Impact of Healthcare Reform on Today’s Medicare Beneficiaries—And on Those Who Care for Them

Much of the discussion regarding the healthcare reform bill just signed into law centers around insurance access—providing coverage for the uninsured and helping those not able to find insurance. But what about those who already have “good” insurance? What happens to today’s Medicare patient?

While much of the reform will not impact older adults already covered by Medicare, such as those reforms focused on holding private health insurers more responsible, there are areas where older adults will definitely feel the impact. The consequences for older persons covered by today’s Medicare are likely to be a little bit of good, bad, and potentially ugly. These include:

The Good:

• Lowered out-of-pocket expenditures for prescription drugs
• Decreased expenditures for certain types of preventive care

The Bad:

• Decreased managed care benefits
• Higher Medicare premiums for wealthier individuals

The Potentially Ugly:

• Decreased access to primary care providers (PCPs)

The Good: Paying Less

With the signing of the Patient Protection and Affordable Care Act (H.R. 3590)¹ on March 23, 2010, comprehensive health system change began. Perhaps the most positive step put forth by the legislation is for the approximately one in four Medicare Part D beneficiaries affected by the coverage gap or “donut hole.” Most Medicare Part D prescription drug plans have a coverage gap during which beneficiaries must pay the entire cost of their prescription drugs. The gap begins once a senior has spent $2830 on prescription drugs in 2010 and lasts until catastrophic coverage kicks in when a patient has spent $4550 out-of-pocket on medications. The new legislation provides a $250 rebate to Medicare beneficiaries who reach the Part D coverage gap in 2010.

The donut hole will be gradually filled in before completely closing in 2020. Beginning in 2011, pharmaceutical manufacturers will be required to provide a 50% discount on brand-name prescriptions in the Medicare Part D coverage gap, and in 2013, federal subsidies for generic prescriptions will also be phased in. The out-of-pocket amount that qualifies an enrollee for catastrophic coverage in Medicare Part D will also be reduced beginning in 2014 and going through 2019 until the donut hole is completely eliminated in 2020.

While this filling of the Medicare Part D coverage gap will likely assist in Medicare beneficiaries’ ability to be more adherent, there will be some older adults currently covered with employee retiree benefits for prescription coverage who may see a decrease in their coverage. The employee retiree prescription coverage is likely to become less available as a result of the elimination of company tax advantages in providing retiree Part D–like coverage. Up until now, these companies have received a tax subsidy for providing their retiree prescription drug coverage similar to that available under Medicare Part D.

Beyond the changes to prescription drug coverage, Medicare beneficiaries will see that their cost-sharing for preventive services such as cancer screenings will be eliminated on January 1, 2011. In addition, to encourage even greater screening, federal payments to physicians for preventive services will be increased. Coverage of an annual wellness visit that includes a comprehensive health risk assessment and a personalized prevention plan will also be added to the services covered by Medicare. These changes on both the Medicare beneficiary and the physician sides should come together to increase the number of older adults undergoing screening.

The Bad: For Some, Paying More and Getting Less

While it appears that the Medicare Part D benefits will improve, the opposite is true for the Medicare Part C program. Medicare Part C is Medicare’s managed care program, or Medicare Advantage (MA). MA will be subjected to a $132 billion cut in its reimbursement, some plans will see their reimbursement level cut as much as 14%, representing the additional reimbursement to the MA plan as compared with the cost of similar care in Fee-For-Service (FFS) Medicare. The result of these cuts for older adults will be a decrease in ancillary and other benefits currently offered by MA plans, as well as increased restrictions as they work to maintain their profitability in the face of deep cuts in their reimbursement.

While reimbursement for MA plans will be reduced beginning in 2011, those MA plans demonstrating higher scores on quality measures will receive bonus payments. In addition, new rules will prohibit MA plans from imposing more expensive cost-sharing requirements than those charged for traditional Medicare. And beginning in 2014, MA plans will be required to spend at least 85% of the health insurance premiums collected on providing healthcare to their customers.

Beyond the decrease in Medicare Part C reimbursement—which will surely mean a decrease in benefits being offered, and increase in utilization management to assure continued profitability. Medicare pain will also be felt by wealthier individuals. While high-income retirees already pay higher Medicare Part B premiums than other Medicare recipients, they will see additional increases. While most retirees who signed up for Medicare in 2010 paid $110.50 each month, premiums for wealthier retirees ranged from $154.70 monthly for individuals earning between $85,000 and $107,000 annually to $353.60 monthly for single tax filers with income topping $214,000 annually. These income thresholds typically increase each year, but the new legislation freezes the income thresholds from 2011 through 2019 at 2010 levels, meaning that each year more individuals will be required to pay these higher premiums.

The Potentially Ugly: PCP Access

The potentially ugly—and it could be very ugly—is that Medicare beneficiaries could experience difficulty accessing PCPs because of reduction in Medicare reimbursement, employee health insurance coverage burden, and addition of the previously uninsured now granted and seeking primary care access.

Medicare Reimbursement
While the legislation calls for increased reimbursement for PCPs, as well as increased residency training slots and medical school loan forgiveness, this will not immediately impact the availability of PCPs. The immediate challenge facing PCP access for Medicare beneficiaries comes from the still pending 21.3% Medicare provider cuts. Congress has delayed these cuts several times since January 1st through extensions which have sometimes occurred after the designated start date. Given that the cost to correct this issue permanently is estimated to be a quarter of a trillion dollars, it remains unclear if and when this recurring issue will cease.

Beyond the overall pressure to cut costs through physician reimbursement, payment reform is also occurring in the move from a volume-based system to one focused on outcomes. The health bill changes the ways in which physicians are paid for the services they provide to Medicare recipients. For example, hospitals with excess numbers of preventable patient readmissions will receive reduced Medicare payments for their services provided beginning in 2012. And beginning in 2015, hospitals will receive 1% lower payments if patients develop avoidable hospital-acquired conditions. This is just one example of Medicare’s move to pay for outcomes rather than the volume of services being rendered. This may pose a difficulty for physicians not accustomed to this approach.

Uninsured Seeking PCP Access
Because of these changes to Medicare reimbursement, physicians have expressed a need to restrict their reliance on Medicare. And with approximately 32 million Americans set to gain insurance coverage, physicians could easily move their focus from Medicare to these newly-covered commercial patients, making it difficult for older adults to find qualified PCPs to care for their medical needs.

This view is shared by many. Rick Foster, CMS’s actuary, has been quoted as saying that he thought the increased demand for healthcare reform services from so many new patients will tax “existing health resources and could lead to price increases, cost-shifting, and/or changes in providers’ willingness to treat patients with low-reimbursement health coverage.”² This is consistent with a survey completed by the Connecticut State Medical Society (CSMS) that found that access is already an issue in that 28% of internists and 26% of family physicians surveyed reported that they are not accepting new patients. Further, those who are taking new patients often have waiting periods of more than two weeks for a routine visit. As a result of these findings, CSMS has stated that accommodating people who are now uninsured would stretch the state’s primary care practices even thinner, increasing patient loads by 7-20%.³

In an attempt to secure a relationship with a PCP who is more likely to remain focused on Medicare, older adults may move their affiliation to those providers strongly affiliated with a large health system because of the perception that these providers are more likely to remain committed to Medicare. In addition, these providers may be viewed as more likely to provide an integrated approach to care through a team of coordinated specialists, which become critical as personal healthcare needs increase. Medical homes, accountable care organizations, and other models of care coordination and delivery call upon a heightened level of provider sophistication. The expectation is that more and more physician practices will be affiliated with a hospital or health system.

Employee Health Insurance Coverage Burden
Physicians’ practices are still more often than not small businesses, and many will face an increasing burden in providing coverage for their employees. Mr. D, a Medicare beneficiary, told me that he believes that physician access for himself, his wife, and other Medicare beneficiaries will become increasingly difficult. He made the following point:

“Our dermatologist of 28 years and her partner have told us it’s very likely they're going to 'hang it up.' They take what Medicare pays plus any secondary insurance company payment as payment in full. But, paying fines for 5 employees (in lieu of unaffordable insurance premiums) just isn't worth it for them! Our G.P. (also about 28 years) has charged us $65.14/office visit like forever. He bills us and we pay the $13.03 Medicare doesn't allow. Now, as you note, Medicare's going to whack him another 21.3% ($13.87) for a total cut of 40%. As everybody knows though, all past cuts like this have been restored and paid back from some other bill (off the Medicare budget of course) like, say ‘The Disaster Relief Bill of 2010.’ [The Enron guys who did 'Off Budget' accounting like that are all in prison!] If all three doctors do stay in business (practice) with a gross of $250,000+ each, they will now see their taxes go up on personal income plus on interest & dividends earned; long term capital gains taxes will more than double, and now more taxes for Medicare. And, our G.P.'s not happy about having to start buying insurance for his 3 employees either. He wants to retire. So that's 3 doctors and 8 employees (11 people) out of jobs. Maybe my wife and I had better start looking for a new primary care physician who's not as old as we are? If we can't find a new G.P. who will take new Medicare/Medicaid patients, we can always go to the emergency room.”

Faced with an already decreasing number of young physicians entering primary care, and even fewer choosing geriatric care, those physicians already practicing may decrease their focus on Medicare beneficiaries because of changes in reimbursement and focus on new opportunities among recently insured non-Medicare recipients.

So, while today’s Medicare patient will experience the good of greater coverage through the Medicare Part D donut hole and the bad of decreasing benefits in MA plan offerings, they can avoid the ugly—limited access to services—by securing a PCP.

Future Medicare Beneficiaries Affected

Beyond these changes, there are others that will affect soon-to-be retired individuals. These include the creation of a temporary reinsurance program for employers who provide retiree health insurance coverage to former employees age 55 and older who are not yet eligible for Medicare. Starting 90 days after the bill is enacted until January 1, 2014, companies that provide health benefits to early retirees and their spouses and dependents will qualify for reimbursement of 80% of the health costs between $15,000 and $90,000. These payments must be used to reduce costs, such as premiums or deductibles, for employees and retirees in the health plan. These changes should help pre-Medicare beneficiaries with additional coverage options so that they are not delaying care until they qualify for Medicare.

Within the healthcare reform legislation there is establishment of a voluntary long-term care insurance program called Community Living Assistance Services and Supports (CLASS). Citizens who pay premiums into the program for at least five continuous years become eligible for payouts for community living assistance services if they become unable to perform the activities of daily living for a period of 90 days or more. The payouts will average just $50 per day and vary based on the functional ability of the participant, and will have no lifetime maximum.

Comprehensive health system change begins, but does not end, with the historic health reform legislation signed into law by President Obama on March 23, 2010. The Patient Protection and Affordable Care Act authorizes many new programs and changes many existing programs in ways that will undoubtedly change the face of health and healthcare in the United States for all Americans, including those currently covered under Medicare.

Perhaps the greatest change in the future will come as the federal government is forced to control ever-exploding healthcare costs. Today’s healthcare reform legislation does lay out several new federal organizations and initiatives tasked with improving quality and costs. These organizations and initiatives include the following⁴:

• Center for Medicare and Medicaid Innovation tasked with testing innovative payment and service delivery models to reduce healthcare costs and enhance the quality of care provided to individuals
• An Independent Payment Advisory Board to develop and submit proposals to Congress and the private sector aimed at extending the solvency of Medicare, lowering healthcare costs, improving health outcomes for patients, promoting quality and efficiency, and expanding access to evidence-based care
• Implementation of physician payment reforms that enhance payment for primary care services and encourage physicians to join together to form “accountable care organizations” to gain efficiencies and improve quality
• A hospital value-based purchasing program to incentivize enhanced quality outcomes for acute care hospitals, as well as home health and nursing home care
• Community Care Transitions Program to provide transition services to high-risk Medicare beneficiaries; in addition, this directs the Centers for Medicare & Medicaid Services to track hospital readmission rates for certain high-volume or high-cost conditions while using financial incentives to encourage hospitals to undertake reforms needed to reduce preventable readmissions
• Reduction in administrative cost: Health plans will adopt and implement uniform standards and business rules for electronic exchange of health information to reduce paperwork, administrative burdens, and costs

As a result of healthcare reform, physicians who care for older adults are tasked with not only the need to educate themselves about the impact of healthcare reform, but also to aid their patients in navigating these turbulent waters.⁵ Even more important will be the need for physicians to work to ensure that older adults continue to have access to the services they need given the many challenges inherent in our efforts to improve the healthcare delivery system.

The author reports no relevant financial relationships.

Dr. Stefanacci served as a CMS Health Policy Scholar for 2003-2004. He is Medical Director of the NewCourtland LIFE Program and Director of the Center for Aging Research, Education & Support (CARES) at the University of the Sciences, Philadelphia, PA. Dr. Spivack is Associate Physician Editor of Clinical Geriatrics.

References

1. Patient Protection and Affordable Care Act. Library of Congress. http://thomas.loc.gov/cgi-bin/query/z?c111:H.R.3590.as. Accessed April 28, 2010.

2. Cusack B. Government report: Health law could hike prices, make employers drop coverage. The Hill. April 22, 2010. http://thehill.com/homenews/administration/93947-govt-report-new-health-law-could-lead-to-higher-prices-employers-dropping-coverage. Accessed May 3, 2010.

3. Connecticut 2009 primary care survey: Physician satisfaction, physician supply, and patient access to medical care. Connecticut State Medical Society. http://www.nytimes.com/2010/04/19/health/policy/19doctors.html?nl=health&emc=healthupdateema3. Accessed April 28, 2010.

4. HR 4872. The Healthcare & Education Affordability Reconciliation Act of 2010 prepared by the Committees on Ways & Means, Energy & Commerce, and Education & Labor. March 18, 2010. http://majoritywhip.house.gov/index.cfm?a=Files.Serve&File_id=2f841bab-490a-47a5-888a-457cca47b114. Accessed April 28, 2010.

5. Leland J. Doctors hear many questions about health law. New York Times. April 18, 2010. http://www.nytimes.com/2010/04/19/health/policy/19doctors.html?nl=health&emc=healthupdateema3. Accessed April 28, 2010.