Medicare Changes Every Boomer Needs to Know About for 2012

“The Boomer” is a column written for adults nearing retirement age and those already in their “golden years.” It will also promote reader interaction by posting e-mail responses and answering reader questions. E-mail your questions or topic ideas to thefoxboomer@gmail.com.

It seems as if the Medicare program is always changing, and it can be hard for baby boomers to keep up with the modifications and deadlines.

Every year more than 1.5 million baby boomer enroll in the government-sponsored health insurance program, and the big problem right now is that the number of people receiving Medicare benefits is substantially higher than the number of people paying into the system.

Health-care costs can be the most unpredictable part of retirement, which makes the future of Medicare an important economic issue for anyone older than 50.

I reached out to Joe Baker, president of the Medicare Rights Center, a not for profit counseling organization in New York, to find out about this year’s Medicare changes and how they impact baby boomers.

Boomer: Where did the $500 million taken from Medicare this year under President Obama’s health care law come from, and how does it affect Medicare for retiring baby boomers in 2012?

Baker: The Affordable Care Act had a number of provisions that achieved savings in the Medicare program. Those savings, which is what you are referring to, come from primarily two places: payments and cuts. There is a slowdown in the increase of payments to hospitals, skilled nursing facilities and other health-care providers. In other words, their reimbursements will still increase, but they won't increase as much as they would have under old law. There will also be savings from actual cuts in reimbursements to Medicare advantage plans—which had been traditionally overpaid by the federal government, getting paid more than 100% of what the traditional or fee for service. The private insurance companies were getting 110% to 113% of what it costs the traditional-run government programs to take care of somebody—that number is getting ratcheted down to 100% over the next three to five years.

The important thing to know is that these savings do two things: they will make the Medicare program more sustainable and are not expected to lead to any kinds of problems for baby boomers or anyone else on the Medicare programs. There are no cuts to benefits or increased premiums to people with Medicare because of these savings.

Boomer: Is it true that both political parties will be looking to squeeze more money from upper- income retirees and the middle class?

Baker: Certainly. It looks like that in the next round of proposals expected to come next month in Congress, they will need to pay for what is called the “doc fix”. So unless at the end of February they agree on a year-long extension of law, it would prevent a cut to reimbursement to doctors from going into effect.

Every few months Congress needs to act to prevent what is called the SGR or sustainable growth rate from going into effect. If it would go into effect now, it would cut doctors reimbursement by Medicare about 30%--and that would cause doctors to leave the program. To prevent SGR from going into effect, Congress passes the doc fix, keeping the rates steady.

There are a couple of problems with asking higher-income folks to pay more into Medicare. One is that not many of them are on Medicare--only about 5% of people on Medicare have more than $80,000 per year in income, and they are already spending about 15% of that income on health-care costs.

Secondly, it is unfair. Those folks are getting the same services as people paying less, and at this point in their lives, everyone tends to be on a fixed income, and their healthcare costs are already high. We have to be very concerned if we rope more people in at lower income levels and call them higher income. So we really don't think this is a solution to our problem, which is health-care inflation.

Boomer: Do you think that the age to be eligible for Medicare will be raised? If so, when?

Baker: Well, my crystal ball is kind of cloudy on this one, but what I can say is that there will be continued proposals to raise the Medicare eligibility age from 65 to 67. I would doubt very much that any of that would happen before the election.

The problem with increasing the eligibility age to 67 is that all it really does is shift the cost--it doesn't really save money overall. Basically, what the federal government is saying is, ‘we don't want you until you are 67--you are either going to have to stay on your companies insurance if you are still working or you are going to have to go and buy an individual policy.’ Either way, it is going to come out of your pocket or a combination of your pocket and your company’s pocket as opposed to Uncle Sam’s. That really doesn't get at the problem--which is overall higher health-care costs.

Another issue to raising the age is that those aged 65 to 67 are relatively healthy. If they were in Medicare they would help it cover the costs of people that are older, let's say in their 80s, and not as healthy.

Boomer: What changes to Medicare will be felt most by baby boomers this year?

Baker: There is some overall good news for folks that are coming into the program this year and for those already in it. First of all, for those that need drug coverage, Medicare’s Part D prescription drug coverage is better than ever. Premiums have remained low, they have not increased significantly this year or at all in many instances, and the donut hole—the coverage gap in the place--continues to shrink. Before the passage of the Affordable Care Act, you would have to pay 100% of your drugs in that donut hole, now you only have to pay 50% of your brand-name drug costs. You will also get a 14% discount on our generic drugs until 2019 when the donut hole is complete gone.

There are also new pieces to Medicare’s preventive care program that started last year. This new program allows folks in Medicare and Medicare Advantage to get access to a wellness visits and preventive for free, for no copayments whatsoever. That is great to keep people healthy longer, and to make sure they get the preventive care they need.

Finally, the Medicare Advantage program is in a relatively stable market for 2012. All of the disaster scenarios that were painted because of cutbacks to reimbursement in the Affordable Care Act have not come true, and those plans are stable and offering the same kinds of extra benefits and either the same or, in some instances, lower premiums.

Despite what we hear in the media every day, Medicare, in some ways, is stronger than ever. We certainly need to look at its long- term physical health, and there are some issues there, but I think they are solvable without significantly changing the program. I think a lot of good is going on in the Medicare program in 2012

E-mail your questions to thefoxboomer@gmail.com.