What Changes Are Coming to Medicare?

By Dwane McFerrin, Vice President, Medicare Solutions

  • Originally published May 21, 2013 , last updated March 20, 2018
  • Medicare
What Changes Are Coming to Medicare?

We have to be realistic. The country’s budget deficit has ballooned in recent years and the CBO projects that Medicare and Medicaid spending will grow from less than five percent of GDP today to nearly double in just the next 10 years. Further projections are even more frightening!

Medicare and Medicaid Spending as a Percentage of GDP

Source: Congressional Budget Office via Wikimedia Commons File: Medicare and Medicaid GDP Chart.svg. 12 September 2009.

Of course, these projections are all based on assumptions, and there are many variables that can change. But it appears that politicians on both sides of the aisle are coalescing on the idea that the growth of Medicare, in particular, needs to be slowed. No party wants to be first to announce changes, so expect to see plenty of blue-ribbon committees, representing both parties involved. The waters are safer for our elected officials if the committees involve former members of Congress, although we’ve seen the bipartisan Bowles-Simpson Commission get little traction on their budget-saving proposals.

So what are the proposals out there and what is the likelihood of any of the proposals becoming the law of the land? Here are five ideas you should be aware of:

1. President Obama proposed $716 billion in cuts to Medicare, but these funds are redirected to Obamacare, or the Affordable Care Act. In his proposed 2014 budget, President Obama indicates he’s open to reform, perhaps by combining Parts A and B of Medicare into a single deductible.1 He proposes a 15% surcharge on new buyers of Medicare Supplement Plan F to discourage seniors from buying plans that have first-dollar coverage. Republicans and Democrats already have misgivings due to cuts to critical access hospitals, cuts in graduate medical education and cuts to nursing homes. Persuading lawmakers of some grand bargain that cuts Medicare entitlements further and raises revenue will be difficult.2

Update: The NAIC has withdrawn its interest in eliminating first-dollar coverage on Med Supp (Plan F) due to lack of proven impact.

2. Senator Coburn (R-OK) and former Senator Lieberman (I-CT) propose raising the eligibility of Medicare by two months every year, thereby increasing eligibility from 65 to 67 years gradually.3

3. The Medicare Payment Advisory Commission (MedPAC) has discussed a 20% surcharge on Plan F.

4. House Continuing Resolution 25 applies means testing for Medicare Parts B and D and to freeze thresholds until 25% of beneficiaries are paying income-related premiums.4 Means testing for 25% of all Medicare beneficiaries goes way beyond taxing the rich!

5. The Bowles-Simpson Commission proposed in 2010 to combine Parts A and B into a $550 deductible and 20% coinsurance rate with $7,500 out-of-pocket maximum. Sounds more like a Medicare Advantage plan!

While we don’t know if any of these proposals will actually come to fruition, we do know that Original Medicare is due for an overhaul. There haven’t been material changes in years and there are changes swirling in health care.

In the current political environment and the investigations underway on three potential scandals (Benghazi, IRS scrutiny of conservative organizations and Associated Press phone records), it appears we are as polarized as ever. Assuming the scandals go from the front page to the back pages of the mainstream media, the unresolved issues for Medicare remain for lawmakers.

1 http://nyti.ms/161LB6C 3/28/2013
2 Mary Agnes Carey, Kaiser Health News 4/18/2013
3 http://1.usa.gov/14Mk4uP 4/18/2013
4 Kaiser Family Foundation, Medicare and the Federal Budget http://bit.ly/ZbKJMN 4/2013