Presentation on theme: "Medicare’s Role Medicare covers 47 million Medicare beneficiaries"— Presentation transcript:
0 Health Reform and Medicare: Overview of Key Provisions Tricia NeumanVice President and Director, Medicare Policy ProjectKaiser Family FoundationForThe Alliance for Health ReformWashington DCMay 7, 2010
1 Medicare’s Role Medicare covers 47 million Medicare beneficiaries 39 million seniors; 8 million under-65 disabled47 percent live on an income below 200% poverty29 percent in fair/poor healthMedicare is a critical part of policy discussions related to the federal budget12 percent of federal spendingMedicare is a major player in the US health care system23 percent of national personal health care spendingThough not initially a primary focus, Medicare played a key role in 2010 health reform law
2 Key Medicare Provisions in 2010 Health Reform Law ImprovementsGradually closes Medicare prescription drug coverage gap (“doughnut hole”)Provides new annual wellness visit with personalized prevention planEliminates cost-sharing for prevention servicesBoosts payments for primary careMedicare SavingsReduces payments to Medicare Advantage plansReduces payments for hospitals and other medical providersCreates new Independent Payment Advisory BoardDelivery system reformsNew Center for Medicare and Medicaid InnovationsNew Coordinated Health Care Office within CMS for dual eligiblesNumerous programs, pilots, demonstrations to improve quality and efficiencyNew revenuesIncome-related premiumsIncrease in payroll tax
3 Gradually Closes the Medicare Part D Coverage Gap or “Doughnut Hole” Key FactsMore than half of all Medicare beneficiaries are in Part D plans3.4 million had spending in the gap in 2007The gap in 2010 is $3,610 out-of-pocket; enrollees pay 100% in gapHealth Reform$250 rebate for Part D enrollees with any spending in the gap in 2010Beginning 2011, 50% discount on brand-name drugsIn addition, Medicare coverage for generic drugs in the gap phases inBeginning 2013, Medicare coverage for brand-name drugs in the gap phases inBy 2020, Part D enrollees pay 25% until they qualify for catastrophic coverageCatastrophic threshold reduced,
4 Standard Medicare Prescription Drug Benefit, 2020 Before and After Health Reform 75% paid by plan15% paid by plan; 80% paid by Medicare5% paid by enrollee100% paid by enrollee25% paid by enrollee75% paid by plan15% paid by plan; 80% paid by Medicare25% paid by enrollee100% paid by enrolleeCatastrophic coverageBrands: 50% discount 25% paid by planGenerics: 75% paid by plan25% paid by enrolleeCoverage gapInitial coverage limitDeductibleSOURCE: Kaiser Family Foundation illustration of standard Medicare drug benefit in 2020 under the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010.
5 Gross Medicare Savings = $533 billion, 2010-2019 Reduces Medicare spending, with savings from Medicare Advantage plans, health care providers and other sourcesGross Medicare Savings = $533 billion,NOTE: * Includes interactions with Medicare Advantage and TRICARE.SOURCE: Congressional Budget Office (CBO), March 20, 2010.
6 Medicare Advantage Provisions Key Facts24% of Medicare beneficiaries now in Medicare Advantage (MA) plansMedicare pays more for beneficiaries in MA plans than in the traditional programHigher payments to MA plans allow for some extra benefits, but increases Medicare spending, contribute to solvency problems, and increase Part B premiums for all beneficiariesHealth reformReduces payments to plansFreezes benchmarks (maximum Medicare payment per county) for 2011; phases in reductions in payments to align more with fee-for-service costs in countyReduces share of rebate retained by plan from 75% to 50% for most plans (2012)Adjusts risk scores for codingBegins to reward plans based on quality ratings (2012)Consumer ProtectionsLimits cost-sharing for certain Medicare-covered services (2011)Establishes new loss ratios requirements for plans (2014)
7 Establishes New Independent Payment Advisory Board New board with 15 full-time members, appointed by President, confirmed by Senate, with first set of recommendations due 2014Board submits proposals if growth rates exceed targets of the 5-year average of CPI-U and CPI-M (before 2018) and per capita nominal GDP+1 percent (beginning 2018)Creates formula for required Medicare savings if spending exceeds target, the lesser ofthe amount by which projected Medicare per capita costs exceeds the spending target, or0.5 % of total projected Medicare spending in 2015, rising to 1.5 % in 2018 and future yearsSecretary implements Board’s proposal unless Congress enacts alternative with equivalent savingsNew procedures and timeline for Congressional consideration of proposalsSecretary submits proposal to implement savings if Board fails to do soBoard proposals cannot ration care, reduce benefits, increase cost-sharing, modify benefits, eligibility, or premiums, raise taxes, or before 2020 reduce payments for certain providers
8 Related Revenue Sources Freezes income threshold for Part B premium at $85,000/individuals and $170,000/couples, rather than index for inflation, effective 2011Establishes a new income-related Part D premium, with same income thresholds set for Part B, effective 2011Increases the Medicare Part A tax rate by 0.9% from 1.45% to 2.35% on earnings over $200,000/individuals and $250,000/couples, effective 2013Eliminates tax deduction for employers receiving the Part D retiree drug subsidy, effective January 1, 2013
9 Baseline Medicare Spending Medicare Spending AFTER Health Reform 2010 health reform law is projected to reduce the future growth in Medicare spending,Medicare Baseline Spending (in $ billions)Average annual growth rate, :Baseline Medicare Spending: percentSpending after health reform: percentBaseline Medicare SpendingMedicare Spending AFTER Health ReformNOTE: Estimates do not take into account future changes to the Sustainable Growth Rate formula to prevent reduction in fees. SOURCE: Medicare Baseline Spending before reform from CBO, March 2009 Baseline: MEDICARE; after reform from Kaiser Family Foundation analysis of CBO cost estimates of health reform legislation, March 20, 2010.
10 Future Challenges ******* Maintaining and improving access to care, and quality of care, in the face of pressure to constrain the growth in Medicare spendingAssuring health care is affordable for people on Medicare, particularly those with modest incomes and serious health needsAssessing implications of health reform for people on Medicare relative to those who will be getting health insurance and subsidies through the exchange and/or Medicaid*******For additional information about health reform and Medicare visit