This year more than 55 million Americans will obtain benefits from the federal insurance program Medicare, so even minor changes to how it operates can impact a vast part of the American public. There are, of course, the minor price raises that happen almost annually, but the major health reform initiatives and a new administration will also influence how Medicare operates.
Annual Price Increases
As expected, Medicare is adjusting its pricing structure to reflect inflation in the health care market. If you have been an enrollee in the program for some time, then you probably have been expecting this, as it is a pretty regular feature of the program. If you are new to Medicare, you should expect these price increases every year and adjust your budget accordingly.
If you are enrolled in Medicare Part A, you will see the following rate increases:
|Maximum Part A Premium||$411||$413|
|Coinsurance for 3rd month of hospitalization||$322||$329|
|Coinsurance for 4th month of hospitalization||$644||$658|
Coinsurance for nursing home stays
If you are enrolled in Medicare Part B, expect to see the following rate increases:
|Outpatient services deductible||$166||$183|
|Normal monthly premium||$121.80||$134|
Typical expense for hold/harmless enrollees
The hold harmless provision applies to most continuing enrollees; because the cost of living adjustment for 2017 is not large enough to cover the premium increase, most enrollees will only pay $109 in premiums. This does not apply to new enrollees.
Fewer Prescription Drug Plans
Medicare Part D uses prescription drug plans offered by private insurers. The number of plans available to Part D participants will drop to an average of 22 in 2017, the lowest number since 2006. Although this may seem like a large number, there is wide variation in medications covered and pricing. For many Part D participants, it may prove difficult to find a plan with their medications and a desirable price point.
In 2007, there were almost 1,800 prescription drug plans for Medicare enrollees to choose from, but that has dropped to only 746 in 2017. There is a wider array of plans and what drugs they cover, partly by design. In 2011, the Centers for Medicare and Medicaid Services (CMS) ordered private insurers that sponsored the plans to produce more drug variation in their plans, in an effort to help enrollees see plan distinctions.
It also didn’t help that CMS often asked insurers to withdraw a plan from a region if it was too similar to another plan already available. This often forced insurers to only offer two plans in certain markets, rather the typical three.
The other major component of Part D is pricing. In 2017, the monthly premium will rise to $42 from $39 in 2016 and $37 in 2015. The annual Part D deductible will rise from $182 in 2016 to $195 in 2017. Medicare is not permitted to bargain with drug makers to lower the price of prescription drugs.
Cuts to Hospital Reimbursement
Medicare is working hard to rein in costs, and one of the ways it may do so 2017 is to lower the reimbursement rate to hospitals for various products and services. Currently, CMS is considering lowering its reimbursement rate by 22.5 percent for prescription medications used in hospitals which is reimbursed now at a rate of 6 percent above the average sales price. CMS hopes this will force hospitals to lower operating costs, especially those involving lower income patients.
Medicare has seen hospital drug costs rise 543 percent from 2004 to 2013. In 2004, the agency spent $500 million on medications used during hospital stays, but this figure ballooned to $3.5 billion by 2013. From 22 percent of its Part B budget in 2004, medications used during hospitalization now takes up almost 48 percent of the agency’s Part B expenses.
CMS is also examining a potential change to including joint replacements at outpatient facilities under Part B. In 2014, hospitals performed 400,000 hip and knee replacements on Medicare beneficiaries, costing the agency almost $7 billion. New advances in surgical recovery would not only allow patients to return home in just hours, but would significantly lower hospitalization costs.
How Health Care Reform Could Impact Medicare
Despite a robust effort by President Donald Trump and the Republican-controlled Congress to repeal the Affordable Care Act which might radically alter how many Americans get health coverage, there appears to be little appetite to reform Medicare. Most of the components of the House and Senate proposals are directed at cutting Medicaid (the federal insurance program for impoverished households), rather than Medicare.
The Affordable Care Act did modify how Medicare operates, including free annual checkups, free preventive services and a more comprehensive prescription drug coverage. However, neither the House’s American Health Care Act, nor the Senate’s Better Health Care Reconciliation Act appear to change any of these features.
The Senate’s new proposal does modify some taxes related to health care. Almost all of the taxes that the Affordable Care Act imposed would be abolished under this proposal, although a Medicare surcharge tax on households with an individual income of $200,000 or a household income of $250,000 or more would remain in place at least until 2023.
Both bills would also abolish the Individual Mandate, the ACA provision that required taxpayers—even seniors—with an income greater than 133 percent of the federal poverty level to pay a financial penalty if they did no have health insurance. In 2017, the penalty would be $695 per adult, or 2.5 percent of the household income, whichever is greater. However, since President Trump signed an executive order halting the IRS from collecting these penalties, the new bills do not need to be ratified to avoid paying the fees.
If you would like to learn more about how your Medicare benefits could change in 2017, please visit Boost Health Insurance. Our knowledgeable health insurance specialists are always available to answer your questions and assist you in finding the right health plan for you and your family.