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Proposed Medicare Changes Would Cut Health Benefits for Older Adults and People with Disabilities

Aging and Disabilities

Proposed Medicare Changes Would Cut Health Benefits for Older Adults and People with Disabilities

Date Posted: 
02/01/2017

For 50 years, Medicare has made it possible for older adults and people with disabilities to access the health care they need, and has contributed to longer life expectancies and greater economic security.  Medicare helps elders and people with disabilities pay for vital medical services and treatments, and allows them to afford basic necessities to stay healthy and avoid homelessness.

Recent proposals to radically restructure Medicare by converting it to a voucher system, known as “premium support,” would give beneficiaries a set amount of money (or voucher) to pay part of the cost of buying health insurance, either from a private insurance plan similar to Medicare Advantage HMO plans or from a modified version of traditional Medicare. Unfortunately, vouchers will likely not be sufficient to cover health costs for the vulnerable populations that rely on Medicare, and will essentially cut health benefits for those who need them the most.

Under the proposed voucher program, Medicare beneficiaries will have to pay more money out of pocket, and will have less money for housing, utilities, food, and other basic necessities. Vouchers would also result in many Medicare beneficiaries paying more money for worse care, and would leave some seniors and people with disabilities uninsured for the first time in a half century. 

Vouchers/Premium Support would increase costs for many Medicare beneficiaries. 

Initially, premiums would vary depending on where beneficiaries lived and what plan they chose.  According to the Congressional Budget Office, most beneficiaries who stay in traditional Medicare would pay higher premiums than under current law.  Because the vouchers would probably not keep pace with health care costs, the plan would shift increased costs to beneficiaries over time.  Beneficiaries are likely to face steadily rising premiums, deductibles and copayments.  One of the primary achievements of the current system is that virtually all people 65 and older are entitled to and covered by Medicare, but this will no longer be a given in a voucher system:  if premiums become unaffordable, some beneficiaries will be unable to pay and will become uninsured. 

Vouchers/Premium support could erode benefits and destabilize traditional Medicare.

Currently, all Medicare beneficiaries receive the same robust set of benefits whether they are in traditional Medicare or a Medicare Advantage plan.  The proposals allow plans to reduce their benefit packages, eroding the level of coverage and creating wide variations among plans. 

Plans may try to reduce their costs by offering benefits that appeal more to healthier, lower-cost enrollees and less to sicker, higher-cost enrollees, and there is little evidence to show that the federal government will seek to prevent this behavior in the current political climate.  Traditional Medicare could potentially become the only option for sicker people, causing premiums to rise and destabilizing the program. 

Raising the eligibility age would eliminate coverage for a vulnerable group.

One of the proposed changes is to gradually raise the eligibility age for Medicare from 65 to 67 starting in 2020.  People in this age group are at a greater risk of not being able to obtain employer-sponsored insurance due to disability, age discrimination, and downsizing from the recession.  They will be forced to purchase medical insurance in the individual market, where insurers can charge much higher premiums for older individuals. Many 65 and 66 year olds would not be able to afford insurance at all.  This will result in increased Medicare costs, because new enrollees would have greater health care needs due to having been unable to access care while uninsured.

Privatization proposals are not necessary because Medicare is not in crisis.    

Medicare is not “going broke.”   The Medicare trust fund is not in crisis and is expected to remain solvent until 2028 as a result of new revenues and cost savings generated by the Affordable Care Act.   Medicare costs can be reduced without privatizing the program by negotiating lower drug prices with pharmaceutical companies and ending the practice of paying private Medicare Advantage plans more per enrollee than is paid for each traditional Medicare beneficiary. Rather than saving money, private Medicare Advantage plans have been paid an average of 13% more than it would have cost to cover the same beneficiaries under traditional Medicare.

Voucher/Premium Support would be more expensive than traditional Medicare.

The Congressional Budget Office has estimated that total costs in a premium support system would be higher and faster-growing than under traditional Medicare, and that any savings would be achieved only by shifting costs to beneficiaries. Preserving traditional Medicare also makes financial sense because Medicare has much lower administrative costs than private insurance.  And because Medicare has tens of millions of enrollees, it has bargaining power which it uses to negotiate lower provider rates which no private plan (or multitude of plans) can match. 

There is already ample choice in the Medicare program.  In addition to traditional Medicare, beneficiaries have a wide choice of types of plans through which to receive their coverage, including an array of HMOs, PPOs and private fee for service plans. Medicare provides good coverage, and Medicare beneficiaries report higher satisfaction with their coverage than younger adults regarding their private health insurance.

Medicare works well, and must be preserved. Efforts to privatize and undermine the program will only harm older adults and people with disabilities, and will be costly to all of us.

Resources and References:

Center for Medicare Advocacy, Medicare Is Not ‘Going Broke’ http://www.medicareadvocacy.org/medicare-is-not-going-broke/

The Commonwealth Fund, Medicare: 50 Years of Ensuring Coverage and Care (April 2015), http://www.commonwealthfund.org/publications/fund-reports/2015/apr/medicare-50-years--coverage-and-care.

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