Looming Medicare Changes
By Sally C. Pipes

Older adults expecting sweeping improvements to Medicare under the newly enacted health reform are likely to discover disappointing changes.

Bad news continues to plague the Obama administration's signature achievement: healthcare reform.

Medicare's chief actuary recently projected that the nation’s healthcare bill will increase rather than decrease as a result of the new law. And a different study from private research firm Avalere Health estimates that more than 3 million older adults will have to switch drug plans this fall despite President Obama's promise that “if you like your healthcare plan, you'll be able to keep your healthcare plan.”

These reports provide only the latest evidence that the new healthcare reform may be disastrous for the country’s elders. Under the terms of the president's reform package, Medicare will eliminate about 25% of the drug plans currently available to seniors in order to “simplify” the system. As a result, roughly one fifth of the 17.5 million elders enrolled in stand-alone drug plans could find themselves looking for new drug coverage and those who are forced to switch may face higher premiums and copayments.

The drug plan debacle will be the first of many to befall older adults in the coming years. The Congressional Budget Office estimates that healthcare reform will cost about $1 trillion over the next decade. Older adults will end up footing much of that bill, as the law is financed with $575 billion in cuts to Medicare.

The reform will extract a big chunk of that—$202 billion, according to the Centers for Medicare & Medicaid Services—from Medicare Advantage. Nearly one quarter of Medicare patients participate in this popular program, whereby the federal government partners with private insurers to deliver health benefits. Between 2003 and 2009, enrollment in the program doubled from 5.3 million to 10.2 million.

But under the recently enacted healthcare reform, enrollment in Medicare Advantage is projected to decline 50% by 2017, largely because of cuts in the level of benefits provided by the program. Some 10 million Medicare Advantage patients could see their benefits gradually decrease by an average of $43 per month.

Medicare Advantage beneficiaries won’t be the only ones affected due to the reform. Elders covered by traditional Medicare may find it harder to get the care they need, as the health reform law cuts payments to all manner of healthcare providers. Medicare Chief Actuary Richard Foster predicts that nearly one in seven hospitals, nursing homes, hospices, and home health agencies will become unprofitable by 2019; 40% could be forced out of business by 2050.

Cuts due to the reform could also force doctors to shutter their practices. The government already reimburses physicians who treat Medicare patients at less than cost. Because they lose money on every Medicare patient they see, more doctors are simply refusing to see older adults.

Nearly one quarter of Medicare patients seeking a primary care doctor have difficulty finding one, according to a report released earlier this year by the independent Medicare Payment Advisory Commission. The Texas Medical Association surveyed doctors a couple years ago and discovered that just 38% of primary care doctors took new Medicare patients.

The health reform law also provides for the direct rationing of care. It creates an independent payment advisory board that will advise Congress on how to reduce Medicare spending if it’s growing too fast. The president will appoint the 15 members on the panel, and none will be required to represent the interests of the older adults whose lives will be affected by its decisions.

The panel isn’t supposed to raise taxes, change benefits, or ration care, but how else will it reduce spending? If the board recommends more cuts in payments to doctors and other providers, for instance, Medicare patients will have no choice but to wait longer for care.

Medicare was designed to provide a safety net for America's elders, but the current healthcare reform may consign our aging population to long waits and substandard care.

— Sally C. Pipes is president and CEO of the Pacific Research Institute in San Francisco.