Consumers in 19 States Face Double-Digit Rate Hikes Under Obamacare

Consumers in 19 states will see increases to their health insurance rates in the double digits for 2017, according to publicly available data filed with state insurance regulators.

Since June, insurance companies have been submitting proposed rate requests to state Departments of Insurance for the 2017 plan year. The U.S. Department of Health and Human Services also has to approve rates for insurers selling on Obamacare’s exchanges.

States are now in the process of reviewing those requests and ultimately deciding whether to approve or alter the insurers’ proposals for next year.

Many insurance companies, like Highmark Blue Cross Blue Shield of Delaware and Aetna in Delaware, have attributed their proposed double-digit rate hikes to the end of the federal transitional reinsurance program and high medical costs from their customers.

The reinsurance program, one of three implemented under the Affordable Care Act, was designed to transfer risk among insurers. The program expires at the end of the year, and insurers have said it’s end alone will cause premiums to rise.

Others, meanwhile, have decided to pull out of Obamacare’s exchanges altogether after losing money in 2015.

UnitedHealthcare was the first to do so, and the nation’s largest health insurer announced earlier this year that it will no longer sell coverage on exchanges in 34 states.

Aetna became the latest insurer to announce it, too, will be leaving the exchanges. The company announced last week that it will no longer sell coverage on exchanges in 11 states, leaving 167,600 customers to purchase new coverage for next year.

The company will continue to sell on exchanges in Delaware, Iowa, Nebraska, and Virginia.

In more than a dozen states, insurance companies have requested double-digit rate increases for next year.

Rate hikes range from a high of 62.1 percent from Blue Cross and Blue Shield of Montana to a low of 8 percent from Evergreen Health in Maryland.

Evergreen Health was one of 23 co-ops, or consumer operated and oriented plans, that started under Obamacare. Since the first open enrollment period in the fall of 2013, 16 co-ops have since failed.

See how rates in your state could change next year below.

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5 States, Nearly 700 Counties Don’t See ‘Choice and Competition’ Promised by Obamacare

Five states will be down to just one health insurer on the Obamacare marketplace next year, and consumers in 664 counties are projected to face that same situation under a law sold as providing “choice and competition.”

The five states that will have no choice are Alabama, Alaska, Oklahoma, South Carolina, and Wyoming.

Two more states, North Carolina and Kansas, are close to having only one Obamacare insurer, health policy experts note.

Alabama will be down to a single insurance company next year because Humana and UnitedHealthcare announced their departure. Aetna and UnitedHealthcare exited South Carolina. UnitedHealthcare also departed Oklahoma.

Moda Health announced it would leave Alaska, while WINhealth in Wyoming closed its doors in 2015.

Projections show residents in 664 of the more than 3,000 counties in the United States will have only one company from which to buy individual insurance next year. That’s up from 225 “monopoly”  counties this year.

Residents of 1,121 counties—more than a third of all counties—will have two or fewer companies to choose from, according to the Kaiser Family Foundation, a health care research group.

160823_ObamacareCompete_BY-THE-NUMBERS_CHART1_v2The situation actually looks worse, though.

The Kaiser Family Foundation’s analysis was done before Aetna announced this month it was exiting the Obamacare exchanges in 536 counties, and before Humana announced in June that it would pull out of the Obamacare exchange in 1,351 counties.

“Unless there are major changes, the marketplace is not going to grow,” @Heritage’s Ed Haislmaier says.

Kaiser has not updated the estimate, and a spokesman said he wasn’t sure whether the estimate anticipated these companies exiting.

In April, UnitedHealthcare announced it would leave most of the 34 states where it previously operated.

A Drain on Rural America

Of the 664 counties expected to have only one insurer under Obamacare, 70 percent are considered rural. The mass exit from the program is hitting rural America the hardest, in particular parts of Kentucky, Tennessee, Mississippi, Arizona, and Oklahoma, The Wall Street Journal reported.

Of states with only one insurance company participating in Obamacare, South Carolina took the biggest hit. In 2013, it had nine companies selling individual insurance policies.

Oklahoma residents could choose from eight companies in 2013 before the health care law established the Obamacare marketplace and exchanges.

Wyoming consumers had five choices before the opening of the Obamacare marketplace, while Alabama and Alaska consumers had four to choose from, according to a Heritage Foundation analysis.

In North Carolina and Kansas, only the Raleigh-Durham and Kansas City areas, respectively, offer competition under Obamacare, said Ed Haislmaier, senior research fellow for health policy studies at The Heritage Foundation.

Speaking before a joint session of Congress in September 2009, President Barack Obama made a pitch for Obamacare by declaring:  “My guiding principle is, and always has been, that consumers do better when there is choice and competition.”

In June 2013, the year that saw the start of Obamacare’s federal marketplace and state exchanges for individual policies, the president said: “You now have these marketplaces where they’re going to offer you a better deal because of choice and competition.”

‘A Dysfunctional Market’

Both the law and its implementation created problems, Heritage’s Haislmaier said.

“The underlying reason is basically a dysfunctional market and a policy made worse through implementation,” Haislmaier told The Daily Signal in a phone interview. “Unless there are major changes, the marketplace is not going to grow, it’s not going to get enough of the young and healthy people they want [to make up for sick and low-income enrollees].”

The United States had 395 competing health insurers in the individual market before Obamacare’s 2013 advent. That number dropped to 287 earlier this year, according to the Heritage analysis published in April.

Haislmaier projects that 40 fewer companies will operate in the marketplace and exchanges in 2017.

Assessing counties can be more accurate than looking at the number of insurers in states, according to a report released in March by Sen. Ben Sasse, R-Neb.

The report found that consumers in 36 percent of the nation’s 3,007 counties had two or fewer insurers from which to pick in 2016.

Another 27 percent of counties had three insurers, while just 8 percent had more than five insurers. Hit hardest by a lack of competition in individual counties: Nevada, Utah, Wisconsin, West Virginia, and Texas.

‘Adapting at Different Rates’

The Sasse report notes that state totals can be misleading. For example, Wisconsin had 16 insurers selling coverage on the Obamacare marketplace, but just one of 72 counties had nine insurers—and 45 counties had five or fewer.

While the California health exchange had a total of 12 companies, the average for the state’s counties was four, according to the Sasse report, which was compiled before the United, Humana, and Aetna announcements.

However, Kevin Counihan, marketplace CEO at the U.S. Centers for Medicare and Medicaid Services, which oversees Obamacare, cites data such as consumer satisfaction, an improving risk pool, and coverage for more Americans as evidence of a strong system.

In a statement provided to The Daily Signal, Counihan said of implementation of the Affordable Care Act:

It’s no surprise that companies are adapting at different rates to a market where they compete for business on cost and quality rather than by denying coverage to people with pre-existing conditions. But the ACA marketplace is serving more than 11 million people and has helped America reach the lowest uninsured rate on record.

The Obamacare official’s take is “largely spin and part of it is ideological,” Haislmaier said, adding:

To say 11 million is an exaggeration because we know there has been a 20-25 percent drop-off in [Obamacare] enrollment from previous years. They are counting people who started to enroll—people who put something in the shopping cart but haven’t yet checked out and paid.

States That Got More Competition

Eight states had an increase in insurance companies from 2013 to 2016, while others kept the same number, according to The Heritage Foundation analysis.

New York had the biggest increase, from 10 companies before the exchanges to 15 companies. Massachusetts saw an increase from eight in 2013 to 10 in 2016. Ohio went from 12 to 14.

Rhode Island and Montana each saw an increase from two insurers to three. Washington state went from seven to 10, and New Hampshire from two to five.

Kentucky had one more insurer on the individual market than before Obamacare—going from six to seven.

Haislmaier said the common thread among these states with an increase was a heavily regulated health market before Obamacare was enacted.

Other states remained the same as in 2013, with California at 12 insurers, Idaho with five, Nebraska with four, and Hawaii with two.

On Aug. 11, the Centers for Medicare and Medicaid Services provided steps it said it took to manage the uncertainties posed by high-risk enrollees.

To demonstrate that insurance companies are profiting from the federal marketplace and state exchanges, CMS noted that in 2014, the Affordable Care Act “almost doubled insurers’ premium revenue in the individual market, which increased by 97 percent,” according to a report from the Commonwealth Fund.

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Her Health Plan Was $257 a Month. Now Her Obamacare Plan Could Be $650 a Month.

Ask 68-year-old Gavin Braithwaite how he feels about the amount he and his wife, Louellen, are expecting to pay for health insurance next year, and he’ll tell you he’s horrified, but not exactly surprised.

Since 1992, Gavin said, he’s watched the cost of their coverage increase over the years.

In the past few years, the Braithwaites say they’ve seen the cost of their premiums go from $257 per month in 2014 to $285 for the first nine months of 2015—their policy changed the last three months of the year—to $494 per month in 2016.

So Gavin wasn’t surprised to learn that his wife’s insurer, Highmark Blue Cross Blue Shield, asked for a rate increase of 32.5 percent for next year, which would bring the cost of her premiums to more than $650 per month.

But, he said, he is horrified.

Gavin and Louellen have lived in Delaware for 24 years, first in Wilmington and now in Lewes, where they started a retail gift shop after leaving the corporate and academic worlds.

The couple retired last year.

In 2013, Gavin turned 65 and enrolled in Medicare. But his wife is 12 years his junior, and she won’t become eligible for Medicare until 2025. So, Louellen has a individual-market plan available on the exchange through Highmark Blue Cross Blue Shield.

Louellen doesn’t qualify for a subsidy.

A spokesman for Highmark could not confirm or deny that she is a customer.

“Yikes,” Gavin told The Daily Signal in a phone interview. “When it went up last year, we were saying to ourselves we didn’t know what we’re going to do next year. And would you believe it? Another 32 percent.”

Rate Increases Nationwide

The Braithwaites are not alone.

Across the country, insurers have slowly been submitting their proposed rates for 2017 to state insurance commissioners, and most are seeking double-digit increases.

Large insurers including Aetna and Humana joined UnitedHealthcare in deciding to leave Obamacare’s exchanges altogether. And 16 of the 23 co-ops started under the Affordable Care Act have failed, leaving health policy experts questioning the impact dwindling insurer participation will have on rates beyond 2017.

In Delaware, two insurers will sell coverage on the exchange next year—Highmark and Aetna.

While Highmark asked for the average rate hike of 32.5 percent for next year, Aetna customers may see their premium costs increase between 23.9 percent and 25 percent.

Whether those increases become finalized, though, is up to Delaware Insurance Commissioner Karen Weldin Stewart.

“These large rate increase requests are occurring in many states across the country, and I know they will be a burden for many Delawareans,” Stewart said in June.

The insurance commissioner said she recognized the proposed increases were “substantial” and promised to work to reduce them.

Still, consumers living in Delaware expressed outrage at Highmark and Aetna’s proposals in public comments to the state Department of Insurance.

Andrew Edmonds of Wilmington, who has coverage through Highmark, told the state his family’s insurance premiums will rise as much as 35 percent in 2017.

Edmonds said his family doesn’t qualify for subsidies, and he said he worries that if the state approves the insurer’s requested rates, “there will soon come a point where we will no longer be able to afford health insurance.”

In documents filed with state regulators, insurance companies pointed to the end of federal programs implemented under the Affordable Care Act as well as high medical costs as the reason for increased rates.

Aetna, which requested average rate increases of up to 24.9 percent for those with coverage on the exchange in Delaware, said the end of the transitional reinsurance program Dec. 31 will cause premiums to rise 5 percent, according to documents filed with the Department of Insurance.

The reinsurance program was one of three designed to transfer risk among insurers. Insurance companies selling coverage in the individual market collectively received reinsurance payments totaling $6.7 billion for 2014.

Highmark, meanwhile, said in a public information session held in June that many of its customers, most of whom were newly insured, had significant medical costs.

Frank Haver, the company’s actuarial director, told attendees that “several” customers in Delaware incurred more than $100,000 in medical claims and continued their coverage for only a few months out of the year.

“This behavior drives up the cost to insure the entire pool, as people use benefits and then discontinue paying for coverage once their health care needs have been temporarily met,” Haver said.

In Montana, insurers requested average rate increases ranging from a high of 62 percent (Blue Cross and Blue Shield of Montana) to a low of 20 percent (PacificSource).

Like Aetna in Delaware, Blue Cross and Blue Shield of Montana also pointed to the end of the reinsurance program as a contributing factor for its proposed 62 percent rate hike.

In a presentation given during a hearing last month, the company said that alone increased individual rates by 3 percent.

The company, though, also experienced high medical claims for insured customers. It said it paid out $1.26 for medical care for every dollar it brought in during 2015.

“Cost is really what’s driving our rate increases,” Michael Frank, president of Blue Cross and Blue Shield of Montana, said during the July 26 hearing in Helena.

PacificSource, which requested an average rate hike of 20 percent for 2017, said the end of the reinsurance program will cause premiums to rise by 5.2 percent.

According to the Office of the Montana State Auditor, roughly 80,000 Montana residents purchase insurance in the individual market, with 52,358 of those consumers buying coverage on the exchange. More than 45,000 Montanans receive a subsidy, but roughly 35,000 do not.

Aaron Albright, spokesman for the U.S. Centers for Medicare and Medicaid Services, said the average monthly premium for consumers purchasing coverage on the federal exchange increased just $4 per month last year, going from $102 to $106 “despite headlines suggesting double-digit increases.”

“People understand how the marketplace works, and they know that they can shop around and find coverage that fits their needs and budget,” Albright said in an email to The Daily Signal. “In addition, the vast majority of consumers qualify for tax credits that reduce the cost of coverage below the sticker price.”

But consumers who don’t qualify for subsidies, like Gavin in Delaware, are worried.

“My family, like many middle-class families who make just enough not to qualify for subsidies, is paying increasingly unaffordable premiums,” a woman from Silver Spring, Maryland, who is covered through CareFirst said in comments to regulators at the Maryland Insurance Administration. “Insuring two members of my family now costs more than $1,000 a month.”

In Maryland, most consumers purchasing coverage through the state’s exchange face double-digit rate increases.

Cigna Health and Life Insurance asked the state to raise rates for individual market plans by nearly 30 percent, according to filings with the Maryland Insurance Administration. Kaiser Foundation Health Plan of the Mid-Atlantic requested a 25 percent increase.

Evergreen Health Cooperative, one of seven co-ops remaining out of 23 that launched under Obamacare with federal loans, requested the lowest rate increase at 8 percent.

To remedy these rate hikes, Ed Haislmaier, a senior fellow in health policy studies at The Heritage Foundation, said the government would need to change insurance rating rules and allow insurers, rather than the exchanges, to verify customers.

“The point in which you do some of these things, you’re making very fundamental changes to the [Affordable Care Act],” he said.

Digging Into Savings

After learning of Highmark’s request to raise rates an average of 32.5 percent, Gavin and Louellen Braithwaite realized they had three options: The couple could dig into their retirement savings to help pay premiums; Louellen could go without insurance and pay the annual $695 fine; or she could change to a “less luxurious” plan.

Gavin said it’s too risky to go without insurance—if his wife twists her ankle on the sidewalk or she gets into a car accident, they worry the cost of paying for health care out of pocket would likely exceed the cost of premiums.

And the couple can’t downgrade Louellen to a lower metal-level plan, which would be cheaper, since she currently has a bronze plan, the bare bones option.

So they’ve decided to dig into their retirement to pay for coverage.

“All you can do is keep digging into savings,” Gavin said.

Though the cost of their premiums has gone up, the 68-year-old said, he and his wife haven’t seen a change in the quality of their insurance. And they’ve been able to keep their doctor, whose practice is less than two miles from the couple’s home, he said.

Gavin has been submitting public comments to the state insurance commissioner to address his insurer’s requests to raise his rates since 2014.

He’s also contacted his elected officials in the state legislature, Gavin said, but he doesn’t expect them to do much.

He said he believes that the best way to combat the rising costs of health insurance is through a single-payer system, and is closely watching what happens in Colorado in November.

There, voters will weigh in on a ballot measure that would create a government-run health care plan called ColoradoCare.

The Centennial State’s plan is the first in the country that would replace Obamacare, and Gavin  said he eventually would like to see a similar model in Delaware if it’s successful in Colorado.

“I think that would be a huge, progressive step to do that,” he said.

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3 Reasons Why Obamacare Is Bad for Millennials

For many millennials, the fear of entering the “real world” is looming. We are preparing to face the financial challenges, often feeling like we are starting the trek up Mount Everest.

Many of us are scrambling to find jobs and avoiding moving back in with our parents. We recognize more and more that good jobs putting us on a promising career path are harder to find.

But our generation faces an additional challenge. Obamacare is jeopardizing our personal freedom and our financial future in ways few saw coming and many are unprepared to handle.

So many young people believe Obamacare is helping our society and will make health care more affordable, but now it is abundantly clear that the plan is harming young people.

Here are three ways Obamacare is hurting millennials:

Health Care Costs Skyrocket

Because of Obamacare, young people have seen up to a 44 percent increase in premiums because the new 3-1 ratio (older people can’t be charged more than three times the cost of a young person’s health care) forces the young to subsidize the old in the health insurance market. Not only are elderly individuals paying artificially lower prices for their insurance, but millennials are paying artificially higher prices.

This gives young people a strong monetary incentive to go without insurance and pay the annual fine for not buying insurance and then still “free ride” at the expense of the taxpayer with hospital emergency room care when they do get sick. If these regulations weren’t in place, young people’s premiums would be reduced by around $1,100.

That’s a lot of money for many young people starting in entry-level jobs, making only $10-15 an hour.

One aspect of Obamacare that seemed appealing to millennials on the surface was that if they are age 26 or younger they can stay on their parent’s plan—assuming their parents have employment-based coverage. However, if they don’t, they must enroll through the health insurance exchanges, where their choices are scarce. If they don’t do either, they must pay a fine. What we want to do is enroll in less expensive health plans of our choice. We can’t do that under these restrictions.

In addition, some options that were specifically designed for young people have been outlawed. Most college students only need and want basic coverage, which they could get through a limited benefit plan. Obamacare has abolished these minimum coverage caps (the plan’s minimum amount of money used to cover medical expenses) that characterizes these short-term, college plans. This desirable option of limited, short-term insurance coverage is now no longer available for students.

Instead of expanding coverage, some young people have decided to go without. That defeats the whole purpose of this law.

Harder to Keep Jobs

Because of Obamacare’s mandates on businesses, employers are increasingly forced to cut back on hiring and hours of work.

Employers are forced to purchase expensive insurance packages at the risk of being fined. The law mandates to anyone employing 50 or more full-time employees to purchase federally standardized health insurance. This coverage is often very expensive because of the inclusion of a wide range of government-mandated benefits.

If businesses don’t offer the federally-approved coverage, they can be fined at a rate of $2,000 to $3,000 for each employee who isn’t covered. Employers deal with this by not absorbing the costs, but passing it on to their workers. How? By slashing hours, cutting wages, rolling back other benefits, and firing people with the least seniority.

It’s not surprising that people have had to take multiple jobs just to support themselves. For young people entering the workforce, this doesn’t make our chances of securing jobs upon graduation any easier.

An Explosion of the National Debt

If the above two reasons weren’t enough to make a young person worry, this point will for sure.

As of March 2015, Obamacare has a net cost of $1.207 trillion over the next 10 years and will add an additional $17 trillion over the next 75 years in unfunded liabilities. Our national debt is over $19 trillion, so how is the United States supposed to pay for this? Oh, that’s right, it will increase taxes on the young people who will continue to pay for Obamacare, as well as the other giant federal entitlements—Social Security, Medicare, and Medicaid—for the rest of our lives.

Not only are the young subsidizing the old through Obamacare’s unfair insurance rating rules, they are also subsidizing a large and rapidly-growing elderly population—including wealthy retirees—through their payroll and income taxes.

Imagine how much that will end up costing. Imagine how much of our hard-earned money will go toward big entitlement programs like this one, which we might never benefit from. If the goal was simply to provide help for those who could not afford health insurance, we could have easily done it without incurring Obamacare’s massive cost and debt. But that wasn’t the goal. The goal was more government intervention, and less of the free market; sadly it seems to be working.

A Better Solution for Young People

There is a better way to help the millions of Americans struggling to find affordable coverage, but not at a debilitating cost to young people.

Congressional Republicans, led by House Speaker Paul Ryan, R-Wis., recently released a plan that embraces a free marketplace, respects personal freedom, allows Americans to keep more of their hard-earned paychecks, and embraces the diversity of this wonderful land we call America.

Ryan’s plan would reform the health care system, starting with the repeal of Obamacare. The plan states: “This law cannot be fixed. Its knots of regulations, taxes, and mandates cannot be untangled.”

The congressional Republican plan will allow people to buy insurance anywhere in America, creating a highly competitive national market for health insurance.

It would give Americans more options, better quality, and intense competition that would lower costs. States would be able to regulate their own health insurance markets, meaning that Washington could no longer force employers and individuals to purchase “Washington-mandated” health plans. It would mean that young people would be able to buy insurance that fits their needs, rather than pay artificially inflated insurance premiums.

Removing the employer mandate would mean that businesses would be able to purchase coverage that is best for them, and they would be able to balance health benefits with wages and other benefits. It would also open up job opportunities, enabling businesses to hire more full-time staff instead of many part-time staff, creating more job security and larger paychecks. That would be a direct benefit to young people entering the workforce.

Obamacare was supposed to lower costs and increase access to care. While insurance coverage has increased, health care costs have soared, particularly for the young. The most energetic new workers are being slammed with higher costs of insurance, including big deductibles—forcing many to go without.

President Barack Obama said his plan would not only expand coverage, but would also control costs, reduce typical family premiums, and expand competition. In fact, its biggest achievement has been to increase cost and expand government control.

Many of our peers don’t like conservatives very much, but they don’t realize that the Ryan alternative to Obamacare will lower insurance costs—especially for millennials. This plan was created with an understanding that young people shouldn’t bear the entire burden and recognizes that our future should be full of excitement and opportunity, not high taxes, suffocating bureaucracy, and crippling premiums.

Lillian Wolfensohn is a senior at George Washington University and is a summer student assistant for the Project for Economic Growth at The Heritage Foundation.

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Medicare’s Next 50 Years: Fix the Problems and Improve the Program

Medicare, the giant health program covering senior and disabled citizens, turned 51 on July 30.

While Americans understandably are preoccupied with a hot presidential race, the big policy problems loom regardless of the winner in November. And of all of the domestic issues, the future of Medicare is the biggest challenge facing the nation related to entitlement programs.

Robert E. Moffit, Ph.D., a senior fellow in health care policy at The Heritage Foundation, has just issued an in-depth special report that details Medicare’s major challenges and outlines ways to improve the program with sensible reforms.

It’s a big task. Medicare covers 57.1 million souls. But 10,000 baby boomers are turning age 65 every day, and the program will be inundated annually by millions of new retirees over the next 15 years. By 2030, government actuaries expect over 81 million Americans will be enrolled in the program.

Regardless of the outcome of the presidential campaign, or what political candidates say or don’t say, pander or promise, Medicare’s growing challenges will get tougher.  The new president and Congress, and the taxpayers who elect them, will not be able to escape the costs or consequences of official inaction.

Recurrent Problems

Medicare is big, costly, and complex. Its major problems have been persistent: burdensome and sluggish bureaucracy, big gaps in coverage, problems securing quality care, inefficient pricing of medical services, absurd restrictions on the personal freedom of patients, subversion of the professional independence of doctors, and disgraceful levels of waste, fraud, and abuse amounting to tens of billions of dollars annually.

Financing will be the biggest challenge. While senior citizens today are better off financially than ever before, they still live on fixed incomes and most are burdened with chronic illness such as heart disease, hypertension, and diabetes. Not surprisingly, the most costly 25 percent of Medicare patients account for more than four-fifths of the program’s spending.

>>> Read the Report: “Medicare’s Next 50 Years: Preserving the Program for Future Retirees

Largely because of the miracles of modern medicine, seniors also are living much longer than they did in 1965, when Medicare was created. While this is indisputably great news, it also means that today’s taxpayers—who finance nearly all of Medicare’s benefits for today’s retirees—are going to be carrying an even bigger burden tomorrow.

How heavy? Consider the Medicare Trustees’ “medium range” estimates for the short term. In 2015, Medicare spent $648 billion. But by 2025, that spending will jump to almost $1.3 trillion.

America, with an annual economic growth rate of 2 percent, is not going to “grow” out of its entitlement crisis. Over the next 10 years, Medicare spending will outpace the growth in the general economy (as measured by gross domestic product, or GDP) and the federal budget. It also will surpass the growth of America’s total health spending or spending on private health insurance.

The slowdown in Medicare spending during the past few years, widely celebrated by health policy wonks, is over.

The Affordable Care Act, popularly known as Obamacare, contains 165 provisions affecting Medicare. The most significant are Medicare payment reductions that guarantee more headaches for doctors and other medical professionals.

This approach imposes other costs: It threatens seniors’ future access to medical care. There is a better way.

Overdue Reforms

Medicare reforms are needed to secure value for patients, enhance the program’s solvency, and reduce its burden on current and future taxpayers. To accomplish these goals, Moffit prescribes a two-step process:

First, the new president and Congress should improve the traditional fee-for-service program. This can be done by simplifying it (combining Medicare Parts A and B) into a single plan with a single deductible, and adding protection against catastrophic illness. That would eliminate much of the confusing co-payment arrangements of today’s Medicare and reduce seniors’ current need to buy supplemental coverage and pay additional premiums.

Moffit also says that Congress needs to reduce further the taxpayers’ subsidies to the wealthiest retirees and gradually raise the normal age of Medicare eligibility from 65 to 68, tracking changes in older Americans’ longer life expectancy and capacity to stay active in the workplace.

Second, the new president and Congress need to inject a heavy dose of free market competition into the program to control costs while enhancing patient choice. This can be done by integrating traditional Medicare into a common, competitive program with Medicare Advantage, as well as other private health plans and employer-sponsored plans that cover retirees.

All plans would be required to meet basic standards and offer catastrophic coverage, and all would compete head-to-head on a level playing field. Intense competition in an environment where provider price and performance is transparent will control costs, spur innovation in health care delivery, and secure even higher levels of patient satisfaction.

A Better Future

Over the past 50 years, Medicare has chalked up an impressive track record of securing access to health coverage and a strong measure of financial security for America’s senior citizens.

For the next 50 years, the new president and Congress can begin to secure even greater value for patients for their Medicare dollars while easing the financial burdens of current and future taxpayers.

Moffit’s new report for Heritage provides a clear-eyed diagnosis of the huge program’s recurrent problems and offers sound remedies to achieve a better future for Medicare.

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