By Mark Miller

Opponents of health reform used smokescreens to frighten older Americans -- conjuring up everything from death panels to dire predictions of slashed Medicare budgets and totalitarian takeovers of hospitals and doctors' offices.

But it's really not nice to scare Grandma.

So, now that the smoke is starting to clear, let's consider the important benefits in the new law for people over age 50. They fall into two groups: people over 65 on Medicare, and everyone else.

First, Medicare

The key smokescreen here was that reform would be funded through draconian cuts to Medicare.

But, as I've stated before in this space, the law contains no reductions in traditional Medicare benefits. None.

What the law does do is reduce reimbursements to Medicare Advantage -- the privatized Medicare insurance plans that offer all-in-one medical and drug coverage. These are managed care plans from insurance companies -- PPOs, HMOs and the like.

These plans have been growing quickly in recent years. But they are reimbursed by the federal government at 114 percent of regular Medicare rates, a payment scheme that was put in place to stimulate the Advantage market but amounts to no more than a big subsidy to insurance companies. The new law freezes the reimbursements at current levels through 2011, and then reduces payments by $116 billion over a period of years, ultimately equalizing them with traditional Medicare.

Will that translate to a squeeze on Advantage plans? Not necessarily.

The new law also offers bonuses to Advantage plans that meet certain benchmarks for high quality care. "That could engender a race to the top," argues Joe Baker, president of the Medicare Rights Center.

Moreover, it's important to keep in mind that Advantage plans operate in a competitive marketplace; if a plan were to slash benefits, enrollees could simply move to more attractive plans during the annual enrollment period. It's more likely that the reduced reimbursements will put pressure on insurance company profit margins.

And these plans could stand some tightening up.

A recent report to Congress on Advantage prepared by the majority staff of the U.S. House Committee on Energy and Commerce found that:

-- Medicare paid $12 billion more in 2009 for Advantage beneficiaries than it would have if the beneficiaries had participated in traditional Medicare.

-- Advantage plans are spending less of every premium dollar on actual medical care delivery than basic Medicare.

-- Twenty-three insurance companies in the program spent $121 million on 355 corporate retreats for executives, insurance brokers and board members between 2008 and 2009.

Next, let's talk about the new Medicare benefits contained in the law

First, the Medicare D prescription drug doughnut hole will be closed. That's the coverage gap that starts when a beneficiary's annual out-of-pocket spending hits $2,830, and resumes at the catastrophic level ($4,550 out of pocket).

This year, patients who enter the doughnut hole will get a $250 rebate. In 2011, pharmaceutical companies will provide a discount of 50 percent on brand-name drugs to low- and middle-income beneficiaries who find themselves in the doughnut hole. Then, the doughnut hole itself will shrink a bit every year, ultimately disappearing entirely in 2020.

The law also contains some important improvements to traditional Medicare aimed at boosting preventive care. Deductibles and co-payments will be eliminated for most preventive care services, starting this year. And doctors will receive incentives for joining "accountable care organizations," which will coordinate patient care and foster greater attention to prevention.

Starting next year, Medicare patients also will be able to get an annual wellness visit -- with no co-payment or deductible -- that includes a comprehensive health risk assessment and a long-term personalized prevention plan.

One possible negative in the bill for retirees is the end of a tax break starting in 2013 for employers that provide prescription drug coverage to Medicare-eligible employees. The ranks of these employers has been dwindling fast in recent years, but ending the tax subsidy could encourage more companies to discontinue the benefit or encourage retirees to use Medicare Part D benefits instead.

Meanwhile, the new law will help millions of older Americans who have lost health insurance but are too young for Medicare.

While insurability issues affect Americans of all ages, the problems are acute for people over 50, who tend to have more pre-existing conditions than younger people do, and use more health care.

Starting this year, insurance companies won't be able to refuse applicants with pre-existing conditions, and the new law also creates new insurance options for people without group coverage. Within six months, you can buy into a new high-risk insurance pool that caps annual out-of-pocket costs at $5,950 for individuals and $11,900 for families. While buying coverage will be mandated for most people starting in 2014, tax credits will be available on a sliding income-based scale to help make the coverage affordable.

The high-risk pool will serve as a bridge to longer-term solutions.

These include private insurance exchanges that will operate starting in 2014, as well as expanded Medicare for low-income households.

The new individual insurance options will open up some very positive new options for baby boomers in their 50s and early 60s, many of whom are eager to move on to second careers, entrepreneurial ventures and other new paths, but have been hanging on to jobs solely for the health benefits.

Health reform gives them the freedom to move on.

That will stimulate entrepreneurial activity, and it's going to open up spots on the management charts, allowing younger people to advance.

Is the smoke clearing for you yet?


Personal Finance - How Health Reform Will Affect Older Americans

© Mark Miller


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