What changes can you expect to Medicare?
By Congressman Joseph R. Pitts
Over the years, Medicare has offered relief to millions of seniors in need of health care. But in recent years, it has become obvious that Medicare simply cannot sustain the demands we are placing on it; reform is necessary.
On December 1, 2003, President Bush signed into law the first major overhaul of the Medicare program since its inception in 1965. This new law strengthens the current Medicare program, adds important new coverage for prescriptions and preventive benefits and brings in features of more modern insurance plans.
While not perfect, this bill made major changes to your Medicare coverage. There has been a lot of debate about what the bill is all about. It does not, as some suggest, cut your benefits or force into a health plan that you do not want.
It's important therefore, to give a clear picture of how this bill will effect your Medicare coverage.
Starting in June 2004, Medicare-approved discount cards will be offered to seniors offering a discount off the full retail price of prescriptions of 10-25% or more on many drugs.
Individuals with incomes less than $12,124 a year or married couples with incomes less than $16,363 may immediately qualify for $600 to help pay for prescription drugs.
Prescription Drug benefit
In 2006, the Prescription Drug Benefit will be added to Medicare. All people with Medicare will be able to enroll in plans that cover prescription drugs. Beneficiaries who choose to participate will pay a premium estimated of roughly $35 a month and there will be a $250 deductible.
Medicare will pay 75% of drug costs between the deductible and $2250. Medicare then pays 95% of drug cost above $5100.
The Prescription Drug Benefit includes additional assistance for people with low income and limited assets. Most significantly, people with Medicare who are also fully eligible for Medicaid with incomes below 100% of the federal poverty level (and with no separate asset test) will receive a full premium subsidy, full subsidy of deductible, and minimal co-pays.
Medicare + Choice
Other beneficiaries with low income and limited assets will receive premium and deductible assistance and have limited cost sharing.
In 2004, Medicare Advantage replaces the Medicare private health plan option known as Medicare + Choice. Changes made to the way Medicare pays these Medicare Advantage plans will help to ensure beneficiaries access to more health plan choices and better benefits.
In 2006, Medicare Advantage plan choices will be expanded to include regional preferred provider organization plans (PPOs). Regional PPOs will help ensure that beneficiaries in rural and urban areas have multiple choices of Medicare health coverage.
The only change in your Medigap coverage is that after 2006, when the Medicare drug benefit begins, you will no longer be able to purchase Medigap policies with drug coverage (currently known as H, I, and J policies), because prescription drug coverage will be available through Medicare. H, I, and J policies will still be available to you, minus the drug coverage component.
If you do not currently have drug coverage through Medigap, you will see no change in your Medigap coverage in 2006. If you have drug coverage through Medigap, you will be allowed to keep that coverage if they do not enroll in the new drug benefit.
If you enroll in the new prescription drug program, you will be able to keep your current Medigap coverage, adjusted to exclude prescription drugs, or you may choose an alternative Medigap policy offered by your current insurer.
PACE and PACENET
Pennsylvania is a model for developing programs to take care of low and middle income seniors and provide a prescription drug benefit through PACE and PACENET.
It is critically important that this law not affect your coverage from state programs, such as PACE and PACENET. This legislation contained language that protects state prescription assistance programs and coordinates your benefits with the new federal program.
Under this new law, federal funds will be made available to states to assist you in signing up for the federal program and understanding its provisions. Because this new law sets up the federal government as the "primary payer" of your Medicare prescription drug benefit, the bill allows states with prescription drug programs to save millions of dollars each year.
States like Pennsylvania are given money to educate PACE and PACENET beneficiaries. The bill allows PACE and PACENET beneficiaries to carry one prescription drug coverage card for both programs.
Health Savings Accounts
This law sets up Health Savings Accounts (HSAs) which will allow all working age employees and retirees to allocate a share of pre-tax dollars to a medical savings account. These savings are portable. So you can take them with you from job-to-job and into retirement.
Contributions can be made to your account by individuals, employers, and family members. And the money you pay into your HSA will be carried forward from year to year.
Total yearly contributions can be as large as your health insurance plan deductible, between $1,000 and $5,000 for self-coverage and $2,000 and $10,000 for family coverage.
Interest and investment earnings generated by the account are not taxable within the HSA.
Any distributions from the account will not be taxed as long as the money is used for qualified medical expenses including, but not limited to, prescription and over-the-counter drugs, long-term care services, and health-coverage purchases under COBRA policies.
The new HSA provision is effective for taxable years beginning after December 31, 2003. You should contact your bank or the IRS for more information on how to set this up.
Retiree Health Plans
In recent years, some employers have changed or even cut back on prescription drug coverage for their retired employees. This law contains incentives for employers to keep their coverage. Employers who provide a prescription drug benefit at least as good as the Medicare drug benefit will get a federal subsidy. This subsidy will help your former employer cover your drug costs as long as you do not sign up for the Medicare drug plan. You should contact Medciare and your insurance company for more information on their intentions.