Medicare Gets Tough

Medicare is getting a little tougher in 2007 in several ways. This new 2007 Medicare will be likely to make a difficult situation worse for geriatric care providers and older persons alike. This year may not be an isolated rough patch; rather, it may be the beginning of a much longer period of increasing cost sharing, as well as pressure being applied to both older persons and to their providers in the form of higher premiums and deductibles for individuals—and lower reimbursement for providers. These issues could come together to force both older persons and their providers into a market outside of traditional Medicare. While the effect of these changes over the long haul is still questionable, noticeable effects of the 2007 Medicare changes are already being felt.

MEANS TESTING OF MEDICARE PART B PREMIUMS

For the first time since Medicare’s beginning in 1965, beneficiaries are seeing their monthly premiums adjusted upward based on their incomes, which is commonly referred to as a means test. Some view this as an appropriate and reasonable approach to ensure survival of this program. Prior to the Medicare Modernization Act (MMA), all Medicare beneficiaries were treated the same with regard to premiums. The MMA has changed that. Now Medicare beneficiaries with incomes over $80,000 for individuals and twice that for married couples will be subject to monthly premiums above $93.50 for Medicare Part B. At minimum, the increased premium is $12 per month, but it reaches almost $70 more per month for those individuals with incomes above $200,000.¹

It is likely that this means testing for Medicare Part B is a political test to see whether further means testing on other Medicare parts is doable; the answer appears to be “yes.” With very little political outcry against this type of cost shift, it is highly likely that similar means testing will be applied to Medicare’s other parts as a way to find additional sources of revenue for a financially troubled program.

TOUGHER 2007 MEDICARE PART D

Medicare Part D is also getting tougher for Medicare beneficiaries for 2007. While the median premium is reported to be decreasing, many beneficiaries—especially those who enrolled in the lowest premium plans in 2006—are likely to see significant increases. Humana, which had the nation’s lowest premium plan at $1.87, has increased its plan to $10.20.

In addition to the increases in monthly premiums for many Medicare beneficiaries, all beneficiaries will face an increase in their out-of-pocket expenditures. In 2007, all Medicare beneficiaries are subject to an increase in the minimum benefit design that will see an increase in the annual deductible from $250 to $265. Also, the coverage gap moves from $2250-$5100 to $2400-$5451.25 for 2007, making this gap in coverage increase by some $200. These increases in out-of-pocket expenditures may make adherence to drug treatment during these gaps in coverage more difficult.

Perhaps the greatest area of concern surrounds the confusion echoed by individuals in 2006 regarding the vast number of plans. This has actually gotten worse in 2007, with an additional eight national prescription drug plans (PDPs), bringing the total to 17 for 2007. The same type of growth is being seen by an additional 499 regional PDPs. Not only are older persons faced with more plans to choose from, but they have significantly less time to make this important decision; 6 months in 2006 is now down to just 45 days for the annual enrollment period. It does not appear, however, that many individuals are likely to do the homework needed to change plans from those they selected in 2006.

It is still hoped that the 3 million Medicare beneficiaries eligible for the low-income subsidy enroll in a Medicare Part D plan. This group has been the most difficult to reach. In fact, of the 5 million who did not enroll, the majority were those eligible for the low-income subsidy.

PHYSICIAN ROLE & RESPONSIBILITY

Medicare beneficiaries are not alone in feeling the effects of this tougher Medicare in 2007; physicians are set to see a 5.1% decrease in reimbursement. The Senate Finance Committee proposes a 0.5% reimbursement increase in 2007, with an additional 1.5% increase in July 2007 for physicians who report quality data to the government, a process that is currently voluntary. If passed, the proposal only calls for delaying the reimbursement decreases, which would be reduced by an estimated 12% in 2009 and 13% in 2010 to compensate for the cost of the 2007 payments increases. This comes at a time when the demand for geriatric services from the wave of baby boomers entering Medicare is increasing, and while the supply of physicians willing to accept Medicare patients is decreasing.

The increases in premiums, which will reach $400 per month in 2009 for Medicare Part B, combined with decreasing numbers of physicians in the Medicare network open to accepting new patients, may push individuals out of Medicare and into a new emerging market of private fee-for-service medical care. Physicians need to be ready to advise their patients and prepare their practices for the changes occurring to Medicare in 2007—and those that will surely occur in subsequent years. These include the development of concierge-type practices in response to those who desire easier access to primary care and other medical services.

Physicians need to start thinking beyond their own practices and look to professional associations such as the American Geriatrics Society for practice management assistance, as well as to advocate for access to quality care for older adults and to support geriatric medicine practitioners. The MMA mandates that the Trustees issue a “Medicare funding warning” that is triggered when general revenue funding is projected to account for 45% or more of total Medicare expenditures for any one year within the 7-year projection period, which includes the current fiscal year and the subsequent 6 fiscal years. If two consecutive fund warnings are issued, the MMA directs the President to propose to the Congress legislation intended to prevent general revenue funding from actually accounting for 45% of program expenditures.

The President is required to submit legislation for remedial action to the Congress in the months immediately following the second consecutive Medicare funding warning. Specifically, a special congressional procedure would be triggered so that cost-reducing and/or income-increasing measures could be considered. The House, which is required to introduce the President’s legislation on this matter, would consider action under expedited procedures.² The solutions likely to come out of Congress would focus mainly on what we are seeing from Medicare in 2007: increased cost sharing being forced upon older persons and decreasing provider reimbursement that will likely force more people and geriatric providers away from the Medicare system. The goal should be finding a solution, rather than pushing older individuals and providers out of the system.

Please send any questions or experiences about Medicare Part D you would like to share with readers to: BSpivack@Waveny.org