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OCT. 7, 2017

COVER STORY

COVER STORY

Medicare Rates Increase Slightly

GOP Overhaul Could Change Medicare into Voucher System

By Edwin QUINABO

Medicare has seen slight incremental rate hikes since Obamacare became law. In the short term, experts believe premiums, deductibles and co-payments are expected to rise in the same moderate pace.  But if the political winds blow in favor of House Speaker Paul Ryan (R-Wis.) and Republicans, Medicare could undergo a major overhaul and be turned into a privatized voucher system that places a greater financial burden on the shoulders of beneficiaries.

As It stands now, Medicare beneficiaries are currently responsible for paying premiums for three divided parts of what’s called traditional

Medicare: Part A (hospital services: annual cost ranges from several hundreds to free), Part B (doctor’s visits and outpatient services: average monthly cost $109.) and Part D (prescription drug costs: average monthly cost about $34.). In addition to monthly premiums, Medicare recipients must also pay copayments, annual deductibles and out-of-pocket costs. Some beneficiaries purchase Medi-gap plans from private insurers to help supplement medical costs not covered by traditional Medicare Parts A, B, and D. Or an alternative route for some is to purchase Part C Medicare Advantage that provides medical and prescription drug coverage through private insurance companies. Medicare Advantage charges lower premiums but have higher cost-sharing and more limited choice of providers.

“Currently, Medicare beneficiaries in Hawaii already have a choice between traditional Medicare and private plans. Private health plans in Medicare – called Medicare Advantage plans – offer an alternative to traditional Medicare. In 2015, 112,110 Hawaii residents, a little more than half, were enrolled in Medicare Advantage or other health plans,” said Barbara Kim Stanton, AARP Hawaii State Director.

AARP Hawaii’s Executive Council Member Toy Arre said there is about 239,880 people enrolled in Medicare in Hawaii.

Changes in 2017

This year Medicare beneficiaries saw a moderate increase in premiums for Part A (hospital services) coverage. It went up slightly to $413 from $411 in 2016. For those who qualify for “free” Medicare Part A coverage (those who already paid Medicare payroll taxes for years), the cost remained free.

For Medicare Part B (doctor visitations and outpatient services), monthly premiums also went up. The monthly cost for individuals making $85,000 or less went from $121.80 to $134; those making above $85,000 to $107,000 saw an increase from $170.50 to $187.50; rates for those making $107,000 to $160,000 rose from $243.60 to $267.90; income earners above $160,000 to $214,000 saw an increase from $316.70 to $348.30; and beneficiaries with individual taxable income above $214,000 had to pay rates that went from $380.80 to $428.60.

 Deductibles and coinsurance costs vary according to plans that beneficiaries qualify for. For some beneficiaries that have no deductible, it will remain the same. For others, the annual deductible for Part B (doctor visitations and outpatient services) went up this year to $183 from $166 from 2016. As usual, once a deductible is met, beneficiaries will be responsible for 20 percent of the costs for Medicare-approved services.

“It’s a little too early to say what will happen with Medicare premiums and deductibles for 2018 and how those changes will affect people with lower incomes and higher incomes. Actual premiums and costs should come out soon with open enrollment beginning Oct. 15,” said Stanton.

Stanton said there is some good news for Medicare Part D, which covers prescription drug benefits. “Last month, the Centers for Medicare and Medicaid Services estimated that the average Part D prescription drug coverage premium is expected to decrease. It’s the first decrease in five years. The average basic premium is expected to go down by about $1.20 to $33.50 a month, a 3 percent savings over this year. The projected decline is the result of bids that drug plans have submitted for 2018.

The actual amount beneficiaries will pay varies wildly depending on the plan,” said Stanton.

Role of Medicare

Close to 60 million seniors age 65 and older and the disabled rely on Medicare to cover doctor visits, hospitalizations and prescription drugs. Without it, retirement would be financially difficult for millions of Americans. Since its creation in 1965, Medicare has guaranteed certain government paid health coverage. Today, it’s the second largest social insurance program in the U.S. and has an annual expenditure in the billions. In 2016, the total annual expenditure was $679 billion, the latest data shows from the Centers for Medicare and Medicaid Services. Medicare also funds some medical nursing facilities and rehabilitation centers.

Given its life-enhancing importance for the most vulnerable sectors of society, Medicare remains widely supported even in today’s anti-federal government intrusion environment. According to a Kaiser poll, 77 percent of respondents believe Medicare is a “very important” program.

The big dilemma is keeping Medicare financially robust enough to have it to continue working for millions of Americans into the next generations -- this is what Congress and the Trump administration will explore in the coming years.

President Donald Trump promised older voters during his campaign that Medicare would remain intact. “"Every Republican wants to do a big number on Social Security. They want to do it on Medicare. They want to do it on Medicaid. And we can’t do that,” he said at a New Hampshire rally during the primaries. “It’s not fair to the people who have been paying in for years.”

On this issue, the president sets himself apart, at least for now, from the Republican establishment calling for major Medicare reform.

How the GOP wants to change Medicare

“Because of Obamacare, Medicare is going broke,” Speaker Ryan said. “For those of us in the younger generations, it won’t be there for us if we stay on the current path.”

Medicare accounts for 15 percent of the federal budget and is expected to grow as the number of beneficiaries rises. Enrollment is expected to go up as the large Baby Boomer generation retires; but enrollment could drop in future generations with a smaller population base.

Contrary to Ryan’s claim, experts say Obamacare has extended the life of Medicare by slowing the growth of spending and cracking down on fraud, waste and excessive payment. Medicare annual cost increases between 2010 and 2015 were 1.4 percent while private insurance in the same period rose more than double that at 3.0 percent.

As far as Medicare’s financial strength, according to the 2017 Medicare Trustees report, Medicare is able to pay all its bills through 2028, in part due to Obamacare. The Affordable Care Act or Obamacare has also helped beneficiaries save on prescription drugs. Between 2010 and 2015, nearly 11 million Medicare beneficiaries saved $20.8 billion on prescription drugs, an average of $1,945 per person.

Under Ryan’s plan, Medicare would go from the current benefit program to a contribution program. The guaranteed benefits package coverage that Medicare beneficiaries currently have would be replaced by a “premium/voucher support” system. Under this new system, the government would give beneficiaries a fixed dollar amount that must be used to shop for coverage from private health insurers in a new Medicare exchange.

Ryan and Senate Majority leader Mitch McConnell (R-Ky) would also want to raise the Medicare eligibility age from 65 to 67.

The fixed dollar amount or government subsidy is based on the Medicare recipient’s income. The less taxable income a recipient has, the bigger the subsidy. If a recipient chooses a plan that costs more than the government subsidy, the recipient must pay the difference.

Consumer groups such as AARP and Democrats oppose Ryan’s plan citing numerous problems. Health care policy expert Henry Aaron of the Brookings Institution who formerly supported Ryan’s plan had changed his position saying it would be dangerous and foolhardy to switch to vouchers. “When the fact changes, I changed my mind,” he said.

"What you've got here is a group of people who are very sick, poor, and often cognitively impaired one way or the other," said Aaron. "Tossing people like that into a health care marketplace and saying, 'Here, go buy some insurance,' is a recipe for problems."

Experts say Ryan’s approach would erode much-needed coverage and shift costs to many who live on fixed incomes. While lower-income recipients would receive greater subsidies, it is unlikely to keep pace with risings costs of insurance. This would lead to health rationing -- recipients going without needed medical care due to an inability to pay for increased out-of-pocket costs.

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