The Short Answer
As part of its cost savings, ObamaCare reduces the growth in payments to some Medicare providers but not in services to Medicare recipients.
Business Week addressed this question
Money in the Medicare trust fund comes mostly from payroll taxes, premiums, and general revenue. The trust fund then pays that money out to health-care providers. Part of the trust fund was expected to go bankrupt by 2016. Obamacare actually saves it money in a variety of ways.
From 2010 to 2019, Obamacare trims payments to providers by $196 billion. They agreed to take a cut because they will get so many new patients, thanks to the individual mandate. Another $210 billion will be generated by raising Medicare taxes on the wealthy (that’s households earning more than $250,000). Another $145 billion comes from phasing out overpayments to Medicare Advantage. About 25 percent of seniors use the program—in which private plans compete for Medicare dollars—instead of traditional fee-for-service Medicare. Under Obamacare, the government has to keep Medicare Advantage costs in line with those of traditional Medicare. More savings come from streamlining administrative costs.
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“You’ve probably seen or heard the national debate that is raging over the $716 billion robbing of Medicare that will directly impact costs and care for tens of millions of seniors across this country.”
– email from Maine People Before Politics, a conservative interest group, to supporters
Let’s start with the implication that seniors are getting a bad deal here:
Benefits to Medicare recipients are not expected to be touched under these Medicare cuts. Payments to health providers and insurers, however, will be scaled back.
In fact, the nation’s main senior citizen advocacy group, the AARP, has said the law at issue here, the Patient Protection and Affordable Care Act, colloquially known as Obamacare, “strengthens Medicare and improves long-term care services.”
The federal Department of Health and Human Services recently announced that in the first half of 2012, 1 million Medicare recipients actually saved an average of $629 on prescription drugs after the health care reform law filled a previous coverage gap. Also, the law stipulates guaranteed Medicare benefits can’t be rolled back, according toFactCheck.org.
“Nothing in the Medicare payment reductions directly impacts the eligibility or benefits that Medicare enrollees receive, assuming that the law is implemented roughly as designed,” said John McDonough, a professor of public health practice at the Harvard School of Public Health.
Any talk of Medicare “robbing” is a half-truth by omission. The $716 billion in savings from Medicare will indeed pay for about half of the cost of Obamacare over 10 years. That money isn’t being cut now — it’s a Congressional Budget Office estimate of a planned reduction slowing Medicare’s growth from 2013 through 2022.
This Medicare dispute is at the center of one of the biggest rhetorical battles between national Republicans and Democrats.
It’s a complex issue often turned into sound bytes, such as the email sent by Jason Savage, the executive director of Maine People Before Politics, the advocacy group that grew out ofGov. Paul LePage‘s transition team.
Savage’s email to supporters last week contained a list of 48 Democratic Maine state legislators who signed a brief to the U.S. Supreme Court earlier this year urging justices to uphold Obamacare.
“Unfortunately, we now have proof that the 2010 government takeover of health care was designed to rob funds from Medicare to pay for the massive new program,” Savage wrote.
Savage is partially correct: the savings will go toward paying nearly half the cost of Obamacare, wrote McDonough on his Boston Globe blog Wednesday.
Still, nothing is really “robbed,” the way almost anyone uses the word, and that money is largely coming from reduced payments to hospitals, other health providers and insurers.
In 2009, hospital associations agreed to Medicare and Medicaid cuts over 10 years in anticipation of the expansion of health care coverage under Obamacare, according to the Wall Street Journal. The idea was that more customers would more than offset the cuts.
With a CBO estimate adjusted for 2013 through 2022, hospitals will lose $260 billion out of the total savings because of lower reimbursements for Medicare services. There are further cuts targeted toward some hospitals.
One change for insurers comes in payments to Medicare Advantage plans, designed in the Bush administration to tamp down costs of plans through competition from private insurers. Those ended up being more expensive than regular Medicare plans, according to the Washington Post, which said those plans will be scaled back with future reimbursement levels tied to merit-based metrics.
But cuts aren’t without bad possibilities, some sources say.
The Brookings Institution has said it’s too early to tell if reduced payments to hospitals mean there will be negative impacts on quality of or access to health care. The Washington Posthas said the reductions “could” affect Medicare quality.
Verdict: The statement ignores the benefits and leaves out crucial information surrounding the targets of cuts.
Savage’s “robbing” rhetoric doesn’t quite fit the scope of the cuts, but his numbers are good. Since benefits for some seniors have already improved, it’s a stretch to suggest for certain that seniors will be negatively impacted, although it is possible in the future.
We rate this statement mostly false.
One more from Time Magazine
First, the context. The Congressional Budget Office estimates Medicare spending over the next 10 years will be about $7.5 trillion. This means the ACA’s Medicare cuts account for less than 10% of overall Medicare spending. The program is not being gutted. Even with the ACA cuts, the CBO says the cost of Medicare is expected to grow from about $500 billion in 2012 to nearly $900 billion by 2022.
As for the cuts, they come from eliminating a massive subsidy to private insurers and gradually reducing the rate of growth in payments to some providers. These changes, while not catastrophic for Medicare, are important. Under the ACA, the federal government will substantially reduce the amount it spends funding Medicare Advantage, which is privately administered insurance offered to Medicare beneficiaries. About one-quarter of Medicare recipients are enrolled in private Medicare Advantage. In theory, these plans are supposed to manage health care spending better than fee-for-service Medicare. But they don’t actually save the federal government any money. They cost, per patient, 14% more than traditional Medicare. (See Figure 3 of this fact sheet from the Kaiser Family Foundation. And see here for more.) The ACA eliminates this subsidy and pegs Medicare Advantage payments to quality metrics.
The second bunch of money that gets cut from Medicare under Obamacare comes from providers. Hospitals, home health agencies and others will see Medicare payments grow more slowly than they have in the past.
Medicare benefits will not change – in theory. However, providers who get paid less from Medicare in the future may be less inclined to accept Medicare patients, thereby reducing access. The frequently criticized Independent Payment Advisory Board, created by the ACA, could cut provider payments even more to keep the growth in Medicare spending under a benchmark. If Medicare per capita spending grows faster than a rate pegged to inflation and later GDP, IPAB will be empowered to recommend provider payment cuts. If Congress can’t find alternative ways to keep Medicare spending growth under the inflation or GDP benchmark, the IPAB recommendations will automatically go into effect. This too could reduce access. Bonus Medicare Advantage benefits – like free gym memberships – may go away.
In exchange for these kinds of reductions in Medicare spending, funding for the program was bolstered in other ways by the ACA. Preventive care is now covered at 100% for Medicare beneficiaries and a gap in Medicare prescription drug coverage will slowly close under the law. Some Medicare beneficiaries, primarily wealthy Americans, will pay higher Medicare premiums and taxes under the ACA.
The idea, however, that the Affordable Care Act struck a dangerous blow to Medicare that will change the program in fundamental ways is untrue. Under the new law, Medicare will remain a wildly popular, public single-payer health insurance system that provides comprehensive coverage to millions of Americans.