Misinformation Alert: Does the healthcare law cut billions in benefits from Medicare?


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By Consumers Union on Friday, August 24th, 2012

Medicare is front and center these days in the misinformation war against the Affordable Care Act, so we’ve focused our ‘lie detector’ on claims about the law’s supposed $716 billion in benefit cuts to the popular healthcare program for seniors.

The reality is, the Affordable Care Act actually SAVES about $716 billion in Medicare costs to taxpayers while actually adding new benefits for seniors and keeping all of the old benefits of traditional Medicare.

So where did this $716 billion ‘benefit cut’ come from? It’s actually the amount budget officials estimate Medicare will increase over then next decade if the healthcare law is repealed. So critics have turned that around to claim the new law ‘cuts’ that amount from seniors.

But you may wondering – what is the difference between a cut and savings? That’s where the law comes in, trying to reduce overpayments to private insurance companies and other providers while increasing actual benefits to seniors under traditional Medicare.

What critics aren’t saying is that much of the savings under the new law comes from a reduction in the amount that taxpayers pay private insurance companies to run Medicare Advantage programs for seniors.

These private Medicare insurance plans cover about one in four beneficiaries, and were created as a ‘market-based’ solution in hopes of driving down costs by having insurers compete with each other. But that’s not what happened. Today, private Medicare Advantage plans cost taxpayers and those who pay Part B premiums at least $1,000 more per beneficiary than providing traditional government-run Medicare to the same person.

These overpayments come at a big cost to all Medicare beneficiaries and taxpayers (think deficit), while providing a small group of seniors extras such as gym memberships and free eyeglasses. The new health law brings the cost of Medicare Advantage in line with traditional Medicare by reducing payments to these private insurers.

Now, insurers with the highest quality plans can receive bonuses under the law, actually encouraging them to compete rather than just handing over extra cash. Total savings from the new Medicare Advantage strategy equals about $156 billion over the next 10 years.

Meanwhile, seniors in traditional Medicare get new benefits under the healthcare law. Enrollees now can get cancer screenings, annual wellness visits, and other preventive medicine without paying a deductible or co-pay. This year, seniors that hit the donut hole can get a 50 percent discount on brand-name drugs and a 14 percent discount on generics; and in 2020 the donut hole will be gone completely.

A second big area of savings for Medicare comes from $415 billion in reductions in the ‘annual fee updates’ for how much Medicare pays certain providers. This includes savings of $260 billion from hospitals, $39 billion for skilled nursing facilities, $17 billion for hospice services, and $66 billion for home health services. Important to remember, back in 2009 the American Hospital Association offered up savings to help fund the health reform law in negotiations with the White House and encouraged other stakeholders to do the same.

The law also reduces funding ($56 million) to those hospitals that see a disproportionate amount of uninsured patients, since in 2014 most Americans will have insurance with help from new tax credits and expansion of Medicaid so these hospital won’t need as much assistance. The rest of the savings come from a variety of other efforts such as fighting waste, fraud and abuse in Medicare.

Opponents of health reform spin the facts to claim the ACA “cuts $716 billion from Medicare” while failing to mention that the law does what many of the politicians say they want: Preserve the existing program while finding savings from insurers and providers, extending the solvency of Medicare, and giving new benefits to seniors.

So when you hear that the new law ‘cuts,’ ‘robs,’ or otherwise harms Medicare, remember that the truth is the law expands the program’s benefits, doesn’t force seniors to pay more, and actually saves taxpayers over $100 billion.


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