Retirees and the New Health Care Reform Law: Frequently Asked Questions
Retirees and the New Health Care Reform Law: Frequently Asked Questions
On March 23, President Obama signed the historic health insurance reform law known as the Patient Protection and Affordable Care Act. It provides near-universal health care coverage in the United States by making it affordable for 31 million Americans who are currently uninsured. The Act also introduces an array of cost-containment measures and insurance reforms that will help to preserve coverage for Americans who have it now.
AFSCME President Gerald W. McEntee commended Obama for his vision and refusal to give up when faced with road blocks. He also applauded the leadership of House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid. “Health care reform is a remarkable achievement,” McEntee said.
He went on to cite its far-reaching impact on the American people. “This victory will protect and improve good union health care benefits. It stops the worst abuses of the insurance companies. It also gives workers and their families who lack on-the-job coverage access to affordable health care. And it ends skyrocketing premiums and caps on benefits,” McEntee said.
He also noted that the law “is good for seniors because it strengthens Medicare and it will help preserve employer coverage for retirees, particularly those who retire early.” In fact, older Americans are among the chief beneficiaries of the Affordable Care Act. Following is a Q and A featuring many of the questions that seniors are asking about the new law.
Does the new law cut Medicare benefits?
NO. To protect beneficiaries, it’s written into the new law that Medicare’s guaranteed benefits will not be cut (protecting participants of both regular Medicare and Medicare Advantage plans) and that all Medicare savings will be used to extend the solvency of the Medicare trust fund, reduce Medicare premiums and cost-sharing, improve or expand guaranteed Medicare benefits, or preserve access to service providers.
Will the new law phase out Medicare’s Part D “Donut Hole”?
YES. Starting in June (2010), Medicare will provide a $250 rebate for seniors who fall into the big gap in Part D prescription drug coverage known as the donut hole. Next year, seniors in the donut hole will start receiving a 50% discount for brand name drugs. Then, in 2013, the federal government will start picking up larger and larger portions of the cost of both brands and generics each year, until the coverage gap is finally phased out in 2020.
Will the new law reduce seniors’ out-of-pocket costs for other services?
YES. The new law will save money for seniors by eliminating Medicare co-payments (currently 20%) for mammograms, colonoscopies and other preventive screening services, starting in 2011. The law also introduces a brand new preventive benefit. For the first time, Medicare will cover annual checkups with your doctor and they will be free of charge.
Does the law cut benefits for seniors in Medicare Advantage plans?
NO. Private Medicare Advantage (MA) plans are paid an average of 14% more than the per-senior cost under regular Medicare. Essentially, these private insurance plans receive $1,000 in extra federal subsidies for every senior citizen they cover – an overpayment that has contributed to record profits for some insurance companies. A portion of these federal subsidies are paid out of the Part B premiums of all seniors, regardless of whether they’re in MA plans or in regular Medicare. So, as a matter of fairness to all beneficiaries, the new health care law phases out the overpayments to MA plans over seven-years, restoring a level playing field with regular Medicare. The reductions in MA overpayments will help strengthen Medicare because the money will be re-invested in the program, extending the life of Medicare’s Trust Fund by more than 12 years. And, MA plans will still qualify for bonuses if they can show they deliver high quality services.
Nevertheless, with lower payments from Medicare, some MA plans may decide to trim the extra benefits they offer. That will be an individual insurance company decision. But the law says they cannot reduce any of the essential benefits guaranteed under Medicare. Also, the new law prohibits MA plans from charging higher co-pays than regular Medicare’s. In addition, beginning in 2014, at least 85% of the premiums collected by MA plans must be spent on benefits, rather than go toward company profits and administration. These are strong protections for seniors in MA plans.
Will the money saved in Medicare affect patient care?
NO. The new health care law produces $500 billion in Medicare savings by phasing out the overpayments to MA plans and instituting changes to Medicare to make it more efficient. These changes include new efforts to crack down hard on Medicare fraud. The law also creates incentives for doctors and hospitals to coordinate a patient’s care, demonstration programs that bundle payments to hospitals and rehabilitation facilities, and a number of other innovations that will save money for Medicare. Many of the new measures are designed to encourage quality rather than the quantity of services, in order to improve care. The important point to remember is that all savings will go back to the Medicare program in order to close the Part D doughnut hole, reduce co-pays, train new primary care doctors and nurses and provide bonus payments to high quality Medicare service providers (i.e., doctors, hospitals, Medicare Advantage plans).
Will the new law make it hard to see a doctor?
NO. Just as now, Medicare beneficiaries will be able to choose their own doctors. The new law makes no changes at all. The law does set aside new funds to train primary care physicians and nurses, so that there will always be enough service providers to treat everyone who needs care. Funding includes $125 million in grants over the next three years to support new or expanded primary care residency programs at teaching health centers, as well as additional money for future needs. Another program, will expand graduate nurse education training under Medicare.
Will employers still receive a federal subsidy for providing retiree drug coverage?
Employers who provide paid drug coverage to their retirees will continue to get the subsidy they’ve received since 2003 (when AFSCME made sure it was included in the Part D law). As a result, most employers will maintain the benefits they currently offer. For private-sector employers, however, the new law does end the tax deductibility of the subsidy in 2013. Public-sector employers aren’t affected by the tax change because they don’t pay federal income taxes.
What is an Insurance Exchange?
The new law establishes state-based insurance “exchanges” – marketplaces where uninsured individuals and small businesses can compare and buy affordable high-quality insurance plans. A variety of private insurance options will be offered in each exchange and most participants will qualify for federal subsidies that will significantly reduce the cost of premiums. The new health care law requires states to have insurance exchanges by 2014. Insurance that is sold in the exchanges must meet or exceed certain benefit standards.
Does the new law provide assistance for early retirees?
YES. A reinsurance fund provides $5 billion to help employers pay for the health benefits of their retirees who are 55 to 64 years of age. The program will reimburse employers or insurers for 80% of the retiree claims in excess of $15,000 and below $90,000. Payments from the reinsurance program will be used to lower the cost of the plan and may be used to reduce the enrollees’ share of the costs.
If a 55 to 64-year old retires early and his/her former employer does not provide health coverage, is there any other assistance?
YES. A temporary high-risk insurance pool will become available this year, providing insurance to individuals – including early retirees -- who have been unable to buy coverage due to a pre-existing condition. Starting In 2014, early retirees will be able to purchase an insurance plan from their state exchange and most will be eligible for subsidized premiums that make coverage more affordable.
When will insurance companies be required to stop denying coverage to people with pre-existing conditions?
The ban on denying coverage to adults due to a pre-existing goes into effect in 2014 (children in 2010). The high-risk insurance pool, described above, is a temporary program designed to help high-risk individuals until the ban takes effect. Starting In 2014, they will be able to purchase an insurance plan from their state exchange (probably with subsidized premiums), with no fear of being denied coverage due to pre-existing conditions.
How will coverage be made more affordable for people who buy individual insurance?
Beginning in 2014, uninsured individuals will be required to purchase insurance. Most of them will buy coverage from a state exchange and most will qualify for federal income tax credits that will help make their insurance affordable. Those with incomes up to 400% of the federal poverty level (incomes up to $43,320 for an individual and $88,200 for a family of four) will qualify for a tax credit. The value of the credit will vary according to the taxpayer’s income.
Are “death panels” included in the law?
Absolutely not! The health care reform law does NOT ration care or deny care to anyone of any age.
Is Congress covered by the new law?
YES. Members of Congress and their staff, who are currently covered under the Federal Employees Health Benefits Program, will be required to purchase insurance from an exchange. The new rule takes effect in 2014, the start year for the exchanges.
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