If you’re thinking that the new health care reform laws will affect you, you’re right! In fact, you may be seeing some of those changes already. The Patient Protection and Affordable Care Act passed by Congress and signed by President Obama this year contains some important benefits for Medicare recipients.

The guaranteed Medicare benefits you currently receive will remain the same. During open enrollment this fall, you will continue to have a choice between Original Medicare and a Medicare Advantage plan. Medicare will continue to cover your health costs the way it always has, and there are no changes in eligibility. But, there are some important benefits that you and your family can take advantage of starting this year.

While no cuts to traditional Medicare benefits are part of the plan, some Medicare Advantage plan members may see changes in health plan benefits and enrollment periods in the coming years as Medicare Advantage subsidies are brought more in line with the cost of traditional Medicare benefits.

Here is a summary of how health care reform will impact Medicare over the next several years.

2010 Changes to Medicare

• $250 Part D Rebate: If you have Medicare prescription drug coverage, and are not already getting Medicare Extra Help, Medicare will automatically send you a tax free, one-time $250 rebate check after you reach the coverage gap (also called the “donut hole”) in 2010. (That’s the Part D prescription drug coverage gap when you’ve spent $2,700, but not reached $6,154 where coverage starts again.) This rebate is the first step toward closing the Medicare prescription drug coverage gap. These checks will begin to get mailed to beneficiaries starting in mid-June, 2010. Checks will be mailed monthly throughout the year as beneficiaries enter the coverage gap.

However, this is a one-time benefit and if you qualify, you will only receive one check after you reach the coverage gap. Next year, if you reach the coverage gap, you will receive a 50% discount when buying Part D-covered brand-name prescription drugs. Over the next ten years, you will receive additional savings until the coverage gap is closed in 2020.

• Improvement In Care Coordination for Dual–Eligibles: For those of you who are enrolled in both Medicare and Medicaid, this improvement comes with the creation of the new Federal Coordinated Health Care Office within the Centers for Medicare & Medicaid Services (CMS). This will provide better services for many beneficiaries who are low-income, frail and/or elderly.
• The Food and Drug Administration (FDA) Authorized to Approve Generic Versions of Biologic Drugs: These biologics (a class of medications used often in rheumatology and oncology) will be approved for market entry after 12 years of exclusive use by the manufacturer. This means more affordable biologics for consumers in the future.
• Expansion of Medicare Coverage to Individuals Who Have Been Exposed to Certain Environmental Health Hazards: People who have developed certain health conditions as a result of exposure to environmental health hazards from living in areas subject to an emergency declaration made as of June 17, 2009 will receive additional coverage.
• Reduction of Annual Payment Adjustments: Annual payment adjustments will be reduced for inpatient and outpatient hospital services, long-term care hospitals, inpatient rehabilitation facilities, and psychiatric hospitals and units.
• Restrictions on Physician Self-Referrals and Claims: Provisions such as tighter restrictions on physician self-referrals and requirements for claims to be filed within one year of service will help reduce fraud.
• Ban on New Physician-Owned Hospitals in Medicare: Hospitals will be required to have a provider agreement in effect by December 31, 2010, limiting the growth of certain grandfathered physician-owned hospitals.
• Insurance Companies Banned from Establishing Lifetime Limits: Insurance companies will have a ban on establishing lifetime limits on your coverage, and the use of annual limits will be limited starting in September 2010.
• Extension of Dependent Period: Starting in September 2010, young people up to age 26 can remain on their parents’ health insurance policy.

2011 Changes to Medicare

• 50% Discount on Part D Drugs During Gap: Pharmaceutical manufacturers will be required to give a 50% discount on Part D-covered brand-name prescription drugs if you reach the coverage gap.
• Elimination of Deductibles and Coinsurance for Preventive Services: Free preventive services, such as colorectal cancer screening and mammograms will be available. You can also get a free annual physical (annual wellness visit) to develop and update your personal prevention plan based on current health needs.
• 7% Discount on Generic Drugs: The Federal Government will offer a 7% discount on generic prescriptions filled during the coverage gap. (Discount will increase annually until it is 25% for both brand-name and generic drugs in 2020.)
• “Medicare Advantage” Enrollees Allowed to Switch to Original Medicare: During the first 45 days of the new year, you may choose to switch back to Original Medicare from a Medicare Advantage program.
• Freeze on the Income Threshold for Income-Related Medicare Part B Premiums: This freeze, for 2011 through 2019 at 2010 levels, reduces the Medicare Part D premium subsidy for those with incomes above $85,000/individual and $170,000/couple.
• 10% Medicare Bonus Payments to Primary Care Physicians and General Surgeons: Certain physicians practicing in health professional shortage areas will receive this bonus. (Effective 2011 through 2015)
• Private “Medicare Advantage” Plans Prohibited from Charging More Than Original Medicare for Certain Medical Services: These services include chemotherapy administration and skilled nursing care. This prohibits Medicare Advantage plans from imposing higher cost-sharing requirements for some Medicare covered benefits than is required under the traditional fee-for-service program.
• Single Annual Enrollment Period (AEP): This Annual Enrollment Period for drug and health plan changes, will begin October 15 and end December 7 each year. (This new AEP will begin in fall 2011 for enrollments for the 2012 plan year.)
• New Voluntary Insurance Program – CLASS (Community Living Assistance Services and Supports): The Elder Justice Act, which was included in the new law, will help prevent and combat elder abuse and neglect, and improve nursing home quality. Individuals on Medicaid will receive improved home and community-based care options, and spouses of people receiving home and community-based services through Medicaid will no longer be forced into poverty. This program is financed through voluntary payroll deductions. After five years of contributing to the program, should a person require services in the future, the fund would provide a lifetime benefit averaging $50 a day, depending on the needs of the person.

2012 Changes To Medicare

• Elimination of Prescription Drug Copayments for Full Dual-Eligibles Receiving Home or Community-Based Long-Term Care:  Part D cost-sharing for full-benefit dual eligible beneficiaries receiving home and community-based care services would now be equal to the cost-sharing for those who receive institutional care.
• New Medicare Independence at Home Demonstration Program: Chronically ill Medicare beneficiaries will receive primary care services in their homes, and this new program incentivizes better coordination of care.
• Reduction of Payment to Hospitals with High Rates of Preventable Hospital Readmissions: This will promote high-quality outcomes.
• Accountable Care Organizations (ACOs):  Incentives will be provided for physicians and other providers to form Accountable Care Organizations (ACOs) to encourage better communication, reduce costs and provide higher-quality care.
• Reduction of Certain Annual Payment Adjustments:  This will include reductions of annual payment adjustments for home health agencies, skilled nursing facilities, hospices, and other Medicare providers.
• Hospital Value-Based Purchasing Program: Within Medicare, hospital value-based purchasing programs will be established, and plans will be developed to implement value-based purchasing programs for skilled nursing facilities, home health agencies, and ambulatory surgical centers.
• Bonus Payments to High-Quality Medicare Advantage Plans. 

2013 Changes to Medicare

• Federal Subsidies for Brand-Name Prescriptions: Federal subsidies for brand-name prescriptions will begin phasing in, filling in the Medicare Part D coverage gap (to 25% in 2020, in addition to the 50% manufacturer brand-name discount).
• Raise Federal Subsidies for Part D Generic Drugs: Federal subsidies for generic drugs will be included in the coverage gap.
• Establishment of a National Medicare Pilot Program: This program will develop and evaluate paying a bundled payment for acute, inpatient hospital services, physician services, outpatient hospital services, and post-acute care services for an episode of care.
• Increase in Medicare Part A Payroll Tax by 0.9%: This will apply for individuals earning over $200,000 and couples earning over $250,000. In addition, adds a 3.8% tax on certain unearned investment income for individuals earning over $200,000 and couples earning over $250,000.

2014 – and Beyond – Changes to Medicare

• Out-of-Pocket Expense Changes: This is a reduction in the out-of-pocket amount that qualifies a Medicare beneficiary for catastrophic coverage under Medicare Part D (effective through 2019).
• Independent Payments Advisory Board: This board will submit legislative proposals containing recommendations to reduce the per capita rate of growth in Medicare spending if spending exceeds a target growth rate. 
• Reduction in Medicare Disproportionate Share Hospital (DSH) Payments: This reduction is initially by 75% and subsequently increases payments based on the percent of the population uninsured and the amount of uncompensated care provided. Requires Medicare Advantage plans to have medical loss ratios no lower than 85%.
• Limits on Medicare Advantage Plan Profits and Administrative Expenses to 15% of Medicare Payments.
• Implementation of General Insurance Reforms for the Non-Medicare Population, Including People in the Two-Year Waiting Period for Medicare: These reforms include guaranteed issue of plans, prohibition on coverage exclusions based on a pre-existing condition, and limiting age rating of premiums to three to one.
• Reduction in Medicare Payments to Certain Hospitals: This reduces Medicare payments to certain hospitals for hospital-acquired conditions by 1% (Effective fiscal year 2015).

Sources – Health Care Reform

¹ “Focus on Health Reform: Health Reform Implementation Timeline,” Kaiser Family Foundation, www.kff.org, June 15, 2010

²Medicare Rights Center, www.medicarerights.com, last modified June 2, 2010

³“Health Care Reform Bill 101: What Does it Mean For Seniors?” Christian Science Monitor, by Peter Grier, March 22, 2010, www.csmonitor.com

⁴“Q+A:  How Does Healthcare Overhaul Affect Medicare?” Reuters, March 22, 2010, www.reuters.com

⁵ “Medicare and the New Health Care Law  – What it Means for You,” May, 2010, www.medicare.gov