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April 19, 2014

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What cuts in Medicare would mean for seniors

AARP says they’d be felt by insurers and providers, not patients

For seniors, the nearly $500 billion in Medicare cuts proposed in the health reform bills moving through Congress can be a frightening proposition — less money for the popular program they rely on to help pay their medical bills.

Barry Gold of AARP of Nevada understands the worries expressed in phone calls to the organization and community meetings across town.

“They hear the large number and they’re concerned where these dollars are going to come from,” Gold said of the proposed cuts. “There are scare tactics; there is misinformation that is making people afraid.”

Getting the explanation (without the cuts Medicare will soon be insolvent) and key details (cuts won’t alter seniors’ policies) heard above that din can be challenging, he said.

If costs aren’t reduced, Medicare is expected to go insolvent in 2017 as health care costs soar and more money is spent than is paid into the fund in taxes.

The bills under consideration in Congress would reduce Medicare expenses by about $50 billion a year over the next 10 years to help slow the spending and spare Medicare from bankruptcy.

Gold tells seniors the reductions would come not in their benefits, but by reducing waste, fraud and abuse and changing the way Medicare pays hospitals and doctors.

He offers a favorite example: You get an X-ray for an ailment. Then you go to a new doctor who doesn’t have a copy of that X-ray. So the doctor orders another one.

“There’s really no reason to do that,” said Gold, AARP’s director of government relations. “That’s the cost of Medicare, and those are the things we can avoid.”

Medicare has a long history as a tool for health care reform fear tactics.

When Congress began laying the groundwork for its creation in the early 1960s, the American Medical Association denounced the proposal as socialism. Ronald Reagan at the time cut an advertisement warning of the perils of “socialized” Medicare.

Today 45 million Americans are enrolled in Medicare, most of them seniors 65 and older who benefit from low monthly premiums and deductibles, and guaranteed health care. It is one of the most popular government-run programs.

But as health care costs have skyrocketed and demographics shift to an older populace, Medicare costs have spiraled out of control, experts say. Legislation in both the House and Senate aims to reel in Medicare’s rising costs by trimming out excesses.

The biggest single cut in Medicare would come by trimming as much as $150 billion in payments to insurance companies for the Medicare Advantage program, which allows seniors to use Medicare benefits to buy coverage from a private insurance company.

The program is popular in Nevada, where one in three seniors have opted for Medicare Advantage, with its extra coverage for vision, dental and other services, over traditional Medicare.

But Medicare Advantage pays insurance companies higher reimbursements and costs the government 14 percent more per person than standard Medicare, draining the system and creating an inequity, critics say.

Those who are enrolled in Medicare Advantage are benefiting at the expense of those who are not, according to critics. Studies show seniors in traditional Medicare pay higher premiums to cover the excess costs of Medicare Advantage.

By some estimates, Medicare would be able to forestall bankruptcy by several years solely by trimming back the extra pay for Medicare Advantage.

Legislation being considered in Congress would not eliminate Medicare Advantage programs. But some health insurance companies have suggested they won’t continue to offer the plans if they do not receive the higher reimbursement rates. That would force seniors to find a new Medicare Advantage plan or enroll in traditional Medicare.

Nevada’s Democrats in Congress — Reps. Shelley Berkley and Dina Titus and Sen. Harry Reid — support the changes in Medicare and Medicare Advantage as a way to bring overall costs down. Republican Sen. John Ensign is opposed.

“These steps will improve Medicare and lower costs for all beneficiaries,” Titus spokesman Andrew Stoddard said.

The rest of the Medicare cuts would come from targeting waste, fraud and abuse and changing the way doctors, hospitals and other providers are reimbursed by the government.

AARP notes that although the nearly $500 billion in Medicare cuts “sounds like a huge sum, it’s actually only a small fraction of the $6.4 trillion expected to be spent on Medicare from 2009 to 2019.”

According to the association for older adults, the remaining cuts would come from “paying doctors more for practices that improve quality of care and save money ... and paying providers (notably hospitals and home health agencies) a little less of an increase each year in an effort to gradually trim the rate at which Medicare costs climb over time.”

Also lost in the debate are the improvements in Medicare that the legislation hopes to bring about — namely the effort to shrink the so-called doughnut hole in the Medicare Part D prescription drug program.

Under the current program, Medicare beneficiaries have most of the costs of their prescription drugs paid for until they hit a threshold, about $2,700. Then they must pay the full costs of the drugs, spending about $1,500 out of pocket, until they hit the next threshold and coverage kicks back in.

The House and Senate bills take different approaches to closing the hole — either by narrowing it over time or providing drugs at a 50 percent discount.

Cuts in Medicare are part of a broad plan to help reduce costs and raise new money to help pay for expanding health care to the more than 30 million Americans who are uninsured.

Gold said the scare tactics over Medicare changes have worried seniors, but AARP is trying to assure older Americans that Medicare needs to be reformed to remain viable.

He offers seniors this selling point: “People at AARP have read the whole bill,” he said. “We are definitely getting our message out.”

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