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Friday, October 12, 2012

Part 2: Higher Medicare premiums and co-insurance

Marc Steinberg

Deputy Director of Health Policy

What Governor Romney Doesn’t Want People Over 55 to Hear About His Medicare Plan

A five-part blog series about what’s really in Romney’s Medicare plan

Part 2: Higher Medicare premiums and co-insurance

I wrote last about what happens to Medicare coverage for prescription drugs and preventive services under the Romney-Ryan plan. That’s the first of five ways that people with Medicare are hurt by the plan. Today’s topic: Medicare premiums and co-insurance.

 Everyone with Medicare pays a monthly premium for their Medicare Part B coverage. For most people this year, it’s $99.90 a month. Typically, it’s deducted from their Social Security payment every month (folks with Medicaid coverage get their premium paid by Medicaid). Like all health insurance premiums, Medicare’s premiums are based on how much it costs to pay for the care beneficiaries receive. If Medicare (or any insurer) has to pay doctors and hospitals more to care for people, those costs get passed along, in part, in the form of higher premiums. Conversely, if Medicare pays out less in health care costs, premiums go down.

Co-insurance works similarly. As most anyone with Medicare can tell you, Medicare covers a portion (typically 80 percent) of many health care services. You are responsible for the rest (though if you’re lucky, you have supplemental insurance to help). If the rate Medicare pays goes down, so does the amount you owe.

Right now, Medicare is scheduled to save money by slowing down its future increases in payments to health care providers and insurance companies in order to encourage them to become more efficient. These savings will be passed on to seniors and people with disabilities in the form of lower Part B premiums and lower co-insurance. Unlike private insurance companies, Medicare cannot raise premiums just to boost profits for Wall Street or to pay bonuses to CEOs. Instead, by law it must keep premiums at a specific share of the program costs. So when the program saves money, beneficiaries automatically get a share of the savings. According to a recent Department of Health and Human Services (HHS) report, total savings in premiums and co-insurance for the average beneficiary will be $134 in 2013, and grow to $629 by 2022. That’s an average savings of $347 per year for everyone with Medicare for the next 10 years—and that’s not including prescription drug costs. Of course, some people would save more and some would save less, depending on how many health care services they use.

Governor Romney has said he wants to reverse all these Medicare savings and increase Medicare spending on insurance companies, doctors, and hospitals. That’s odd because Congressman Ryan’s budget plan—the blueprint for the Republican health care agenda—includes all of those savings. Moreover, Governor Romney—who claims he wants to reduce the deficit and cut taxes—also hasn’t explained how he intends to pay for this increased health care spending.

But, assuming he somehow was able to ramp up Medicare spending in the next 10 years, what would that mean for people with Medicare? It would mean higher costs for seniors and people with disabilities with Medicare—to the order of an average of $347 per year for the next 10 years in higher premiums and co-insurance for each person with Medicare. In 10 years, a couple with Medicare would be paying an average of $1,258 more per year under the Romney plan. So how does that square with Romney’s assertion that current Medicare beneficiaries and those approaching retirement will not be affected by the Romney-Ryan plan’s proposed changes? Again, it just doesn’t.

Next: A decimated Medicaid program

Part 2: Higher Medicare premiums and co-insurance | Families USA

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