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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  • http://www.nallyfamilypractice.blogspot.com Adam Nally

    I appreciate the attempt at the positive, however, I disagree with your logic. I work in a geriatric heavy population and because of the “brilliance” of the ACA, as of today, 15 of my patient have had to drop their secondary coverage and 10 patients have dropped off insurance all together due to the escalation of costs. . . the numbers continue to rise daily. Yes, a few more whistles and bells have been covered, but the for the patients under Medicare, none of them can afford secondary insurance, and those approaching Medicare in their 60′s have had to drop commercial insurance to wait for Medicare because the 300-500% increase in premiums occurring in the last month has made any insurance unaffordable to these populations.
    If I understand the projections you quoted correctly, they were calculated during the 26% physician pay cut in Medicare and don’t include the 1.7 billion dollar cost to fixing physican payment on Part B (soon to be 29% pay cut) January 1st.) Though the Obama administration claimed there would be a decreased in GDP cost, it didn’t include fixing part B payments to physicians.
    In Medicare heavy populations, we as physicians CANNOT keep our doors open with those numbers.
    You can make the positives sound as “fluffy and great” as you want, but when physicians begin dropping Medicare and patient’s have no provider, three small benefits mean nothing.

    • HJ

      They can just pay cash.

      • http://warmsocks.wordpress.com/ WarmSocks

        They should not need to pay cash. Money was deducted from people’s paychecks so that they would have their medical care paid for after retirement. Today’s seniors feel (rightly so) that they have already paid their premium for good coverage; it is immoral to renege on the promise to fund our senior’s medical care.

        • HJ

          “Money was deducted from people’s paychecks so that they would have their medical care paid for after retirement.”

          Give the money back and then make them pay cash.

    • pj

      You say, “….because of the “brilliance” of the ACA, as of today, 15 of my patient have had to drop their secondary coverage and 10 patients have dropped off insurance all together due to the escalation of costs. ”

      How can you be so sure cost esclation is due solely or even mainly, to the ACA???? This disaster was decades in the making.

      • http://www.nallyfamilypractice.blogspot.com Adam Nally

        I can say that because each of these patients dropped or could not afford their insurance due to the escalation of deductibles by 300-500% this year. The escalation in deductibles is directly attributable to the removal of pre-existing conditions mandated by the ACA. In order for insurance to cover these costs they pass them on to the patients. Cost elevation has continued to rise over decades, yes. But a 300-500% increase in one year – exactly one month after the pre-existing condition clause took effect is cause and effect.

        • pj

          With all due respect, correlation does not prove causation.

        • http://pulse.yahoo.com/_TMKWORBBA3L6IP6EV2DMDO6QFQ DalalStreetKing

          Hello Adam:
          Just turned 65 and and getting to learn about Medicare:
          1. Is it possible to see a chart of the deductibles from 2009, 2010, 2011 that shows 300-500% increase in deductibles? Or , a link that would show the numbers.
          2. I thought the AC’s pre-existing cluase goes into effect in 2014, correct? Or, are you referring to something else, like the initial open enrollment?

          Thank you very much.

  • http://blog.headache-treatment-options.com/appliedobjectivism/ David Allen, MD

    Medicare is pretty bad off. Here is a balanced report:

    http://truecostblog.com/2009/07/30/medicare-bankrupt-in-6-8-years-without-rationing/

  • http://warmsocks.wordpress.com/ WarmSocks

    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

    Better benefits? No. Grandma doesn’t have ANY benefits because doctors around here are smart enough to insist on being paid for their work. Medicare doesn’t cover the cost of providing care, so there are no doctors within thirty miles who are accepting medicare patients.

    Maybe on paper the benefits look good. Here in the real world, grandma can’t even find a doctor. From a patient’s perspective, medicare is already insolvent.