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Planning Solutions to Protect Your Investments and Your Family

Andrea A.J. Witt, Esq.
November 2016

The campaign promise to repeal the Affordable Care Act is looming as January approaches, and monumental changes to Medicare may be on the horizon as well. Medicare is a government run health care system relied on by those 65 or older, and the disabled. Seniors and people approaching retirement should pay careful attention, as their plans for income and savings may be affected.

House Speaker Paul Ryan first proposed changes to Medicare in a budget blueprint in 2011. His plan, known as premium support, has been denounced by democrats since its inception as an attempt to "voucherizer" or privatize Medicare. Tom Price, nominated Secretary of Health and Human Services, the agency that oversees Medicare, has long been a supporter of Ryan’s plan, and has stated that Medicare reform is a top priority.

The concept of premium support envisions the traditional fee-for-service Medicare program to compete directly with plans offered by private insurance companies, such as Blue Cross Blue Shield. Seniors could opt out of traditional Medicare by purchasing health insurance from their choice of several competing providers and plans and the federal government would contribute the same basic amount to each beneficiary (likely the amount would differ according to general geographic regions.)

Medicare, currently a single payer system in which the government guarantees and directly pays for beneficiaries’ health care, would become a system in which a beneficiary uses the set financial benefit provided by the government to purchase their own private health insurance. If a beneficiary chooses a costlier health insurance plan, they would face a higher out-of-pocket premium. On the flip side, those selecting plans that cost less than the federal contribution would receive a rebate.

Democrats fear premium support would gut Medicare, created and relied on by seniors and the disabled since its creation in 1965. Representative Nancy Pelosi has stated the premium support plan would "shatter the sacred guarantee that has protected generations of seniors." Critics contend that seniors would no longer be able to rely on basic health care as they know it, but instead would be forced to navigate a sea of complicated options between health insurance providers and plans. Private health insurance options are universally confusing for anyone to understand – doctors move in and out of networks frequently often without notice to their patients, and copayments vary throughout any individual plan and are impossible to remember and when deciding upon care.

Critics also fear that healthy, affluent seniors would choose to purchase plans from private insurance companies offering additional benefits. Medicare would be left with seniors who are sicker and therefore more expensive to treat, and in short order premiums would rise dramatically for those least likely to be able to be to afford the increase.

Republicans argue that Medicare is going broke and that absent significant change, seniors and the disabled will soon be without health coverage entirely. Supporters of a premium support plan contend that competition will drive down cost, and reign in unnecessary spending, resulting in generous plans offering extra benefits with lower premiums.

Seniors are understandably afraid that changes will affect them immediately, and their income and savings will be insufficient to cover their growing costs. Republicans claim their plans would only apply to future Medicare beneficiaries, and to those who are currently 55 years old and younger. Regardless, if any of the proposed changes become reality, Americans of all ages will have to refigure their projected spending and future savings.

The future of Medicare remains uncertain, but seniors and the disabled should be aware that the Republican congress led by Speaker Ryan who has long championed Medicare reform, bolstered by the president-elect, may finally have the opportunity of significant change for which they have been waiting.

The counseling and guidance we provide retiring, disabled and elderly individuals and families on traditional Medicare Plans, Medicare Advantage and private Medicare supplement plans is about to get much more complicated.

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