Winners and losers under the new and improved Medicare: they did it! We have a "new and improved" Medicare. Let's look at some of the players and how the new Medicare will benefit—or not benefit—them

Healthcare Financial Management, Jan, 2004 by Jeanne Schulte Scott

AARP

AARP has invested a good chunk of its political clout into the new Medicare law. The law is not perfect, AARP seems to say, but it's a start. We'll fix it later.

The only problem with that argument is that there will be little hope of "fixing" the law alter the bill is passed, in part due to the enormous federal budget deficits the government faces. Most commentators believe that, with the new law in hand, Republicans will have an enormous political advantage in the 2004 elections. In fact, many are predicting a virtual sweep by the GOP in the House and Senate, leading to "veto-proof" majorities. Conservatives in Congress have already put seniors on notice that they will "cap" Medicare spending to keep the entire program, not just the new prescription benefit, under a preset cost limit.

With broader Republican control in Congress and a Republican president, any changes in Medicare are far more likely to narrow the program than to expand it. AARP will have greater visibility in a Republican-controlled government, but it will be virtually toothless when it comes to stopping these inevitable cutbacks.

President Bush and Republicans

By making 2006 the effective date of the new Medicare, the White House may defuse election backlash from seniors over the limited benefits and high premiums that will have to be paid. With $100 million already in Bush's campaign chest, the Bush campaign will inudate the airwaves and the print media with "issue ads" about the new Medicare aimed at America's seniors. Because the new law was supported by the major senior lobbying group, AARP, senior opposition should be sporadic at best. It's a rout for the president and Congressional Republicans.

Democrats

Democrats are reeling. The seven-member House-Senate conference committee, which hammered together the final version of the new Medicare, had only two Democratic members, one conservative and one moderate. The bill was effectively a GOP product with little or no Democratic input. Expected Democratic opposition never materialized. The only real opposition came not from Democrats but from conservative Republicans who opposed the bill because of its massive costs and new entitlement provisions.

Booked by a couple of unexpected Senate retirements and facing House campaigns in several states that have undergone radical redistricting, Democrats may confront dismal prospects in the 2004 Congressional elections. At the presidential level, Democrats have the unenviable task of facing off against a popular wartime incumbent with an unlimited campaign chest. No matter who their nominee may turn out to be, Democrats face an uphill battle.

Providers

In the zero-sum balancing act that is today's Medicare, if one provider group wins, another provider group must lose. Urban hospitals took it on the chin, while rural health care won a lot, and physicians obtained some temporary relief. Rural health care will gain upward of $25 billion in additional payments over the next 10 years as a result of recalculating the wage index and equalizing payments under the new Medicare. Urban, high-Medicare use hospitals stand to lose the most, as hospitals face almost $12 billion in new payment eats. Physicians won a roll-back in the Balanced Budget Act--mandated scheduled for 2003 and 2004 Medicare payment reductions.

HMOs and PPOs

Big time gains were achieved by the managed care industry. The new Medicare calls for incentives to be paid to new health plans to encourage them to offer and maintain coverage. Trying to avoid the pitfalls of the old Medicare Choice programs, Congress has added upward of $87 billion in overpayments to HMOs and PPOs. In addition, the law provides for up to $32 billion in "rebates" to help hold new plan premiums down, making them more attractive to seniors. Traditional Medicare gets no incentives, and will have to compete against these new plans.

State Medicaid Plans

State governors are celebrating a decision to transfer healthcare coverage for "dual-eligible" seniors from Medicaid to Medicare. According to researchers at the Commonwealth Fund, states spend $6.8 billion annually for the drugs used by seniors who are eligible for both Medicare and Medicaid. That burden is now shifted from the states to Medicare.

Medicaid recipients may not be celebrating, though. The coverage offered by the new Medicare is far less than what is available under almost every state Medicaid plan.

Seniors

Retirees who already had broad drug coverage through programs of their former employers may end up losing that coverage if employers dump their retiree drug plans now that the government will provide coverage. To head off this possibility, the new Medicare includes an estimated $58 billion over 10 years in incentives to employers to encourage them to maintain their current retirement policies.

Low-income seniors and high-end users of drugs will benefit somewhat from the new law. The average senior will have to spend almost $840 out of pocket each year on drugs before seeing dollar one in new benefits.