Exactly how Obamacare changes Medicare depends on the type of Medicare. In general, the Medicare benefits and coverages promised under traditional Medicare insurance (Part A and Part B) are not changed significantly. The Affordable Care Act (ACA) law includes a few measures to add additional wellness benefits for seniors, and that’s it.
ACA Changes to Medicare Advantage Plans
The big change to Medicare Advantage (MA) by Obamacare is a limit on overpayments to health care providers. Also, MA insurers must prove to the government that 85% of revenues collected for insurance premiums goes toward medical treatments. The percentage is called a medical loss ratio. When MA insurance companies fail to meet the required medical loss ratio they are required to issue rebates to beneficiaries.
It’s not all bad new for MA insurance companies. They can also receive significant bonuses for outperforming their competition in their geographic area. Both medical loss ratio and quality of care metrics can pay bonuses. By paying bonuses, Medicare virtually guarantees plan quality will improve and costs will go down.
ACA Changes to Medicare Part D
Since 2003, Medicare prescription drug plans have included a coverage gap, or donut hole, that require seniors to pay out of pocket once the initial coverage limit is reached. The ACA law eliminates coverage gaps by 2020 and provides additional discounts in the gap until that time.
Beneficiaries with Part D plans in 2011 received drug discounts during the donut hole that amounted to savings of 50 percent on name brand drugs and 7 percent on generics. Here’s the discount structure through 2020:
Part D plans are available as a standalone plan and come bundled with most Medicare Advantage plans. In spite of the additional discounts for seniors, monthly premiums for both Part D and MA plans with Part D (MAPD) have remained steady, with only slight annual increases since 2011.
ACA Changes to Medigap Insurance
Changes to Medicare Supplemental insurance are being considered by congress and the president as a way to hold costs down for Medicare. As yet there’s nothing in the ACA that changes supplemental insurance (Medigap). However, there is a threat to Medigap as we know it today. There was a movement in congress to modify the insurance plans to eliminate the payment of deductibles and copays. The general consensus is that if seniors have “skin in the game” they will think twice before seeing a doctor at Medicare’s expense.
Medicare Supplement plans are not impacted by the medical loss ratio changes from ACA and proposed plan changes were rejected. For now, ACA has no impact on Medigap insurance and the NAIC is fighting hard to keep it that way.
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