Should Retirees Worry About Medicare Under Trump?
“A war on seniors.” “Mediscare.” “A Bitter Day.” With President-elect Donald Trump’s recent appointment of Tom Price for Health and Human Services (HHS) secretary, many Americans have become concerned about the future of Medicare, the federal government program that provides healthcare to 48 million seniors and 9 million disabled people.
Price is a former orthopedic surgeon from Georgia and current chairman of the House Budget Committee, as well as a member of the House GOP Doctors Caucus, a group of 18 medical providers in Congress whose backgrounds help to shape healthcare policy. He supports House Speaker Paul Ryan’s “A Better Way” proposal, published in June, to reform the Affordable Care Act and Medicare. If Price is confirmed as HHS secretary, he would be in charge of administering Medicare.
With the Affordable Care Act under the knife right now – it's too early to know what the replace part of "repeal and replace" would look like – observers are also worrying about what's next for Medicare.
How Price and Ryan Want to Change Medicare – and Why
Ryan’s plan’s fundamental goal is “fixing the currently broken subsidy system and letting market competition work as a real check on widespread waste and skyrocketing healthcare costs.”
With regard to Medicare, his proposed solution is a premium support program to replace the current fee-for-service program in which the government pays directly for seniors’ healthcare. Instead, the government would give seniors a certain dollar amount that they could use to buy health insurance on the private market or to pay for premiums in a reduced version of Medicare. Another way to explain premium support is that it would shift the government’s support of seniors’ healthcare costs from a healthcare version of a defined-benefit program to the equivalent of a defined-contribution program. This change would take place in 2024, according to the proposal. Seniors would then have to shop for plans on a new Medicare Exchange.
“This means that the government will pay a share of the benefits, and beneficiaries have to pay the rest of the cost of coverage, which will vary depending on which plan they choose under the menu of private-plan options Ryan envisions,” says Allison K. Hoffman, professor of law at the University of California, Los Angeles School of Law.
The plan that Ryan proposes would also raise participants’ eligibility age from 65 to nearly 67 to match Social Security’s full retirement age, beginning in 2020. Full retirement age depends on your year of birth. People born in 1937 or earlier have a full retirement age of 65, and that age gradually rises to 67 for those born in 1960 or later.
Ryan’s Better Way proposal promises not to disrupt Medicare for those in or near retirement and to allow those individuals to participate in Medicare as it exists now or opt in to the new premium support program. Previous proposals for a premium support program have stated that it wouldn’t apply to those who are currently 55 and older; Ryan’s plan would not apply to those currently age 55 or older at the time of the plan’s adoption.
Ryan’s proposal also promises to adjust premium-support payments to help support the sick and those with lower incomes while asking wealthier seniors to pay more. It would also require private insurers on the Medicare exchange to “offer insurance to all Medicare beneficiaries, to avoid cherry-picking and to ensure that Medicare’s sickest and highest-cost beneficiaries receive coverage.”
The proposed changes would make Medicare Parts A (hospital insurance) and B (medical insurance) more like the current Medicare Part D prescription drug coverage program, where seniors must to choose among providers for the plan that best suits their needs. Some seniors might appreciate the choice, while others might see it as an additional burden. (And the plan isn’t without potential problems: See 3 Big Medicare Part D Increases You Need to Know.)
The reforms’ stated goals are to reduce federal spending and increase competition in the healthcare market to improve the quality of service.
Critiques of Ryan’s Proposal
“Assuming that this government contribution amount does not grow as quickly as healthcare costs do – the very reason why these types of proposals are generally advanced – Medicare beneficiaries will have to pay more and more of the cost of their healthcare over time,” Hoffman says. “No one will be exempt from the way that the Republican proposals will create more financial risk for beneficiaries, and that risk will only increase over time.”
Fundamentally, the proposal would make seniors pay more so that the government (i.e., taxpayers) would pay less. Enrollees might pay double under Ryan’s proposal compared with what seniors currently pay for Medicare, according to an analysis by the Center on Budget and Policy Priorities, a research and policy institute that analyzes important federal budget matters.
The Kaiser Family Foundation, a non-profit organization that provides in-depth health-policy information, says that how a premium-support plan affects seniors’ premium and out-of-pocket costs would depend on a number of factors. None of those factors has been established. Seniors’ costs could go up or down and also would depend on where seniors live and which plan they chose.
Political blogger Kevin Drum, in an article for “Mother Jones,” says, “It’s pretty plain that it would be worse for seniors than the current Medicare system. After all, if it were better, Ryan wouldn’t feel like he has to exempt current Medicare recipients.”
Another problem with the proposed reforms is that healthier people might use their vouchers to purchase private insurance, leaving the sickest people behind in traditional Medicare and making it financially unsustainable.
Writing for the November issue of “Harper’s Magazine,” longtime health journalist Trudy Lieberman notes that under a premium-support system, private plans might not be required to offer the same basic benefits that traditional Medicare does, the way Medicare Advantage plans currently are required do. Other possible problems are that private plans might have narrow networks, making it difficult for seniors to keep seeing the providers they like, and that private plans might not provide the best care for people with serious illnesses or those who need specialized treatment. She further points out the difficulties consumers face in making the best choices with regard to their Medicare plans because of a lack of information.
Lieberman also states, “One thing is clear: The pitch for ‘saving’ Medicare will exploit seniors’ fears of losing their benefits and obscure what the proposed changes really mean.”
How Medicare Reform Might Benefit Seniors
While most of the news about Medicare reform has focused on premium support and how it could harm seniors, there are a number of ways in which Medicare reform – which includes many proposed changes in addition to premium support – might benefit seniors.
Ryan’s “A Better Way” would restore the ability for seniors enrolled in Medicare Advantage to switch plans during the first three months of the year for certain reasons, such as their doctor leaving their plan’s network.
Ryan wants to close the Center for Medicare & Medicaid Innovation in 2020. Critics have said this center’s initiatives in reshaping how healthcare is organized and paid for in order to control costs and improve quality might be harmful to seniors. (Learn more about some of these activities in The Proposed Medicare Drug Rules & Senior Health and Medicare’s New Payment Rules: Should You Worry?)
The plan would also seek to protect doctor-patient relationships by easing regulatory burdens that have caused some doctors to stop practicing. Ryan wants to increase the number of doctors who participate in Medicare.
His proposal also states that a 2013 analysis by the Congressional Budget Office found that a premium-support plan would save money for both the government and plan participants. Premium support’s advocates say it will give consumers more choices and increase competition among private insurers, resulting in lower prices for consumers.
In a recent article for “Forbes,” investing columnist Alex Verkhivker, a former senior policy advisor for the IRS’s Taxpayer Advocate Service, examines whether Ryan’s plan could be workable. He says that the popularity and success of Medicare Advantage – an existing alternative to Medicare Parts A and B that a third of seniors choose and that lets them buy coverage from a private insurer instead of using original Medicare – shows that Ryan’s proposal could work. The idea is not to eliminate social insurance but to have the private sector provide it instead of the government – with some premium support from the government.
To understand more about how Medicare Advantage compares to traditional Medicare, see Pitfalls of Medicare Advantage Plans.
A big question is whether any changes to Medicare that are actually implemented would meet the promises in the Better Way plan. And then there's an even bigger question.
What Does Trump Want?
We don’t know exactly where President-elect Trump stands on Medicare, though many observers think that his appointment of Price indicates that he might support a major shift. A Trump tweet from January 2, 2013, shows that he might share common ground with Ryan and Price: “Medicare payments have become so unpredictable that record amount of doctors are now leaving . . . Bad for long term.”
Others think Trump has not demonstrated that he wants to make major changes to Medicare.
“President-elect Trump did not make Medicare reform a centerpiece of his campaign, and it’s highly unlikely he’d propose something that impacts retirees,” says Timothy Costa, principal of government relations with Pittsburgh-based law firm Buchanan, Ingersoll & Rooney.
Indeed, Trump could hurt his chances of reelection in 2020 by allowing Medicare changes that harm his voting base.
Trump tweeted the following statements in support of Medicare from 2011 through 2015:
What Trump’s transition website says about the matter is vague: “Modernize Medicare, so that it will be ready for the challenges with the coming retirement of the Baby Boom generation – and beyond.”
“Candidate Trump talked a lot of drug costs and waste, fraud and abuse in the program. It’s likely he’ll start with those areas, which encompass far more than just Medicare,” Costa says.
Meanwhile, incoming chief of staff Reince Priebus insisted as recently as early January that Trump wouldn't "meddle" with Medicare (or Social Security)," a position not shared by many Republicans in Congress.
The Bottom Line
“It’s too early to tell what reform is going to look like, and interested parties will have ample opportunity to have their voices heard,” Costa says.
The current proposals to reform Medicare are only a possibility. They reflect changes that Paul Ryan, supported by Tom Price and other Republican leaders, would like to see. Their plan, like so many other blueprints for change, is likely to see numerous revisions before and if it is implemented.
Meantime, learn more about the government’s health program for seniors by reading Medicare 101: Do You Need All 4 Parts? Also check out When You Can and Can’t Delay Enrolling in Medicare and How to Avoid Penalties When Postponing Medicare.) To understand more about the procedures shaping the push to appeal the Affordable Care Act, see How Obamacare Can Be Repealed.
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