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Health Care & Insurance

Obamacare Repeal Could Raise Health Care Costs for Medicare Beneficiaries

What's on the line if the Affordable Care Act is wiped out.

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Medicare beneficiaries are not necessarily immune from proposals on Capitol Hill to repeal, or partially repeal, the Affordable Care Act. The 2010 health care law includes a number of popular Medicare-related provisions—such as free preventive-care services and the closing of the Part D prescription-drug coverage gap—that could be swept away if Congress repeals the ACA.

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Lawmakers could take a scalpel to free screenings for diabetes, heart disease and cancer, including breast and colorectal cancers, as well as free flu and pneumonia vaccinations. A repeal was included in health care legislation introduced in 2015 by House Rep. Tom Price (R-GA), who is President Trump’s choice to head the Department of Health and Human Services. Legislation that Price introduced in 2016 also called for the full repeal of the ACA.

A handful of Republican proposals, including Price’s, also would end the shrinking of the Part D “doughnut hole.” The ACA enacted a gradual closing of the coverage gap with a combination of government subsidies and drug-company discounts. The gap is scheduled to be eliminated in 2020.

In 2017, beneficiaries in the coverage gap receive discounts and savings of 60% on the cost of brand-name drugs and 49% on the cost of generics. Under current law, those savings climb to 75% for both brand-name and generics in 2020, regardless of total drug costs, when the coverage gap disappears. Before the ACA, beneficiaries in the doughnut hole paid the full amount for drug costs until they left the gap—and those subsidies and discounts could end with a repeal. This year, a beneficiary reaches the coverage gap when his total drug costs (his share and his insurer’s share) reach $3,700, and he leaves the gap when his total costs reach $4,950.

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These provisions are near and dear to the powerful senior lobby, so it is far from clear that the provisions will be targeted as part of the attack on the ACA. But budgetary pressures have “the potential for indirect effects” on these benefits, says Paul Van de Water, a senior fellow at the Center on Budget and Policy Priorities. Legislation in the last session of Congress called for eliminating most of the ACA taxes that financed the expansion of health coverage. Without those revenues, “there could be more pressure to look to Medicare” when Congress seeks to replace the ACA, Van de Water says. Those taxes include the 0.9% Medicare payroll tax on high earners, the 3.8% tax on net investment income and fees imposed on certain health care industries.

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One possible effect of a repeal, or some replacement proposals, could be higher out-of-pocket costs under Medicare Part A, which covers hospital services, and Part B, which covers outpatient care, according to an analysis by the Kaiser Family Foundation. Those expenses include the Part A deductible and co-payments and the Part B premium and deductible. The Part A deductible in 2017 for each benefit period is $1,316, and the Part B deductible in 2017 is $183.

These out-of-pocket charges are based on government payment levels to hospitals and other health care providers. For instance, the Part A deductible is indexed to increases in hospital payment rates. The ACA restrained the rate of hospital payment hikes. Repealing the ACA cost restraints would lead to increased government spending and, hand-in-hand, lead to increased out-of-pocket costs for patients, according to Kaiser. Congressional bills differ on whether cutbacks on provider payments will continue.

Repeal Could Benefit Some Beneficiaries

But repeal may offer a silver lining to some beneficiaries. Enrollees in private Medicare Advantage plans may reap some extra benefits from a repeal. The ACA reduced payments to Advantage plans to get their per-beneficiary spending more in line with per-beneficiary spending under traditional Medicare. The ACA also imposed an annual tax on health insurers, including those that offer Advantage plans. If legislation that would repeal these provisions passes, insurers could then use the extra money “to reduce premiums and increase benefits” to beneficiaries, says Gretchen Jacobson, associate director of the Kaiser Family Foundation’s program on Medicare policy.

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Many higher-income beneficiaries could see a financial benefit from repeal. The ACA froze the income thresholds for the income-related Part B premium. By ending the inflation adjustments, the ACA estimated that more households over time would pay the premium surcharge, which starts at $85,000 of adjusted gross income for individuals and $170,000 for couples. The Price bill would restore the inflation adjustment.

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The ACA also imposed a Part D premium surcharge on higher-income beneficiaries. “If there is a repeal, the income-related premium for Part D would end,” Jacobson says.

Any action Congress takes on specific Medicare benefits under the ACA will seem trivial compared to a top goal of key lawmakers: an overhaul of Medicare. House Speaker Paul Ryan’s repeal-and-replace ACA proposal would give a fixed government contribution to each Medicare beneficiary to go toward the cost of enrolling in private plans or traditional Medicare. Beneficiaries would pay out of pocket for what this “premium support” doesn’t cover. Also, starting in 2020, Ryan (R-WI) would gradually increase the age of eligibility for Medicare to age 67, for people born in 1966.