Changes to Medicare were a key point of contention when the Affordable Care Act (ACA) was in legislation. Some of the biggest changes as a result of the act include cost savings for Medicare Advantage insurance companies, caps on the cost of prescription drugs within the coverage gap, higher premiums for people with high incomes, and increased coverage for preventive care. The act also increased the payroll tax for high earners to increase revenue for Medicare.
Cost Savings Attempts
The government was paying more for people with Medicare Advantage plans than people with Original Medicare, so they found a way to reduce pay for Medicare Advantage insurers. Pushback has kept the pay fairly level though as attempts to reduce compensation have been rebuked.
Medicare Advantage insurance companies with a 4, 4.5, or 5-star rating receive a 5% bonus each year, so high-performing companies can offset the payment reduction.
The insurance companies are required to keep the medical loss ratio (the amount they pay back to cover their clients’ healthcare costs) at 85% or more each year.
Prescription Drugs
One big concern at the time of the act’s signing was the Medicare Part D donut hole. This is the coverage gap that people fall into when they pay a certain amount for prescription drugs. Until they reach the level of catastrophic coverage, people in the coverage gap pay more than they used to for prescriptions. They had to pay the full cost for prescriptions within the donut hole.
Thanks to the ACA and changes made more recently (the Bipartisan Budget Act of 2018), people who fall into the coverage gap only have to pay 25% of the cost for generic and brand-name prescription drugs.
High Income Premiums
To help the government program continue, the income brackets were adjusted so that people who made over certain amounts would have to pay more for their Part B premiums. These cost-reducing efforts have been adjusted over time to lower the income requirements for the highest income bracket.
Most Medicare beneficiaries qualify for premium-free Part A, so the additional funds brought in from wealthy people paying more for Part B helps to keep Medicare alive as the workforce ratio shrinks in proportion to our retired demographic. Only around 5% of Medicare beneficiaries pay this higher rate, so it’s not a concern to the average senior but helps reduce government costs.
Preventive Care Coverage
The Affordable Care Act made certain preventive carefree. Screenings and other preventive medicinal practices help to spot the onset of health conditions, which is a benefit to everyone.
Some of the preventive care includes:
- Screenings for certain cancers and diseases
- Mammograms
- Nutrition counseling
- Certain vaccines
- Initial “Welcome to Medicare” visit
- Annual Wellness visits
Tax Changes
Medicare is funded in large part thanks to payroll taxes on American workers. The Affordable Care Act aimed to increase revenue for Medicare by increasing the Medicare payroll tax by 0.9% for individuals earning more than $200,000 and married couples earning more than $250,000. This only affects 3% of the American workforce.
Kannonball Insurance is the Home of the Medicare Wonder Woman. Let the Medicare Wonder Woman take the wonder out of Medicare.
