Medicare Cuts and Economic Consequences For Seniors

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1 FEBRUARY 28, Raiding Seniors Health Care for ObamaCare s Medicaid Expansion OBAMACARE BREAKS THE PROMISE OF MEDICARE FOR SENIORS TO BANKROLL A MEDICAID EXPANSION FOR ABLE-BODIED, CHILDLESS ADULTS THE MEDICARE PROMISE OUR SENIORS DEPEND UPON Medicare is under attack. Created to provide seniors with basic protections as they encounter medical issues during their golden years, Medicare seniors are yet another victim of the federal Affordable Care Act (ObamaCare) and the Washington takeover of health care. The federal government has made $37 trillion worth of benefit promises to seniors. 1 The Medicare Advantage program in particular has given millions of seniors a choice of several private insurance plans that offer comprehensive benefits, better access to doctors and often lower out-of-pocket costs for health care. ObamaCare s severe cuts to Medicare have sent a clear message to our nation s seniors: your health is not worth protecting. Millions of seniors will lose the Medicare benefits they depend on in order to live a longer, healthier life. AUTHORED BY Josh Archambault Senior Fellow

2 BREAKING THE MEDICARE PROMISE ObamaCare breaks the Medicare promise to our seniors in order to pay for a new promise of Medicaid expansion. ObamaCare assures states that do expand Medicaid eligibility mostly to working-age, non-disabled adults with no kids that the federal government will pay 100 percent of their expansion costs from 2014 to 2016 and 90 percent thereafter, indefinitely. The financing for ObamaCare s Medicaid expansion relies on both cuts to seniors Medicare and more than $1 trillion in new taxes. According to the nonpartisan Congressional Budget Office (CBO), $716 billion will be raided from the Medicare program over the next 10 years. 2 IS OBAMACARE S MEDICAID EXPANSION WORTH SACRIFICING SENIORS MEDICARE? ObamaCare s Medicaid expansion is almost entirely designed for working-age, able-bodied adults with no children. A handful of states expanded coverage for this population well before ObamaCare was law, and the results have been astoundingly negative. Two to three times more individuals enrolled than projected, dramatically increasing taxpayer costs. Meanwhile, despite assurances from hospital lobbyists and executives, the level of uncompensated care hospitals provided in the states rose instead of declined after the expansion, with those costs often passed along to patients with private coverage. Most devastating to Medicaid expansion supporters, the uninsured rate did not go down in most of these states either. 3 For the ObamaCare Medicaid expansion, a significant portion of new Medicaid enrollees will be former inmates just released from prison. Past experience further tells us that 30 to 40 percent of this new expansion population will drop their current private insurance to instead get free, taxpayer-paid coverage under ObamaCare s Medicaid expansion. SLASHING MEDICARE PUTS SENIORS HEALTH AT RISK ObamaCare s $716 billion in cuts to Medicare attack seniors enrolled in both regular Medicare (Part A) and Medicare Advantage (Part B). 4 These cuts put critical services on the chopping block, including hospital services, skilled nursing services, hospice services and home health visits. ObamaCare s Medicare cuts have no concern for value and do not even target areas where waste, fraud or abuse is suspected. Instead, ObamaCare s Medicare cuts are across the board, disregarding quality or performance. CUTTING SENIORS MEDICARE TO PAY FOR MEDICAID EXPANSION HAS SEVERE IMPLICATIONS: Seniors Lose Access to Doctors: Doctors will lose needed revenue by treating Medicare patients, to the point where they will stop seeing them in order to keep their practices open. Experts predict that 15 percent of hospitals and nursing homes will stop accepting Medicare patients over the next 10 years. 5 Seniors Lose Access to Hospitals: Experts also predict 40 percent of hospitals will be unprofitable by 2050 due to ObamaCare s Medicare cuts. 6 Seniors will also face limited provider networks. UnitedHealth, a major insurer with a large Medicare Advantage population, has already announced that ObamaCare will force it to narrow its provider networks by 10 to 15 percent. 7 Seniors Lose their Health Plans: Nearly 5 to 7 million fewer seniors will be able to enroll in Medicare Advantage in six years starting with 105,000 seniors being forced out of Medicare Advantage in 2014 increasing costs and decreasing the level of care for many low-income seniors. 8 Seniors Lose Benefits: Cuts in payments in the Medicare Advantage program will lead to seniors losing many of the extra benefits they depend on from these private plans. 2 FOUNDATION FOR GOVERNMENT ACCOUNTABILITY

3 ObamaCare s Cuts to Seniors Medicare: State Breakdown: ObamaCare Medicare cuts ( , in millions) Number of people losing Medicare Advantage (2017) Average Medicare cut per beneficiary (2017) Alabama $9, ,922 $3, ,114 Alaska $ $4,027 73,166 Arizona $11, ,371 $3,010 1,009,731 Arkansas $5,422 41,177 $3, ,445 California $60,562 1,091,580 $3,882 5,155,569 Colorado $6, ,587 $3, ,757 Connecticut $7,007 59,796 $3, ,346 Delaware $1,797 4,247 $3, ,108 District of Columbia $1,026 7,169 $4,988 84,055 Florida $44, ,963 $3,203 3,642,486 Georgia $13, ,339 $3,472 1,352,934 Hawaii $2,152 60,405 $4, ,648 Idaho $2,121 34,109 $3, ,106 Illinois $22, ,361 $3,100 1,974,491 Indiana $11,559 90,922 $3,403 1,085,473 Iowa $5,157 40,937 $3, ,318 Kansas $4,806 30,404 $3, ,378 Kentucky $8,309 68,287 $3, ,760 Louisiana $9, ,352 $5, ,000 Maine $2,538 15,062 $3, ,893 Maryland $10,671 37,370 $3, ,447 Massachusetts $13, ,082 $3,927 1,142,035 Michigan $22, ,895 $3,240 1,784,017 Minnesota $7, ,794 $2, ,515 Mississippi $6,107 29,742 $3, ,462 Missouri $11, ,188 $3,631 1,078,641 Montana $1,507 14,202 $2, ,364 Nebraska $2,985 20,093 $3, ,009 Nevada $4,096 59,842 $2, ,294 New Hampshire $2,196 8,008 $3, ,620 New Jersey $17, ,170 $3,701 1,425,376 New Mexico $3,115 50,829 $4, ,640 New York $39, ,028 $4,512 3,198,779 North Carolina $16, ,204 $3,542 1,616,201 North Dakota $995 4,568 $2, ,815 Ohio $21, ,148 $3,390 2,044,162 Oklahoma $7,028 52,627 $3, ,907 Oregon $6, ,130 $3, ,067 Pennsylvania $28, ,221 $3,637 2,438,595 Rhode Island $2,214 43,992 $3, ,537 South Carolina $8,600 70,428 $3, ,532 South Dakota $1,290 5,281 $2, ,041 Tennessee $11, ,399 $3,300 1,146,696 Texas $43, ,470 $4,732 3,283,249 Utah $2,852 51,783 $3, ,745 Vermont $1,030 2,183 $2, ,930 Virginia $11, ,258 $3,804 1,238,072 Washington $9, ,813 $3,611 1,061,371 West Virginia $3,983 51,413 $3, ,892 Wisconsin $9, ,206 $3, ,305 Wyoming $784 2,576 $2,860 86,801 Total $561,219 6,932,441 $3,714 50,332,895 Medicare Enrollment 2013 Federal Medicaid expansion costs by state: ObamaCare Medicare cuts by state: BookandRamletpaperonMedicare.pdf Number of people losing Medicare Advantage by state: Average Medicare cut per beneficiary by state: Medicare Enrollment by state: FOUNDATION FOR GOVERNMENT ACCOUNTABILITY 3

4 THE DANGEROUS IMPACT ON SENIORS ENROLLED IN MEDICARE ADVANTAGE One of every four Medicare patients is enrolled in a Medicare Advantage plan, with enrollment growing each year. Nearly half of new Medicare patients (those just turning 65) enroll in a Medicare Advantage plan almost immediately. 9 These plans are popular because they often offer more comprehensive and supplemental benefits than what are available in traditional Part A Medicare. These flexible private plans offer valued access to doctors and have less out-of-pocket costs for seniors. This is especially important for lower-income seniors as they experience lower out-of-pocket costs than seniors enrolled in traditional Medicare. The health outcomes for those on the program are favorable as well. A recent study found that seniors on Medicare Advantage are more likely to receive higher levels of recommended preventive care and have fewer disease-specific complications. For example, seniors enrolled in Medicare Advantage have fewer ulcers and diabetic foot amputations compared to seniors in traditional Medicare. Medicare Advantage patients also spend 19 percent less time in the hospital during an acute illness than those on traditional Medicare. 10 BENEFITS ON THE CHOPPING BLOCK BECAUSE OF OBAMACARE S CUTS TO MEDICARE One of the value propositions of most Medicare Advantage plans over traditional Medicare is that they offer seniors a range of plan options with many different supplemental benefits to address unique medical needs. Because of ObamaCare s cuts to Medicare in order to fund Medicaid expansion, 5 million seniors will now lose these health options. Seniors Lose Preventive Dental More than half (55 percent) of all Medicare Advantage plans cover some form of preventive dental care. Virtually all local and regional PPOs (preferred provider organizations) provide such coverage (99 percent and 100 percent, respectively). 11 Seniors Lose Vision Coverage All plans provide some vision benefit, particularly glasses and contacts. Almost all (86 percent) cover exams and all plans cover eyeglasses. 12 Seniors Lose Hearing Coverage Nearly two thirds (65 percent) of Medicare Advantage plans cover hearing tests. 37 percent of plans cover hearing aids. In 2010, 51 percent of HMOs, 27 percent of local PPOs, and 15 percent of regional PPOs provided a hearing aid benefit. 13 Seniors Lose Out-of-Pocket Cost Protections In 2010, most (79 percent) Medicare Advantage plans had a limit on how much seniors would be forced to pay out-of-pocket, a protection unavailable in traditional Medicare. 14 In 2013, roughly 50 percent of Medicare Advantage plans had a limit of $3,400 or less. 15 Seniors Lose Podiatry Coverage 47 percent cover more expansive podiatry services than traditional Medicare. 16 Seniors Lose Chiropractic Services 34 percent cover more expansive chiropractic services than traditional Medicare. 17 Seniors Lose Protection When Traveling Abroad 62 percent provide a world-wide travel benefit not provided by traditional Medicare. 18 This benefit can include urgent and emergency care coverage anywhere in the world for just a small copay, and coverage for care when traveling for more than 6 months out of your service area. 4 FOUNDATION FOR GOVERNMENT ACCOUNTABILITY

5 Seniors Lose Transportation Benefits 14 percent provide transportation beyond ambulance services, such as transportation to medical appointments and vision exams. 19 Seniors Lose Gym Membership and Wellness Education More than half (57 percent) of Medicare Advantage plans offer some form of coverage for a gym or health club membership. 31 percent provide newsletters or other forms of written health information seniors can use to become more informed about their health. 20 Seniors Lose Predictable Visit Costs Medicare Advantage plans typically offer fixed dollar copayments (i.e. $15 or $25 per visit) rather than traditional Medicare s unpredictable coinsurance formula (i.e. 20% of cost of the visit). 90 percent of Medicare Advantage plans require no cost-sharing for Medicare-covered preventive services, which include important procedures such as mammograms, pap smears, and prostate exams. 21 Seniors Lose Days of Hospital Care Most Medicare Advantage plans (93 percent) provide unlimited days of hospital care, in contrast to traditional Medicare, which has annual limits and lifetime reserve days. 22 Seniors Lose Home Health Visit Coverage Most Medicare Advantage plans (88 percent) do not impose cost-sharing for home health visits, unlike traditional Medicare. For seniors forced off of Medicare Advantage onto traditional Medicare, this will result in higher costs for home health visits. Medicare beneficiaries who use the home health benefit have an average of 37 home health visits per year. 23 Seniors Lose Drug Benefits Most Medicare Advantage plans (82 percent) offer Part D benefits, a benefit that is not rolled together with coverage on traditional Medicare. 24 Most (88 percent) of Medicare Advantage enrollees in individual plans select a Medicare Advantage plan that has a drug benefit. Cuts may change or limit which medications Medicare Advantage plans can pay for. CONCLUSION ObamaCare not only cuts payments in Medicare, but also will levy a new health insurance tax on most companies offering Medicare Advantage plans. Companies will find ways to pass on that cost to seniors. These increasing costs and cuts will impact enrollees directly, especially those in poor health or dealing with complicated chronic conditions. Long-term reform of Medicare is still needed. ObamaCare s Medicare cuts will jeopardize seniors access to doctors and hospitals, and limit their choice of health plans that offer many advantageous benefits. Our leaders should fulfill past promises before making new ones. If not, the safety net will break for the most vulnerable as able-bodied adults are piled on top. FOUNDATION FOR GOVERNMENT ACCOUNTABILITY 5

6 REFERENCES 1. Robert Moffit and Alyene Senger, Presidential Debate Prep: Understanding Obamacare s $716 Billion in Cuts to Medicare, Heritage Foundation, The Foundry, October 16, 2012, Accessed February 5, 2014, Available at: understanding-obamacares-716-billion-in-cuts-to-medicare/ 2. Douglas Elmendorf, Letter to Speaker John Boehner, July 24, 2012, Accessed February 5, 2014, Available at: default/files/cbofiles/attachments/43471-hr6079.pdf 3. Jonathan Ingram, Medicaid Expansion: We Already Know How The Story Ends, March 11, 2013, Accessed February 5, 2014, Available at: 4. In general, Part A covers hospital care, skilled nursing facility care, nursing home care, hospice, and home health services. Part B is also known as Medicare Advantage (MA), which are private plans that cover both Part A and Part D (drugs) in the same plan. MA plans will cover medically necessary services, and preventive services. Clinical research, ambulance services, durable medical equipment, mental health services, second opinion before surgery, and some prescription drug coverage. 5. Richard Foster, Estimated Financial Effects of the Patient Protection and Affordable Care Act, as Amended, Department of Health & Human Services, Centers for Medicare and Medicaid Services, Chief Actuary, April 22, 2010, Accessed, February 5, 2014, Available at: 6. Ibid. 7. Melinda Beck, UnitedHealth Culls Doctors from Medicare Advantage Plans, Wall Street Journal, November 16, wsj.com/news/articles/sb Congressional Budget Office, Comparison of Projected Enrollment in Medicare Advantage Plans and Subsidies for Extra Benefits Not Covered by Medicare Under Current Law and Under Reconciliation Legislation Combined with H.R as Passed by the Senate, March 19, 2010, Accessed February 5, 2014, Available at: macomparisons.pdf and Kaiser Family Foundation. Medicare Advantage 2014 Spotlight: Plan Availability and Premiums. November 25, 9. Medicare Enrollment by Age Group and FFS Status, , Chart date September 5, 2013, Accessed February 5, 2014, Available at: Report cited in Congressional Testimony by Jon Kaplan, The Boston Consulting Group, December 4, 2013, Energy and Commerce Committee, Subcommittee on Health Hearing: Medicare Advantage: What Beneficiaries Should Expect Under the President s Health Care Plan Full Report Boston Consulting Group report Alternative Payer Models Show Improved Health-Care Value, Accessed February 5, 2014, Available at: aspx?id=tcm: &mid=tcm: Marsha Gold et.al., Medicare Advantage 2010 Data Spotlight: Benefits and Cost-Sharing, Kaiser Family Foundation, February 2010, Accessed February 5, 2014, Available at: Ibid. 13. Ibid. 14. Ibid. 15. Marsha Gold, et al., Medicare Advantage 2013 Spotlight: Plan Availability and Premiums, Kaiser Family Foundation, December 2012, Updated, Accessed February 5, 2014, Available at: Marsha Gold et. al, Ibid. 18. Ibid. 19. Ibid. 20. Ibid. 21. Ibid. 22. Ibid. 23. Ibid. 24. Marsha Gold, et al., FOUNDATION FOR GOVERNMENT ACCOUNTABILITY

7 Josh Archambault Senior Fellow