Budget Cuts and Medicare Advantage: What Does This Mean to You?

So we’ve all heard the buzz that President Obama plans to make some health care changes. But what are those changes and how will they affect you? The following is a glimpse at the proposed changes and the projected monetary savings.

President Obama has made it no secret that he is not a fan of Medicare Advantage Plans. His Administration is expected to propose a cut in federal payments to insurers that run these plans. The proposal would call for the insurers to competitively bid to offer plans. The idea is that the government would pay them based on the bids. The way it stands right now, the government pays the insurers based on a formula, and on an average those payments have been 14% higher than what is typically spent per beneficiary. The projected savings over a 10 year period amounts to $177 billion. But many argue that seniors could lose benefits and experience higher costs due to insurers trying to protect profit margins.

President Obama is also proposing to set up a regulatory pathway for companies to create generic versions of biotechnology drugs that currently can’t be copied. The Administration hopes to make it more difficult for makers of traditional branded drugs to extend the patent-protected life of existing products. Additionally, upper-income seniors may pay more for Medicare drug plans just as they do for Medicare’s doctor plan.

The last proposal would bundle Medicare payments to cover a hospital stay plus patient care for the 30 days following the patient’s discharge. It is thought that this would standardize fees to create more stability to hospital pricing. Cutting payments for hospitals that routinely readmit discharged patients is also on the Administration’s agenda. They believe that this proposal will save $8.4 billion over the next 10 years.

So there you have it. Simple right? Probably not so much. Could President Obama’s proposals really work the way he hopes they will? It’s hard to say just how effective a plan of this magnitude could be. Maybe this is the answer to our growing health care crisis…or maybe not.