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Center for Medicare Advocacy

February 10, 2011

The Center for Medicare Advocacy, Inc. is a national, non-profit organization that works on behalf of older people and people with disabilities to ensure fair access to affordable and comprehensive health care.  We submit this statement for the record of the Hearing on the Health Care Law’s Impact on the Medicare Program and its Beneficiaries, held before the House Ways & Means Committee on February 10, 2012.

Last year Congress passed two statutes, collectively referred to as the Affordable Care Act,[1] to extend health insurance to millions of Americans who are uninsured, to improve quality of care for all Americans, to reduce spiraling increases in health care costs, and to reduce the deficit. Some misstated reports about changes made by health care reform to Medicare have resulted in public fear of cuts to Medicare benefits. 

The Center for Medicare Advocacy wants to be very clear for the record: Medicare reforms included in the Affordable Care Act do not reduce Medicare’s guaranteed benefits; they improve Medicare and help safeguard the Medicare Trust Fund


The health care reform law expands Medicare coverage, by eliminating cost-sharing for preventive services, adding a yearly wellness visit, limiting some cost-sharing in private Medicare plans, closing the Part D “Donut Hole,”  and creating opportunities for exciting new delivery systems to promote coordination of care.

Further, perhaps of most significance, the changes made to Medicare by the Affordable Care Act extend the solvency of the Medicare Part A (hospital insurance) trust fund.  The Medicare Trustees now project that the Trust Fund will remain solvent through 2029, rather than through 2017, or an extension of 12 years.[2] According to the Center on Budget and Policy Priorities, the most recent projection by the Trustees is among the most favorable projections made by the Medicare Trustees in the last 21years. [3] 

The Affordable Care ActC:UsersnuehleckeAppDataLocalMicrosoftWindowsusersWeekly AlertsWebsitewww.medicareadvocacy.orgInfoByTopicReform10_10.28.ReformDoesntCutBenefits.htm – _edn1#_edn1 achieves savings in the Medicare program through a series of payment reforms, service delivery innovations, and increased efforts to reduce fraud, waste, and abuse. The actual projected reduction in Medicare spending is $428 billion over 10 years, after $105 billion in new Medicare spending is taken into consideration. [4]   It is important to stress again that none of the payment reforms affect Medicare’s guaranteed benefit packages. In fact, the law specifically states that the guaranteed benefits in Medicare Part A and Part B will not be reduced or eliminated as a result of changes to the Medicare program. [5]


The greatest amount of savings in Medicare, about $130 billion over 10 years, will be achieved by reducing overpayments to private Medicare Advantage (MA) plans[6] that serve only  24% of all Medicare beneficiaries.[7]  These are the insurance plans that contract with the Centers for Medicare & Medicaid Services (CMS) under Medicare Part C to provide benefits to those who voluntarily enroll.  MA plans must provide all of the guaranteed benefits under Part A and Part B; they may provide additional benefits with moneys they receive in excess of the cost of providing the guaranteed benefits.

Under the funding mechanism in effect before enactment of the Affordable Care Act, MA plans were paid, on average, 9%−13% more than the traditional Medicare program to provide the same coverage. These extra payments resulted in Medicare Part B premiums being $3.35 higher per month for all beneficiaries in 2009, and resulted in the federal government (and taxpayers) spending $14 billion more than it would have paid had Medicare Advantage plan enrollees remained in the traditional Medicare program.  The Medicare Payment Advisory Commission (MedPAC) had recommended to Congress for years that the benchmarks used to evaluate MA plan bids should be set at 100% of traditional Medicare costs, to achieve financial neutrality between payment rates for traditional Medicare and private plans.[8]  Instead, billions of dollars were wasted ­− jeopardizing the solvency of the Medicare Trust Fund, and increasing costs for all Medicare beneficiaries and for taxpayers. 

The Affordable Care Act phases in changes to the MA overpayments in order to curtail this waste, starting with a freeze in Medicare payments to MA plans for 2011.These changes are not as extensive as those recommended by MedPAC, however, and the new payment mechanism will not achieve the financial neutrality recommended by MedPAC. As a result of the new payment formula, plans in some lower-paid counties, generally rural and suburban areas, will continue to receive payments that exceed the traditional Medicare amount.[9] The new payment structure also provides for an increase in payments by up to 5% for plans that receive four or more stars on the CMS star rating system.[10] In other words, the Affordable Care Act  protects beneficiaries and strengthens the Medicare Advantage program by rewarding MA plans that provide higher quality care and reducing wasteful payments to those that do not provide additional value.


Many people in the health care industry predicted that the change in MA payments would result in fewer MA plans contracting with CMS, higher premiums, and reduced benefit packages.  CMS announced at the end of September 2010, however, that these predictions were not accurate.  According to CMS, MA plan premiums for 2011 are, on average, $1 less than in 2010, and most beneficiaries continue to have numerous choices of Medicare Advantage plans. [11] 

Many MA plans that chose to leave the Medicare market in 2011 did so as a result of changes made by the Medicare Improvement for Patients and Providers Act of 2008 (MIPPA),[12] not the Affordable Care Act.

Those who point to the cuts in the overpayments to MA plans as proof that Medicare benefits were reduced by health care reform legislation fail to acknowledge that the Affordable Care Act improves benefits offered by MA plans.  For example, the new law sets limits on the amount of cost-sharing plans can charge for chemotherapy administration services, renal dialysis services, and skilled nursing care services.[13] Further, starting in 2014, 85% of MA plan revenues must go towards benefits, not profits, or plans may be subject to sanctions.[14] 


The Affordable Care Act moves towards linking payment to quality outcomes for entities that provide services to Medicare beneficiaries. Health care reform emphasizes efforts to measure quality and to provide payment for only those services and procedures that meet certain quality of care standards. As stated above, Medicare Advantage plans may be entitled to bonus payments if they score highly on quality measures. In addition, hospitals will be given incentives to reduce hospital acquired conditions with respect to hospital discharges starting in 2015.[15]

Medicare payments also may be reduced for certain providers in the future if they do not provide high quality health care. For example, beginning in 2012, hospital payments may be reduced if a hospital is determined to have excessive readmissions for identified conditions or procedures that are high volume or high cost and for which the readmission rate is high.  A readmission is defined as a return to the same or a different hospital for the same condition within a time frame to be specified by the Secretary of Health and Human Services (HHS).[16]


It is anticipated that another $15.5 billion in savings to the Medicare program will be achieved from 2014-2019 through the workings of the Independent Payment Advisory Board (IPAB), a new quasi-governmental body which will take over from Congress the function of establishing Medicare payment policies, will be able to achieve.[17] The Affordable Care Act includes strict parameters for IPAB activity. It must submit proposals to Congress to reduce Medicare spending if statutorily-defined parameters are met.  These proposals will go into effect if Congress does not act.  Most importantly, the Affordable Care Act prohibits the IPAB from changing eligibility or benefits, reducing the Part D low-income subsidy, or rationing care.[18]

The beneficiary protections built in to the IPAB by the Affordable Care Act are in stark contrast to other recommendations currently under discussion to control increased Medicare and other health care costs and to reduce the deficit. For example, the National Commission on Fiscal Policy and Reform (Fiscal Commission) recommended changing current Medicare cost-sharing by creating a single annual deductible of $550 for Part A and Part B services.[19] Further, Congressman Paul Ryan, Chair of the Committee on the Budget, would change the benefit and cost-sharing structure of the current Medicare program. His Roadmap for America’s Future would eliminate the guaranteed benefits available to all beneficiaries under Medicare and that are protected by the Affordable Care Act.  Instead, he would offer older people and people with disabilities $11,000 to purchase a private insurance plan,[20]essentially changing Medicare into a capped dollar voucher program.

In addition to changing Medicare from a uniform, defined benefit health insurance program to a defined contribution plan, Congresman Ryan’s proposal does not take into account that Medicare was enacted in 1965 because private insurance companies did not want to offer insurance to older people and people with disabilities.  There is no guarantee that these same insurance companies would want to offer insurance to this population again, particularly if the Affordable Care Act’s prohibition of discrimination against people with pre-existing conditions is eliminated.


The Center for Medicare Advocacy provides direct assistance to thousands of Medicare beneficiaries in Connecticut each year, and assists beneficiaries, their families and their advocates who live in the other 49 states and the District of Columbia through phone calls, electronic inquiries, and educational efforts.  The following examples explain how the beneficiaries we assist have already been helped by the Affordable Care Act, or will be helped by health reform in the future:

•         Ms. M in Arizona and Mr. B in New York are Medicare beneficiaries with different health care statuses. Like millions of other Medicare beneficiaries, both are eligible for health care reform’s a new Annual Wellness Visit wellness visit that will include a health risk assessment to establish or update their medical and family history, create a list of current providers and suppliers involved in providing medical care – including a list of prescriptions, take measurements of height, weight, body mass index, blood pressure and other routine measurements, and detect cognitive impairments.  They will pay no cost-sharing for the visit or for the preventive services that are recommended to each of them during the visit.

•         Mr. G. in Florida and Ms. K. in Connecticut are two of the millions of Medicare beneficiaries with high prescription drug costs.  When they enter the Part D “doughnut hole” in 2011, as they did in 2010, they will no longer have to pay the full cost of their medicine, but will pay only 50% of the cost of brand name drugs and 93% of the cost of generic drugs.

•         Mr. W., a Virginia beneficiary with multiple chronic conditions, including diabetes, joined a Medicare Advantage plan when he first became eligible for Medicare.  Changes to the Medicare Advantage program limit the likelihood that he will pay more than people in traditional Medicare for high cost services and add an out-of-pocket limit to his health care costs.  The Medicare Advantage plan in which he is enrolled rates highly on the quality rating scale, meaning that his health plan will be eligible for quality bonus payments. Mr. W. also enters the Part D doughnut hole each year and anticipates spending substantially less for his prescriptions starting in 2011.

•         Ms. C in Texas has Alzheimer’s disease and resides in a long-term care facility.  In 2010, she spent approximately three (3) months in a Long-Term Care Hospital (LTCH) as a result of poor quality care in a number of settings.  Ms. C was originally sent to an acute care hospital from the long-term care facility to have a wound (bed sore) on her toe treated. She went to the LTCH for an acquired illness (MSRA), either from the acute hospital or at the long-term care facility. While in the hospital, she experienced multiple hospital acquired infections before she finally returned to the long-term care facility. The Affordable Care Act creates quality and payment incentives to ensure that Ms. C and other beneficiaries like her receive the highest quality of care and are not hospitalized as a result of avoidable health care incidents.

•         Ms. J. in Massachusetts has multiple chronic conditions that need monitoring and coordination. She will benefit from new delivery systems such as Accountable Care Organizations and Medicaid Homes designed to improve coordination and quality of care for people like her.

•         Ms. S. in California is eligible for the Part D Low-Income Subsidy that pays her drug plan premium, eliminated the Donut Hole, and reduces her cost-sharing for drugs.  Changes to how CMS determines which Medicare Prescription Drug Plans qualify as Low-Income Subsidy plans provide her more stability and continuity in drug plan coverage, and mean that she is less likely to have to change drug plans in order to receive the full subsidy.

•         Ms. G. in Pennsylvania was a plaintiff in a law suit challenging how people who are dually eligible for Medicare and Medicaid receive assistance with their Medicare premiums and cost-sharing.  The new Federal Coordinated Health Care Office, created by the Affordable Care Act, will help ensure that the most vulnerable Medicare beneficiaries, those who are eligible for both Medicare and Medicaid, will not encounter barriers that prevent them from receiving the full array of benefits and services for which they are eligible.


The Affordable Care Act slows the growth in future Medicare spending by reducing wasteful overpayments to private Medicare Advantage plans, by restructuring up-dates in payments to many providers, and by tying payments to improved quality of care.  In addition, the Affordable Care Act helps beneficiaries by reducing out-of-pocket costs, adding new benefits and promoting quality care. Health care reform does not reduce Medicare benefits, it adds to them. It does not endanger Medicare’s financial future, it saves billions of dollars for the Trust Fund, extends the projected solvency of the program by over a decade, and cuts billions of dollars in wasteful spending. The Affordable Care Act creates a stronger Medicare program for the 47 million older people and people with disabilities who rely on Medicare for their health care coverage today, and for the millions who will follow tomorrow.

Respectfully submitted,

Judith A. Stein, Esq.

Executive Director


Vicki Gottlich

Senior Policy Attorney

[1]  Pub.L.111-148, the Patient Protection and Affordability Care Act of 2010 (PPACA or ACA), on March 23, 2010, and Pub. L. 111-152, the Health Care and Education Reconciliation Act of 2010 (HCERA), on March 30, 2010.

[2] 2010 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds, August 5, 2010,

[3] Paul N. Van der Water, 2010 Medicare Trustee Report Shows Benefits of Health Reform and Need for Its Successful Implementation (Center On Budget and Policy Priorities, August 16, 2010)

[4] CBO March 20, 2010; Joint Committee on Taxation Revenue Estimates, JCX-17-10 (March 20, 2010).

[5] PPACA (Pub. L. 111-148), § 3602.

[6] CBO March 20, 2010; Joint Committee on Taxation Revenue Estimates, JCX-17-10 (March 20, 2010)

[7] Medicare Advantage Fact Sheet  (Kaiser Family Foundation Sept. 2010),

[8] Report to Congress, Medicare Payment Policy (March 2010);

[9] B.Biles, G. Arnold, Medicare Advantage Payment Provisions (G.W.U. March 2010), available at

[10] HCERA § 1102.

[11] “Medicare Advantage Premiums Fall, Enrollment Rises, Benefits Similar Compared To 2010 Wide Range Of Medicare Health And Drug Plan Options Continues In 2011” (  CMS Sept. 21, 2010);

[12] Section 162 of the Medicare Improvements for Patients and Providers Act of 2008, Pub. L. 110-225 required private fee for service Medicare Advantage plans to have provider networks in most areas of the country, effective January 1, 2011.

[13]PPACA §33203..

[14] HCERA §1103. A plan’s contract must be terminated if the plan fails to have a Medical Loss Ratio of 85% for 5 consecutive years.

[15] PPACA §3008.

[16] PPACA § 3025.

[17] CBO March 20, 2010; Joint Committee on Taxation Revenue Estimates, JCX-17-10 (March 20, 2010).

[18] PPACA § 3403(c), adding Section 1899 of the Social Security Act

[19] ).  In 2011, the Part B deductible is $162, and the Part A deductible is $1,132 per spell of illness.