insurance

Health care reform impact on Medicare

Medicare Advantage less advantageous

Millions of seniors are enrolled in Medicare Advantage, an offshoot of Medicare that allows individuals to channel their Medicare benefits toward buying private health insurance.

And while Medicare patients may have reason to celebrate, those enrolled in Medicare Advantage plans may lose some benefits, such as free Medigap coverage and vision plans, starting in 2011, says Certner.

"Because of the large subsidies we were giving these plans, that factored into the kinds of additional packages and benefits (Medicare Advantage providers) were able to offer people," says Certner. "The problem was, these were very expensive benefits and they weren't just being paid for by the taxpayers. Anyone not in a (Medicare Advantage) plan, which is the bulk of beneficiaries, was paying a much higher premium because of this."

A 2008 study by The Commonwealth Fund found that Medicare was paying an average of 12.4 percent more for each Medicare Advantage enrollee than for those enrolled in a traditional Medicare plan. The new law strips out these overpayments which will likely lead to cutbacks in the frills that Medicare Advantage plans offer to entice new patients to sign up, says Certner.

Still, by law, Medicare Advantage plans can never offer less coverage than plain-vanilla Medicare, so there's no need for Medicare Advantage patients to worry that their plan will strip out essential services. Stronger Medicare Advantage plans will actually receive efficiency and performance bonuses from the federal government that will alleviate some of this shortfall. In the end, this may help weed out some of the weaker, less effective Medicare Advantage providers that may not have been passing along the additional government subsidies to consumers, says Guterman.

And while the new law does much to shore up the long-term solvency of the Medicare fund, Guterman says it fails to address one key issue that may hurt the program in the long term: doctor reimbursement. The law fails to repair the recurring problem of the Medicare Sustainable Growth Rate, a flawed federal formula that automatically sets Medicare payments unrealistically low based on economic indicators and previous years' costs rather than real-world medical costs.

"There's always the worry that (failing to fix the problem) might harm access to care for Medicare beneficiaries" if doctors decide that treating Medicare patients doesn't make business sense, says Guterman. With the health care reform debate over for the time being, it's doubtful that Congress will take up a permanent fix for this issue any time soon.

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