Planned cuts to Medicare spending are driving senior citizens to rethink their support of some candidates in the November election. Republicans wasted no time in trumpeting the fact that Democrats have “cut $500 billion from Medicare.” In reality, the plan calls for a reduction in the increase on federal Medicare spending. The increase has been trimmed from 6.8% to 5.5% annually.
Does this really translate into cuts for Medicare? Overall Medicare spending is expected to reach nearly $1 trillion by 2020. Currently, the federal government spends about $520 billion on Medicare annually. Over the next decade, the cuts will reduce anticipated Medicare spending from $7.6 trillion to $7.1 trillion, but annual spending on Medicare is still expected to increase.
The annual increases are due in part to the number of newly eligible Medicare beneficiaries. As the number of eligible seniors increases, more money must be made available to cover new participants in the program. Some participants will also be covered by private health plans, so seniors may actually receive better coverage.
Where are the reductions coming from? Right now, seniors are most likely to see reductions in coverage or coverage options if they’re enrolled in a Medicare Advantage program. New rules prevent health care insurance organizations from offering multiple plans that substantially duplicate each other. Instead, the number of Medicare Advantage plans will be reduced, as will some benefits.
This reduction in Medicare Advantage benefits is designed to equalize government spending on persons enrolled in traditional Medicare and those enrolled in Medicare Advantage programs. Seniors enrolled in Medicare Advantage plans may be able to keep some of their benefits (like vision, dental care and some preventative health benefits) by paying higher premiums than they have in the past.
The new regulations on Medicare Advantage plans will take effect January 1, 2011. Seniors who are enrolled in a Medicare Advantage plan that is being withdrawn must choose new Medicare coverage during the Open Enrollment period to maintain Medicare coverage.