Health Reform and Medicare: Overview of Key Provisions

1. Health Reform and Medicare:Overview of Key Provisions Tricia Neuman, Sc.D. Vice President and Director, Medicare Policy Project Kaiser Family Foundation For KaiserEDU.org Hello. I am Tricia Neuman, a Vice President of the Kaiser Family Foundation and Director of the foundation’s Medicare Policy Project. In this tutorial, I will review the role of Medicare in the Patient Protection and Affordable Care Act of 2010 – which I will refer to as the 2010 health reform law. During the debate over health reform, there was a lot of discussion about expanding coverage to the uninsured and controlling costs. Although Medicare was not a primary focus of the health reform law, it ultimately played a key role. In this tutorial, I’ll review the main Medicare provisions included in the 2010 health reform law, and discuss potential implications for Medicare beneficiaries. Hello. I am Tricia Neuman, a Vice President of the Kaiser Family Foundation and Director of the foundation’s Medicare Policy Project. In this tutorial, I will review the role of Medicare in the Patient Protection and Affordable Care Act of 2010 – which I will refer to as the 2010 health reform law. During the debate over health reform, there was a lot of discussion about expanding coverage to the uninsured and controlling costs. Although Medicare was not a primary focus of the health reform law, it ultimately played a key role. In this tutorial, I’ll review the main Medicare provisions included in the 2010 health reform law, and discuss potential implications for Medicare beneficiaries.

2. Medicare’s Role Today Medicare covers 47 million Medicare beneficiaries 39 million seniors and 8 million people under-65 receiving Social Security Disability Insurance payments because of permanent disabilities Individuals entitled to Medicare without regard to medical history or income Medicare is a critical part of policy discussions related to the federal budget 12 percent of federal spending Medicare is a major player in the US health care system 23 percent of national personal health care spending Though not initially a primary focus, Medicare played a key role in 2010 health reform law Before getting into specific provisions of the health reform law, let’s step back for a moment and take a broader look at Medicare – the federal program that provides health insurance coverage to 47 million people. Today, Medicare covers 39 million seniors ages 65 and older and another 8 million younger beneficiaries who qualify for Medicare because they are permanently disabled and receive Social Security Disability Insurance payments. Medicare accounts for 12 percent of the federal budget so plays a critical role in policy discussions that relate to the federal budget, as it did in the health reform debate. Medicare accounts for 23 percent of national personal health expenditures, so is an essential component of efforts to reform the nation’s health care system. Thus, Medicare ultimately played a key role in the 2010 health reform legislation .Before getting into specific provisions of the health reform law, let’s step back for a moment and take a broader look at Medicare – the federal program that provides health insurance coverage to 47 million people. Today, Medicare covers 39 million seniors ages 65 and older and another 8 million younger beneficiaries who qualify for Medicare because they are permanently disabled and receive Social Security Disability Insurance payments. Medicare accounts for 12 percent of the federal budget so plays a critical role in policy discussions that relate to the federal budget, as it did in the health reform debate. Medicare accounts for 23 percent of national personal health expenditures, so is an essential component of efforts to reform the nation’s health care system. Thus, Medicare ultimately played a key role in the 2010 health reform legislation .

3. The A, B, C’s and D’s of Medicare Part A: Inpatient hospital care Up to 100 days of skilled nursing facility care Hospice care Limited home health services post-hospital Funded by payroll tax that is deposited into the Hospital Insurance Trust Fund Part B: Physician services Outpatient hospital care Preventive services, such as mammography screening Mental health services Home health X-rays and other diagnostic procedures Durable medical equipment Financed by premiums and general revenues Medicare is divided is organized into four parts. Part A covers inpatient hospital care, up to 100 days of skilled nursing facility care, home health visits following hospitalizations and hospice care. Employees and employers pay 1.45 percent of earnings , so individuals and their spouses will be entitled to Medicare Part A benefits when they are eligible, typically at age 65. Funds collected from the payroll tax are deposited into the Medicare Hospital Insurance Trust Fund. Part B pays for physician servicies, outpatient hospital care, preventive services, such as mammography screening, mental health services and home health, xrays and other diagnostic procedures, and durable medical equipment, such as wheelchairs. Part B is financed mainly by monthly premiums paid by people on Medicare and by general revenues from the federal government. Medicare is divided is organized into four parts. Part A covers inpatient hospital care, up to 100 days of skilled nursing facility care, home health visits following hospitalizations and hospice care. Employees and employers pay 1.45 percent of earnings , so individuals and their spouses will be entitled to Medicare Part A benefits when they are eligible, typically at age 65. Funds collected from the payroll tax are deposited into the Medicare Hospital Insurance Trust Fund. Part B pays for physician servicies, outpatient hospital care, preventive services, such as mammography screening, mental health services and home health, xrays and other diagnostic procedures, and durable medical equipment, such as wheelchairs. Part B is financed mainly by monthly premiums paid by people on Medicare and by general revenues from the federal government.

4. The A, B, C’s and D’s of Medicare (cont’d) Part C Now called Medicare Advantage Beneficiaries may choose to enroll in a private plan, such as an HMO or PPO, to receive Medicare-covered benefits Medicare pays a fee to the insurers that sponsor these plans; plans provide benefits covered under Parts A and B, and often Part D. Part D Helps pay for outpatient prescription drugs Benefits provided by private plans that contract with Medicare Two types of plan: stand-alone prescription drug plans and Medicare Advantage plans Funded by premiums, general revenues and state payments. Part C, now called Medicare Advantage, provides Medicare-covered benefits through private plans, such as HMOs and PPOs. The government pays private insurers a fixed among of money to provide benefits covered under Parts A and B, and often Part D to enrollees. Part C is not separately financed Part D – the newest part of the program – helps pay for prescription drugs. To receive these prescription dru g benefits, beneficiaries must enroll in a private plan – either a stand-alone Medicare prescription drug plan or a Medicare Advantage prescription drug plan. Part D is funded by premiums paid by enrollees, general revenues paid by the federal government, and state payments. Each part of the program was affected by provisions of the 2010 health reform legislation. Part C, now called Medicare Advantage, provides Medicare-covered benefits through private plans, such as HMOs and PPOs. The government pays private insurers a fixed among of money to provide benefits covered under Parts A and B, and often Part D to enrollees. Part C is not separately financed Part D – the newest part of the program – helps pay for prescription drugs. To receive these prescription dru g benefits, beneficiaries must enroll in a private plan – either a stand-alone Medicare prescription drug plan or a Medicare Advantage prescription drug plan. Part D is funded by premiums paid by enrollees, general revenues paid by the federal government, and state payments. Each part of the program was affected by provisions of the 2010 health reform legislation.

5. The health reform law includes numerous Medicare provisions. Some increase Medicare spending to improve benefits and coverage. Other provisions reduce the growth in Medicare spending to help the program operate more efficiently and help fund coverage expansions to the uninsured in the underlying health reform legislation. Other provisions are designed to improve the delivery of care and quality of care. I’ll now discuss the key Medicare provisions in the health reform law – starting benefit improvements - always more popular than provisions that reduce spending! The law includes more than $100 billion in new Medicare spending over the next ten years. The largest component of spending improves the Medicare prescription drug benefit over time, which I will describe later. The law also improves coverage of prevention services. Beginning 2011, Medicare will cover a new annual wellness visit with a personalized prevention plan and will no longer require people on Medicare to pay deductibles or coinsurance for preventive services that receive an A or B grade from the US Prevention Services Task Force. The law also increases spending somewhat for primary care services – an effort that begins to address a long standing concern that Medicare pays inadequately for primary care.The health reform law includes numerous Medicare provisions. Some increase Medicare spending to improve benefits and coverage. Other provisions reduce the growth in Medicare spending to help the program operate more efficiently and help fund coverage expansions to the uninsured in the underlying health reform legislation. Other provisions are designed to improve the delivery of care and quality of care. I’ll now discuss the key Medicare provisions in the health reform law – starting benefit improvements - always more popular than provisions that reduce spending! The law includes more than $100 billion in new Medicare spending over the next ten years. The largest component of spending improves the Medicare prescription drug benefit over time, which I will describe later. The law also improves coverage of prevention services. Beginning 2011, Medicare will cover a new annual wellness visit with a personalized prevention plan and will no longer require people on Medicare to pay deductibles or coinsurance for preventive services that receive an A or B grade from the US Prevention Services Task Force. The law also increases spending somewhat for primary care services – an effort that begins to address a long standing concern that Medicare pays inadequately for primary care.

6. The 2010 law improves prescription drug coverage under Medicare Part D by gradually closing the coverage gap, sometimes called the doughnut hole. Under prior law, the standard Part D benefit had a somewhat unusual design. After an initial benefit period, in which enrollees pay25% of their total drug costs, they are required to pay the full cost - 100 percent of their total drug costs - once they reach the gap, until their expenses reached a level to qualify for catastrophic coverage. This coverage gap has proven to be a serious concern for Medicare beneficiaries in Part D plans. A study by the Kaiser Family Foundation shows that an estimated 3.4 million people on Medicare reached the coverage gap, and many of those who reach the gap, including those with serious chronic conditions like diabetes and depression, stop taking their medications or skip doses because they cannot afford the full cost of their prescriptions. The health reform law addresses this concern by phasing in coverage in the gap – beginning with a $250 rebate for enrollees with any spending in the coverage gap in 2010. The 2010 law improves prescription drug coverage under Medicare Part D by gradually closing the coverage gap, sometimes called the doughnut hole. Under prior law, the standard Part D benefit had a somewhat unusual design. After an initial benefit period, in which enrollees pay25% of their total drug costs, they are required to pay the full cost - 100 percent of their total drug costs - once they reach the gap, until their expenses reached a level to qualify for catastrophic coverage. This coverage gap has proven to be a serious concern for Medicare beneficiaries in Part D plans. A study by the Kaiser Family Foundation shows that an estimated 3.4 million people on Medicare reached the coverage gap, and many of those who reach the gap, including those with serious chronic conditions like diabetes and depression, stop taking their medications or skip doses because they cannot afford the full cost of their prescriptions. The health reform law addresses this concern by phasing in coverage in the gap – beginning with a $250 rebate for enrollees with any spending in the coverage gap in 2010.

7. As you can see in this illustration of the standard Medicare drug benefit - before and after full implementation, the health reform law substantially reduces enrollees cost-sharing requirements . Without health reform, individuals enrolled in Part D plans are required to pay 100% of total drugs costs in the gap. But, as a result of the legislation, the gap is essentially eliminated by 2020. Between 2011 and 2020, Medicare will phase in coverage of generic drugs in the gap so that by 2020, Medicare will pay 75 percent of the total cost of generic coverage in the gap. Coverage of brand-name drugs improves in two ways. First, beginning in 2011, manufacturers will provide a permanent 50 percent reduction on the total cost of brand-name drugs in the gap – effectively reducing the enrollees’ liability in half for the most expensive drugs. Then, beginning in 2013, Medicare will phase in additional coverage for brand-name drugs. Thus by 2020, enrollees pay 25% on both brands and generics until they qualify for catastrophic coverage, based on the standard benefit design. In addition, the law also reduces the out-of-pocket threshold between 2014 and 2019 making it easier for enrollees to qualify for catastrophic coverage than under prior law. As you can see in this illustration of the standard Medicare drug benefit - before and after full implementation, the health reform law substantially reduces enrollees cost-sharing requirements . Without health reform, individuals enrolled in Part D plans are required to pay 100% of total drugs costs in the gap. But, as a result of the legislation, the gap is essentially eliminated by 2020. Between 2011 and 2020, Medicare will phase in coverage of generic drugs in the gap so that by 2020, Medicare will pay 75 percent of the total cost of generic coverage in the gap. Coverage of brand-name drugs improves in two ways. First, beginning in 2011, manufacturers will provide a permanent 50 percent reduction on the total cost of brand-name drugs in the gap – effectively reducing the enrollees’ liability in half for the most expensive drugs. Then, beginning in 2013, Medicare will phase in additional coverage for brand-name drugs. Thus by 2020, enrollees pay 25% on both brands and generics until they qualify for catastrophic coverage, based on the standard benefit design. In addition, the law also reduces the out-of-pocket threshold between 2014 and 2019 making it easier for enrollees to qualify for catastrophic coverage than under prior law.

8. Of course, the health reform law also includes reduces the growth in Medicare spending by more than $500 billion over ten years, according to Congressional Budget Office estimates. The largest component of these savings – about 40 percent or nearly $220 billion – comes from reducing annual increases in payments that many health care providers would otherwise receive from Medicare, and other reductions in provider payments. This affects, for example, hospitals, skilled nursing facilities and home health agencies. Another major component of the savings – 25 percent of $136 billion – comes from reduction in payments to Medicare Advantage plans which I will describe in more detail in a moment. Other provisions that achieve savings include increases in premiums for higher-income Medicare beneficiaries, a new board tasked with reducing Medicare spending to keep expenditures below defined targets, and other delivery system reforms. Of course, the health reform law also includes reduces the growth in Medicare spending by more than $500 billion over ten years, according to Congressional Budget Office estimates. The largest component of these savings – about 40 percent or nearly $220 billion – comes from reducing annual increases in payments that many health care providers would otherwise receive from Medicare, and other reductions in provider payments. This affects, for example, hospitals, skilled nursing facilities and home health agencies. Another major component of the savings – 25 percent of $136 billion – comes from reduction in payments to Medicare Advantage plans which I will describe in more detail in a moment. Other provisions that achieve savings include increases in premiums for higher-income Medicare beneficiaries, a new board tasked with reducing Medicare spending to keep expenditures below defined targets, and other delivery system reforms.

9. Beneficiaries have choice of fee-for-service “original” Medicare or can enroll in a Medicare Advantage (MA) plan (such as HMOs and PPOs) Medicare Advantage plans are paid a fixed amount per enrollee But more than it would pay under traditional Medicare Relatively high payment to plans has resulted in an increase in plan availability and enrollment “Overpayments” to plans shorten the life of the Part A Trust Fund and increase Part B premiums Thus, an issue during the health reform debate One issue that received considerable attention during the health reform debate relates to Medicare payments to private insurers that offer Medicare Advantage plans. Today, beneficiaries have a choice of the traditional FFS Medicare program or can enroll in a private plan that receives payments from Medicare for every enrollee. Over the past several years, Congress has increased payments to Medicare Advantage plans to encourage more plan participation and enrollment. These relatively high payments allowed plans to offer extra benefits to enrollees which in turn attracted a growing number of beneficiaries to Medicare Advantage plans – in fact a doubling in enrollment between 2004 and 2010. Today, 25 percent of all Medicare beneficiaries are enrolled in a Medicare Advantage plan. However, as a result of this payment system, Medicare pays more for beneficiaries who enroll in MA plans than it pays for beneficiaries in traditional Medicare – increasing costs to the Medicare program. The overpayments also contribute to Medicare’s fiscal problems, shortening the life of the Medicare Trust Fund and increasing premiums paid by all beneficiaries. Thus Medicare Advantage payment reform emerged as a critical issue during the health reform debate.One issue that received considerable attention during the health reform debate relates to Medicare payments to private insurers that offer Medicare Advantage plans. Today, beneficiaries have a choice of the traditional FFS Medicare program or can enroll in a private plan that receives payments from Medicare for every enrollee. Over the past several years, Congress has increased payments to Medicare Advantage plans to encourage more plan participation and enrollment. These relatively high payments allowed plans to offer extra benefits to enrollees which in turn attracted a growing number of beneficiaries to Medicare Advantage plans – in fact a doubling in enrollment between 2004 and 2010. Today, 25 percent of all Medicare beneficiaries are enrolled in a Medicare Advantage plan. However, as a result of this payment system, Medicare pays more for beneficiaries who enroll in MA plans than it pays for beneficiaries in traditional Medicare – increasing costs to the Medicare program. The overpayments also contribute to Medicare’s fiscal problems, shortening the life of the Medicare Trust Fund and increasing premiums paid by all beneficiaries. Thus Medicare Advantage payment reform emerged as a critical issue during the health reform debate.

10. Key Provisions Freezes benchmarks for 2011; phases in reductions, based on FFS costs in county Reduces plan’s share of rebate from 75% to 50% for most plans (2012) Provides new bonus and higher rebates to plans receiving high quality ratings (2012) Impact on Beneficiaries Fewer enrollees (CBO) Fewer extra benefits (CBO) Possibly fewer plans The health reform law made a number of changes to Medicare payment policy for Medicare Advantage plans. Over a ten year period, these provisions reduce Medicare spending by an estimated $136 billion over ten years. Under the payment system in place prior to the health reform law, Medicare sets a maximum payment per county, known as the benchmark. If plans submit a “bid” to Medicare that is below the benchmark, they were permitted to keep 75 percent of the difference between their bid and the Medicare maximum. This is called the “rebate”. The health reform law freezes the maximum payments, or benchmarks, that Medicare will pay Medicare Advantage plans in 2011. Beginning in 2012, the law phases in reductions in payments that will vary based on average medicare costs in the county. In addition, Medicare will keep a larger share of the difference between the plan’s bid and the county level benchmark, reducing the amount that plans were previously able to keep, called the “rebate”. Notably, the law also includes a new system of bonus payments to plans, based on a 5-star quality rating system. This represents the first time Medicare has used a quality rating system for bonus payments. How these payment changes will affect beneficiaries remains to be seen – but is expected to vary across the country. The Congressional Budget Office projects the law will result in fewer enrollees in Medicare Advantage plans, and fewer extra benefits for Medicare Advantage enrollees, on average. It is also possible that the number of plans available to beneficiaries will decline – which may or may not be a concern. On average, Medicare beneficiaries have 30 plans available to them in 2010. The health reform law made a number of changes to Medicare payment policy for Medicare Advantage plans. Over a ten year period, these provisions reduce Medicare spending by an estimated $136 billion over ten years. Under the payment system in place prior to the health reform law, Medicare sets a maximum payment per county, known as the benchmark. If plans submit a “bid” to Medicare that is below the benchmark, they were permitted to keep 75 percent of the difference between their bid and the Medicare maximum. This is called the “rebate”. The health reform law freezes the maximum payments, or benchmarks, that Medicare will pay Medicare Advantage plans in 2011. Beginning in 2012, the law phases in reductions in payments that will vary based on average medicare costs in the county. In addition, Medicare will keep a larger share of the difference between the plan’s bid and the county level benchmark, reducing the amount that plans were previously able to keep, called the “rebate”. Notably, the law also includes a new system of bonus payments to plans, based on a 5-star quality rating system. This represents the first time Medicare has used a quality rating system for bonus payments. How these payment changes will affect beneficiaries remains to be seen – but is expected to vary across the country. The Congressional Budget Office projects the law will result in fewer enrollees in Medicare Advantage plans, and fewer extra benefits for Medicare Advantage enrollees, on average. It is also possible that the number of plans available to beneficiaries will decline – which may or may not be a concern. On average, Medicare beneficiaries have 30 plans available to them in 2010.

11. Numerous delivery system, quality and payment reforms Federal Coordinated Health Care Office in CMS for dual eligibles (2010) New Center for Medicare and Medicaid Innovations (2011) Shared Savings/Accountable Health Organizations (2012) Reduces payments for preventable hospitalizations (2012) Independents at Home demonstration project with shared savings (2012) Value-based purchasing for hospitals (2012) National pilot to bundle payments for hospital and post-acute care (2013) Reduces payments for hospital-acquired conditions (2015) Establishes mandatory physician quality reporting program (2015) The CBO estimates that these initiatives will reduce Medicare spending by $12 billion over ten years As the health reform legislation was being debated, policy makers expressed considerable interest in reforms that would improve the delivery of care under Medicare – addressing long-standing concerns about the fragmentation of care, excess costs due to preventable hospital readmissions and a strong interest in improving the coordination of care for high cost , chronically ill beneficiaries, and for low-income beneficiaries who are covered under both Medicare and Medicaid, known as dual eligibles. To achieve these goals, the health reform law includes a new Federal Coordinated Health Care Office in CMS for dual eligibles and A New Center for Medicare and Medicaid Innovations to move forward with delivery system and payment reforms. The law also launches several new initatives – some of which are listed on this slide - to improve the quality of care for patients discharged from the hospital – including for example, provisions to reduce payments for preventable hospitalizations, create a national pilot program to bundle post acute care, and reduce payments for hospital-acquired conditions. The Congressional Budget Office estimates these initiatives will reduce Medicare spending by $12 billion over ten years.As the health reform legislation was being debated, policy makers expressed considerable interest in reforms that would improve the delivery of care under Medicare – addressing long-standing concerns about the fragmentation of care, excess costs due to preventable hospital readmissions and a strong interest in improving the coordination of care for high cost , chronically ill beneficiaries, and for low-income beneficiaries who are covered under both Medicare and Medicaid, known as dual eligibles. To achieve these goals, the health reform law includes a new Federal Coordinated Health Care Office in CMS for dual eligibles and A New Center for Medicare and Medicaid Innovations to move forward with delivery system and payment reforms. The law also launches several new initatives – some of which are listed on this slide - to improve the quality of care for patients discharged from the hospital – including for example, provisions to reduce payments for preventable hospitalizations, create a national pilot program to bundle post acute care, and reduce payments for hospital-acquired conditions. The Congressional Budget Office estimates these initiatives will reduce Medicare spending by $12 billion over ten years.

12. Independent Payment Advisory Board with unprecedented authority to recommend reductions in Medicare spending Creates new board with 15 full-time members, appointed by President, confirmed by U.S. Senate Requires the board to recommend specific Medicare savings proposals if Medicare spending exceeds target growth rates Requires the HHS Secretary to implement board’s recommended proposals , unless Congress enacts an alternative with equivalent savings Prohibits board from recommending proposals that would ration care, reduce benefits, increase cost-sharing, or modify benefits, eligibility, premiums, or raise taxes, or reduce payments for certain providers (before 2018) Requires board to make recommendations to slow the growth in health care spending outside of Medicare – though these recommendations are not binding CBO projects the Board will achieve Medicare savings of $15.5 b (2015-2019) Concerns about the potential effect of the overall health reform law on national health care spending and the federal budget was a hot-button issue leading up to enactment. To help address this concern, the law includes a new Independent Payment Advisory Board with unprecedented authority to recommend changes in Medicare spending to achieve specified spending targets that are defined in the law, with 15 full-time members, appointed by President, confirmed by U.S. Senate, with unprecedented authority to recommend reductions in Medicare spending. The board is required to recommend specific Medicare savings proposals if Medicare spending exceeds target growth rates – based on inflation initially and then on the growth in the economy. The Secretary of the Department of Health and Human Services is required to implement the board’s recommendations, unless Congress enacts an alternative with equivalent savings. The board is prohibited from recommending proposals that would ration care, reduce benefits, increase cost-sharing, or modify benefits, eligibility, premiums, or raise taxes, or reduce payments for certain providers (before 2018) CBO projects the Board will achieve Medicare savings of $15.5 b (2015-2019) Concerns about the potential effect of the overall health reform law on national health care spending and the federal budget was a hot-button issue leading up to enactment. To help address this concern, the law includes a new Independent Payment Advisory Board with unprecedented authority to recommend changes in Medicare spending to achieve specified spending targets that are defined in the law, with 15 full-time members, appointed by President, confirmed by U.S. Senate, with unprecedented authority to recommend reductions in Medicare spending. The board is required to recommend specific Medicare savings proposals if Medicare spending exceeds target growth rates – based on inflation initially and then on the growth in the economy. The Secretary of the Department of Health and Human Services is required to implement the board’s recommendations, unless Congress enacts an alternative with equivalent savings. The board is prohibited from recommending proposals that would ration care, reduce benefits, increase cost-sharing, or modify benefits, eligibility, premiums, or raise taxes, or reduce payments for certain providers (before 2018) CBO projects the Board will achieve Medicare savings of $15.5 b (2015-2019)

13. New Medicare-related revenue sources in the health reform law Medicare savings attained through increases in premiums paid by higher income Medicare beneficiaries under Parts B and D. Freezes income threshold for Part B premium at $85,000/individuals and $170,000/couples; income thresholds will no longer be indexed for inflation (2011) Establishes new income-related Part D premium, with same, fixed income thresholds as Part B (2011) Increases the Medicare Part A tax from 1.45% to 2.35% on earnings over $200,000/individuals and $250,000/couples (2013) Medicare savings in the health reform law are also achieved through increases in premiums paid by higher income Medicare beneficiaries under Parts B and Part D. Under prior law, Medicare beneficiaries in Part B with incomes above $85,000 for individuals and $170,000 for couples are subject to an income related premium – which means they pay a larger share of the Part B premium than other beneficiaries. Previously, the income thresholds were indexed annually so that a constant share of beneficiaries - about 5 percent - would be subject to the higher premium over time. The health reform law freezes the income thresholds at 2010 levels, which means a growing share of Medicare beneficiaries will pay the higher Part B premium over time. A new income-related premium is also imposed on higher income enrollees in Part D plans. And, in addition, the law raises revenues by increasing the Medicare Hospital Insurance Payroll tax on earnings above $200k for individuals and $250k for couples. These revenues are deposited into the Part A Hospital Insurance Trust Fund – which helps keep the trust fund solvent for longer. Medicare savings in the health reform law are also achieved through increases in premiums paid by higher income Medicare beneficiaries under Parts B and Part D. Under prior law, Medicare beneficiaries in Part B with incomes above $85,000 for individuals and $170,000 for couples are subject to an income related premium – which means they pay a larger share of the Part B premium than other beneficiaries. Previously, the income thresholds were indexed annually so that a constant share of beneficiaries - about 5 percent - would be subject to the higher premium over time. The health reform law freezes the income thresholds at 2010 levels, which means a growing share of Medicare beneficiaries will pay the higher Part B premium over time. A new income-related premium is also imposed on higher income enrollees in Part D plans. And, in addition, the law raises revenues by increasing the Medicare Hospital Insurance Payroll tax on earnings above $200k for individuals and $250k for couples. These revenues are deposited into the Part A Hospital Insurance Trust Fund – which helps keep the trust fund solvent for longer.

14. Medicare Part A Trust Fund One unanticipated and positive outcome of the health reform legislation is the improved fiscal status of the Medicare Hospital Insurance Trust Fund. Prior to enactment of the health reform law, the Medicare Trust Fund was projected to be exhausted by 2017. This means the trust fund would have insufficient funds to pay for all hospital and other Part A claims submitted on behalf of beneficiaries that year. As a result of the Medicare savings provisions, and new Medicare payroll tax provision, the trust fund will be solvent until 2029 – a significant improvement. One unanticipated and positive outcome of the health reform legislation is the improved fiscal status of the Medicare Hospital Insurance Trust Fund. Prior to enactment of the health reform law, the Medicare Trust Fund was projected to be exhausted by 2017. This means the trust fund would have insufficient funds to pay for all hospital and other Part A claims submitted on behalf of beneficiaries that year. As a result of the Medicare savings provisions, and new Medicare payroll tax provision, the trust fund will be solvent until 2029 – a significant improvement.

15. With ongoing concern about the growth in Medicare spending, this exhibit confirms that the health reform law is projected to significantly reduce the growth in Medicare spending over the next decade. By 2015, Medicare spending is expected to be $50 billion less than it would have been in the absence of the health reform law. By 2019, Medicare spending is projected to be $100 billion less than it would have been without health reform. Or, on a per capita basis, the annual growth in Medicare spending over a ten year period is projected to decline from 6.8 percent pre health reform to 5.5 percent after health reform. With ongoing concern about the growth in Medicare spending, this exhibit confirms that the health reform law is projected to significantly reduce the growth in Medicare spending over the next decade. By 2015, Medicare spending is expected to be $50 billion less than it would have been in the absence of the health reform law. By 2019, Medicare spending is projected to be $100 billion less than it would have been without health reform. Or, on a per capita basis, the annual growth in Medicare spending over a ten year period is projected to decline from 6.8 percent pre health reform to 5.5 percent after health reform.

16. Future Challenges Assessing the implications of Medicare provisions in the 2010 health reform law for seniors and people with disabilities on an ongoing basis Maintaining and improving access to care, and quality of care, in the face of pressure to constrain the growth in Medicare spending Assuring health care is affordable to people on Medicare, particularly those with modest incomes and serious health needs ******* Although the health reform legislation was not primarily about Medicare, in the end, the legislation included a number of provisions that affect virtually every part of the program – including benefits, provider payments, plans payments, premiums, delivery system and quality improvements, and financing. Over time, it will be important to monitor the effects of these Medicare savings provisions to assess the extent to which reductions in spending impact patients’ access to care, or the quality of services they receive. Other challenges include maintaining and improving access to care, and quality of care for beneficiaries, in the face of pressure to constrain the growth in Medicare spending.; and assuring the affordability of health care, particularly for those with modest incomes and serious health care needs. Thank you. I hope this tutorial helps provide a better understanding of Medicare ‘s role in the 2010 health reform law. If you would like to learn more information, please go the Kaiser Family Foundation website. Although the health reform legislation was not primarily about Medicare, in the end, the legislation included a number of provisions that affect virtually every part of the program – including benefits, provider payments, plans payments, premiums, delivery system and quality improvements, and financing. Over time, it will be important to monitor the effects of these Medicare savings provisions to assess the extent to which reductions in spending impact patients’ access to care, or the quality of services they receive. Other challenges include maintaining and improving access to care, and quality of care for beneficiaries, in the face of pressure to constrain the growth in Medicare spending.; and assuring the affordability of health care, particularly for those with modest incomes and serious health care needs. Thank you. I hope this tutorial helps provide a better understanding of Medicare ‘s role in the 2010 health reform law. If you would like to learn more information, please go the Kaiser Family Foundation website.