How Does Health Insurance Reform Affect Medicare, Medigap Plans, Medicare Advantage and Medicare Part D Prescription Drug Coverage?
NOTE: The information below is a copy of an article that was originally sent in our March Medigap / Medicare Supplement client newsletter.
You have, no doubt if you are here, heard all about this past the recent passing of the health insurance reform legislation by Congress, which was subsequently signed into law by the President. So, what does that mean for Medicare, Medicare Supplements and, more specifically, for you?
After receiving that question many times since the vote (and in the time leading up to the vote), we wanted to take some time to address it, now that the bill is passed and the situation is a little more resolved.
While much of the legislation itself and discussion about it on the state level is still being interpreted, these are some areas from the legislation (as it stands now) that will affect Medicare and, most likely, you:
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Changes to "Original" Medicare Benefits
- Contrary to what some people have speculated, there is nothing in this legislation that 'cuts' the current benefits of Medicare A & B. The '$400 billion in savings from Medicare' number that has been thrown around is accurate but doesn't come from cutting "Original" Medicare.
- Medicare will begin paying for annual wellness visits (which it currently does not cover). As of now, it is unclear when this additional benefit will start.
- There will be cuts of payments to home healthcare and for certain hospital procedures, totaling $66 billion over the next 9 years. These are not reductions in benefits, but rather reductions in the amounts paid to providers of those benefits.
Changes to Medigap (Medicare Supplement) Plans
- There is nothing in this legislation that specifically addresses Medigap plans by name.
- Medigap plans are changing for people turning 65 after June 1, 2010 anyway. Most of the 'old' plans, like 'G' and 'F', will not be changing; however, there will be two new plan options available('M' and 'N'). Read more about that if you are interested.
- Most analysts, including myself, speculate no immediate changes to Medigap plans or the way they work, as a result of this bill. Interpretations of this bill may have some effect on the plans/rates, but as of now, there is nothing that needs to be done regarding your Medigap plan if that is the type of coverage you currently have.
Changes to Medicare Part D
- Medicare Part D will be greatly affected by the legislation. For those that don't know, the 'donut hole' is the part of Medicare Part D coverage that starts after an individual has reached $2,700 in overall retail costs. It lasts through approximately $4,500 in total retail costs. In this 'gap' ($2,700-$4,500), Medicare Part D provides little to no coverage.
- This legislation starts the process of closing that gap (or 'donut hole'). Beginning in 2010, people hitting the 'donut hole' will get $250 in the form of a 'donut hole' rebate.
- After 2010, the 'donut hole' will gradually become closed over the next 10 years. According to the legislation, by 2020 the Federal Government will pay 75% of individual retail drug costs between $2,700 and $6,154 in total retail costs.
Changes to Medicare Advantage Plans
- Government payments to Medicare Advantage insurance companies will be cut by $132 billion over the next 10 years.
- This reduction in payments (and anticipated corresponding reduction in plan benefits) will begin in 2011. It will be phased in, so the initial impacts may not be dramatic.
- It is uncertain how this reduction in payments to these companies will affect the coverage they offer. Obviously, it is logical that they will decrease benefits in a way that corresponds to the reduction in money they are getting from the Federal Government. However, how this will all play out is, at least in part, up to the individual companies (i.e. some may increase premiums, some may reduce benefits, some may find a way to reduce administrative costs).
I hope this has been useful to you in seeing some of the bullet-point ways that the health insurance reform legislation will affect your Medicare and Medicare supplemental coverage over the next few years.
As always, it is our goal to keep our clients and other interested readers up to speed on information as we know it, and in particular, how that information will affect you and your coverage. If we can help you in any way, answering questions or providing additional information, please do not hesitate to contact us. The best way to reach us is by EMAIL. You can also reach me toll-free, direct at 877.506.3378.
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