How Will the New Healthcare Law Affect Medicare?

By Ryan Staib Posted : 05/18/2010

Before President Barack Obama's healthcare overhaul was signed into law on March 23, 2010, Medicare was projected to be sustained through 2017. The new plan promises to strengthen Medicare, extending it another 12 years to 2029. Designed to make Medicare more efficient, the plan aims to cut away wasteful overspending generated by excessive administrative costs, billing separately for services covering an episode of care, and generous payments made to private plans.

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Government-subsidized private plans like Medicare Advantage receive an average of 9 percent more than standard Medicare rates, allowing most private plans to offer lower deductibles and co-payments and extra benefits such as gym memberships and vision and dental care.

With a reduction in government payments to Advantage plans - an estimated $136 billion over the next decade - starting in 2011, some predict that seniors who are highly dependent on their extra benefits may experience a disruption in services. It could also threaten the enrollment of private Medicare Advantage plans, or cause some of its 11 million members to seek traditional Medicare health insurance.

Cutbacks in government payments to private plans will better align them with Medicare, but will not prevent insurance companies from offering their own Advantage plans. It will, however, challenge insurers to enhance their customer service and wellness programs for people with chronic conditions in order to earn the bonus payments made to plans scoring four stars or better on the government's rating system.

The real bonus is that in 2011 the new plan also eliminates deductibles and co-payments, and provides free annual wellness check-ups for seniors.

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