Major Changes Coming to Medicare Programs
Relief from the “Donut Hole” is one of the biggest benefits seniors will see from the new health care reform bill.
But such changes will come at a price for many elderly citizens.
For years, many seniors have found themselves trying to get out of Medicare’s now infamous “donut hole.” The new reform bill finally does something about it.
The “donut hole” is a gap in coverage suffered by seniors who spend more than $2,830 a year in prescription drugs. Under current Medicare programs, seniors have a $310 deductible and then pay 25 percent of the cost of all the medicine they purchase until the total cost reaches $2,830. After that amount, seniors are stuck with the total cost of the medicine until the bill reaches $6,440, when Medicare coverage kicks in again. This $3,610 gap in coverage is known as the donut hole.
Beginning this year, seniors who fall into the doughnut hole will receive a $250 rebate. In 2011, the same seniors will receive a 50-percent discount on brand-name drugs and a 7-percent discount on generic drugs. The generic drug discount will also increase in future years.
Seniors will also be eligible for free annual wellness exams and tests, such as blood pressure screenings and examinations for certain types of cancer.
The donut hole in coverage is scheduled to be completely closed by 2020, when Medicare will pay for 75 percent of the cost of prescription medicine, after the $310 deductible.
Seniors To Pay More
However, these changes will come at a price for some high-income seniors. For those making $85,000 or more a year, their premiums are expected to increase.
Seniors who are part of Medicare Advantage – plans that are run by private insurers such as Humana and are an alternative to traditional Medicare - are expected to also see their premiums rise in coming years as the government reduces the federal subsidies given to private insurers that offer the plans. These changes are expected to be phased in during a three-year period, beginning in 2011. But it will take longer for some plans to implement the changes.
What isn’t completely clear at this point is whether insurers will drop extra benefits they offer through the Advantage program that will no longer be covered by the federal government or whether they will pass on the extra costs to customers. However many experts believe the rates for the programs will rise in coming years. While the reform bill does not contain cuts to traditional Medicare benefits, it does reduce Medicare payments for home healthcare by $40 billion during the next nine years. It also calls for cutting $22 billion in certain hospital payments during the same period.
One of the more controversial aspects of the bill is the future creation of an Independent Payment Advisory Board. The 15-member panel will submit legislative proposals to reduce per capita Medicare spending if the program’s costs grow faster than inflation. The panel will use a five-year average (beginning with the 2008-2013 period) for the Consumer Price Index to decide the rate at which Medicare spending should increase.
If Medicare is growing faster than the core inflation rate, then the board will submit its proposals to Congress and the president for consideration. Some critics have claimed that the board would be used to save money by reducing or restricting Medicare coverage for seniors. However, supporters say the reform bill prohibits the board from submitting any cost-saving ideas that would ration care, raise taxes or change benefits.