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“Obamacare” and Its Impact on Medicare: Separating Fact from Fiction

kevin hansen's photo

If there’s ever been a topic to give someone a heart attack, it’s health care reform.

A lot of rumors and spectulation are going around about the Affordable Care Act, (aka Obamacare) and its impact on Medicare. Sometimes, the stories are pretty scary. Of course like most rumors, at best they’re exagerations and at worst they’re just wrong.

One assertion I hear over and over claims the new law calls for drastic cuts to Medicare. Another says that Medicare Advantage plans are being eliminated. While the actual long-term impact of the Affordabe Care Act on Medicare isn’t clear, here are some facts:

  • No cuts to guaranteed Medicare benefits. The law does aim to cut Medicare costs, but not through reductions in benefits. For instance, limits on excessive payments to providers, taxes on high-premium plans (beginning in the year 2018), rules targeting fraud and waste, and a focus on coordinated care are all expected to help curb Medicare costs.
  • Closing of the Part D donut hole. Prior to the Affordable Care Act, Medicare beneficiaries paid full price for prescription drugs after they went over a certain dollar limit each year. Under the Act, those same beneficiaries will get a 52.5 percent discount on covered brand-name drugs while they’re in the donut hole. The discount is applied automatically at the pharmacy counter. And by 2020, the donut hole will be closed completely.
  • Free annual wellness exams and certain screenings. Some screenings, such as mammograms and colonoscopies, are now covered by Medicare. Also, Medicare recipients will receive a free wellness exam each year.
  • Change in payments to Medicare Advantage plans. Medicare Advantage plans have consistently cost the government more than traditional Medicare, averaging 14 percent more than traditional Medicare in 2009. Under the Affordable Care Act, the excess payments to private plans will be reduced to two percent while also providing financial incentives for plans to focus on providing high-quality care to enrollees. This should lead to better, more economically efficient care.

Individuals who have questions about Medicare and the Affordable Care Act can get answers at Your State Health Insurance Assistance Program (SHIP) is also a good place to learn the facts.

Principal Funds, Inc. is distributed by Principal Funds Distributors, Inc.


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