Tuesday, June 8, 2010

A Raw Deal for Seniors: Democrats’ Government Takeover of Health Care

While Democrats are advertising this week’s distribution of $250 rebate checks to a select group of seniors, a broader look at the implications of the new health care law reveals that many more seniors will pay more in costs and premiums:

  • The law provides for $250 rebate checks to seniors who reach the Part D “doughnut hole” in 2010. However, the universe of seniors who will receive these checks is limited. The Administration admitted that only 80,000 seniors will receive rebate checks this week, and four million may receive a rebate at some point this year.[i] This four million number represents fewer than 10 percent of all Medicare beneficiaries—meaning that more than nine in ten Medicare beneficiaries will NOT receive this supposed benefit.[ii]
  • Even though the Administration seeks to highlight this year’s $250 checks, their impact is dwarfed by the numbers of seniors harmed by the law’s cuts to Medicare Advantage (MA) plans. According to Medicare’s actuaries, “enrollment in MA plans will be lower by about 50 percent (from its projected level of 14.8 million under the prior law to 7.4 million under the new law).”[iii] The Congressional Budget Office (CBO) also found a 50 percent reduction in extra benefits provided to seniors in MA plans. Those benefits will be cut by a projected $68 per month, or $816 annually.[iv]
  • Recent reports indicate that even as the Administration touts the new rebate checks to seniors included in the law, the cuts to Medicare Advantage will have a much bigger impact. “Many insurance companies are planning to increase costs for a range of services for seniors next year…dozens of Medicare Advantage providers plan to cut back vision, dental and prescription benefits. Some plans are…raising fees for hearing aides, eye glasses, and emergency room visits.”[v] In other words, many more seniors will be hurt, and to a greater degree, than will benefit from the $250 rebates issued to a small fraction of Part D participants.
  • The law’s elimination of the prescription drug “doughnut hole,” which will not be complete for 10 more years, also picks winners and losers. All seniors paying Part D premiums will see their costs rise so that only a few million will benefit. Specifically, CBO found that “the law would lead to an average increase in premiums for Part D beneficiaries of about 4 percent in 2011, rising to about 9 percent in 2019.”[vi] While 2.9 million seniors were fully exposed to the Part D “doughnut hole,” and thus will receive all the new law’s benefits, more than 17 million seniors will pay higher prescription drug premiums so this much smaller subset can benefit.[vii]

As the Administration uses mailings and other political “spin” to sell its unpopular government takeover of health care to seniors, the fact remains that the legislation uses hundreds of billions of dollars in Medicare savings to fund new entitlements. As a result, millions of seniors will lose access to their Medicare Advantage plans despite being promised they could keep the plan they liked.[viii] From this perspective, providing a $250 check to a select subset of these disappointed beneficiaries represents neither health care “reform” nor a change many seniors will believe in.


[i] “Obama Pitching Seniors on Health Bill” by Erica Werner, Associated Press June 8, 2010, http://news.yahoo.com/s/ap/20100608/ap_on_bi_ge/us_obama_health_overhaul_3

[ii] Medicare Payment Advisory Commission, “Report to the Congress: Medicare Payment Policy,” March 2010, http://medpac.gov/documents/Mar10_EntireReport.pdf,  p. 286

[iii] Richard Foster, Department of Health and Human Services, Estimated Financial Effects of the “Patient Protection and Affordable Care Act,” as amended, April 22, 2010, http://www.cms.gov/ActuarialStudies/Downloads/PPACA_2010-04-22.pdf , p. 11

[iv] Congressional Budget Office, impact of H.R. 3590 and reconciliation legislation on Medicare Advantage plans and extra benefit subsidies, March 19, 2010, http://cbo.gov/ftpdocs/113xx/doc11379/MAComparisons.pdf

[v] “HHS Warns Medicare Insurers on Rates” by Janet Adamy, Wall Street Journal June 7, 2010, http://online.wsj.com/article/SB10001424052748704726104575291121755620054.html

[vi] Congressional Budget Office, impact of H.R. 3590 and reconciliation legislation on Part D premiums, March 19, 2010, http://www.cbo.gov/ftpdocs/113xx/doc11355/Comparison.pdf

[vii] Medicare Payment Advisory Commission, “Report to the Congress: Medicare Payment Policy,” pp. 286-88

[viii] See for instance the pledge that “you will not have to change plans” included in Senator Obama’s 2008 campaign plan FAQ, http://www.barackobama.com/pdf/Obama08_HealthcareFAQ.pdf