiving benefits. This, plus rising health care costs, will continue to endanger its long-term solvency. Access will continue to be at risk until the Medicare SGR is repealed and doctors are assured a fair fee for their services.

Still, the bottom-line is that Grandma will get better benefits, starting now, and won’t have to worry about the program running out of money for another two decades. The delivery system reforms from the ACA have the potential of improving outcomes and saving even more money, which could help the program staying solvent well beyond 2029. I’d say that’s pretty good news for America’s seniors.

Bob Doherty is Senior Vice President of Governmental Affairs and Public Policy, American College of Physicians and blogs at The ACP Advocate Blog.

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