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Traditional Medicare benefits will be affected by the new health care law.

Welcome to VoteFacts.  We are back again to focus on the facts relating to Medicare and the new health care law.  This is such an important issue to current generation seniors who really want to know what they're getting when they vote for any politician who promises something with Medicare.  You can also read and vote on our prior post on Medicare cuts as well - click here.   But today we're looking at a Yahoo Finance article on the new health care law and what it calls a "Fact" relating to the new health care law.   That article declares: 

"Fact: Traditional Medicare benefits will be unaffected by the law, and some seniors will even enjoy better coverage."

To help us all out, let's go directly to the Congressional Budget Office, the Congressional Research Service, and the Center for Medicare and Medicaid Services reports to get a closer look at this topic.  As always, we encourage you to click on each report and read for yourself to verify and view in even wider context.  Here are your bullet points:

What does happen with Medicare and current generation seniors?

• [A] combination of policies... has led CBO to project that the growth rate of Medicare spending (per beneficiary, adjusted for overall inflation) will drop from about 4 percent per year, which it has averaged for the past two decades, to about 2 percent per year on average for the next two decades.  It is unclear whether such a reduction can be achieved through greater efficiencies in the delivery of health care or will instead reduce access to care or the quality of care (relative to the situation under prior law).  CBO, Page 9

• Medicare spending is predicted to slow from 5.9 percent in 2012 to 1.3 percent in 2013 due to both a scheduled 30.9-percent physician payment rate reduction mandated under the Sustainable Growth Rate Formula, and an additional 2-percent payment reduction across all providers from the sequester under the Budget Control Act of 2011.  CMS, Page 1

(Here's a side note for the serious wonks out there, "The health care spending savings rate from the new health care law assumes that the sustainable growth rate (SGR) mechanism that constrains Medicare physician payment rates will go back into effect, at which time physicians would be facing a cut in payments."  CRS, Page 4)

• Higher balances in the Medicare Hospital Insurance (HI) fund will give the government legal authority to pay Medicare benefits longer, but most of the money will pay for new programs rather than reduce future budget deficits and therefore will not enhance the governments economic ability to pay Medicare benefits.  CBO, Paragraph 10

• The new health care law appropriates and transfers from the Medicare trust funds billions of dollars over the coming years to support many of the new law's provisions.  CRS, Page 4

• The March 2010 health care legislation also established the Independent Payment Advisory Board (IPAB), which will be required to submit proposals to reduce Medicare's spending per enrollee if the growth of such spending is projected to exceed certain targets. Those proposals would go into effect automatically unless blocked or replaced by subsequent legislative action.  CBO, Page 38

• The new health law introduced a new 3.8 percent "unearned income Medicare contribution" on income from interest, dividends, annuities, and other non-earnings sources for individual taxpayers with incomes above $200,000 and couples filing joint returns with incomes above $250,000. Despite the title of this tax, this provision is unrelated to Medicare; in particular, the revenues generated by the tax on unearned income are not allocated to the Medicare trust funds.  CMS, Page 9

Okay, okay, we know what you're thinking -- The media and our politicians repeatedly insist that the above only reflects slowed spending levels for current generation seniors, not a reduction in benefits to current generation seniors.  However, we sure do wonder then, isn't access to health care services kind of a "benefit" for current generation seniors?

Furthermore, isn't Medicare solvency for current generation seniors also kind of a "benefit", because we know that even after reducing spending growth rates by one half for current generation seniors, the Medicare Hospital Insurance fund is still projected to become exhausted by 2022 (and even faster if they do not allow the provider cuts to happen).  What will their benefits look like when the fund reaches exhaustion within many of their lifetimes?  Given the unsustainable trajectory, why shouldn't current generation seniors expect that this slowed spending for their generation will have to become even greater just to stave-off exhaustion in 2022?

Anyway, here is what current generation seniors can very likely expect with the new health care law that our media and politicians insist does not reduce their benefits:

• Both the Congressional Budget Office (CBO) and the Center for Medicare and Medicaid Services (CMS) Office of the Actuary caution that certain payment reductions may not be sustainable in the long-term, and could possibly result in diminished quality of care and/or reduce access to needed services.  CRS, Page 16

• Over time, unless health care providers could alter their use of inputs to reduce their cost per service correspondingly, Medicare's payments for health services would fall increasingly below providers' costs. Providers could not sustain continuing negative margins and would have to withdraw from serving Medicare beneficiaries or shift substantial portions of Medicare costs to their non-Medicare, non-Medicaid payers.  CMS, Page 217

• Health care providers for whom Medicare constitutes a substantive portion of their business could find it difficult to remain profitable and, absent legislative intervention, might end their participation in the program (possibly jeopardizing access to care for beneficiaries). Simulations by the Office of the Actuary suggest that roughly 15 percent of Medicare Part A providers would become unprofitable within the 10-year projection period as a result of the productivity adjustments.  CMS, Page 10

• The new health care law restrains the rate of increase in payment rates for many providers of Medicare services to less than the expected rate of increase in the cost of the providers' input... However, it is unclear the extent to which providers will achieve greater efficiencies in the delivery of health care and the extent to which cost pressures will instead reduce access to care or diminish the quality of care (relative to the situation under prior law) outcomes that might increase pressure on the Congress to increase payments to providers. It is also unclear whether and how the Congress would respond to such pressure if it arose and what effects the response would have on total federal health care spending, revenues, and deficits.  CMS, Page 28-29

Here is what they say about exhaustion of the Medicare HI fund, even with this slowed spending for current generation seniors:

• The Congressional Budget Office notes that the Medicare HI trust fund balance would still be declining, and the trust fund will become insolvent a few years after 2019.  CRS, Page 14

• Once the Medicare HI trust fund is exhausted, it appears that total payments to health plans and providers for services covered under Part A of Medicare would be limited to the amount of revenues subsequently credited to the trust fund. If that occurred, beneficiaries' access to health care services would almost certainly be reduced.  CBO, Page 62

What a pickle our government is in.  They can either allow the cuts to providers to happen and risk access for current generation seniors, or they can stop the cuts and the program becomes exhausted sooner than 10 years and lose funding they need to pay for the new provisions of the health care law, and our deficits balloon even further.  But, with or without this new law, the Medicare Hospital Insurance fund is facing exhaustion within the lifetime of a good portion of current generation seniors.  Maybe we'll have to wait for health care reform part two to actually solve this problem, which will happen soon no matter who wins in November.

Cast your vote on the Yahoo Finance statement they declare to be "Fact".  As is typical with our media, it looks like they failed to give you the full picture on the subject so you can make a more broadly educated assessment for yourself.  Is access to providers a traditional Medicare benefit, and is lingering exhaustion of the HI fund threatening to impede traditional benefits?  That is food for thought.  But today we want to know, do you think that traditional Medicare benefits will be affected by the new health care law?

VoteFacts Original Post Date:  August 2, 2012

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Voting Key


Fact = 100% - 92% True
Mostly Fact = 91% - 75% True
Slightly Fact = 74% - 60% True
Split = 59% - 50% True
Slightly Fiction = 49% - 30% True
Mostly Fiction = 29% - 10% True
Fiction = 9% - 0% True