Repealing the ACA’s Medicare Advantage payment changes would be expected to:
- Increase total Medicare spending as a result of increasing payments to Medicare Advantage plans relative to spending under traditional Medicare. CBO has estimated that repealing the Medicare Advantage-related provisions in the ACA would increase Medicare spending by roughly $350 billion6 over 10 years.
- Increase the Part B premium and deductible paid by beneficiaries. The Part B premium and deductible would likely increase if the payment reductions for Medicare Advantage plans are repealed because the Part B premium is set to cover 25 percent of Part B spending, and the Part B deductible is indexed to rise at the same rate as the Part B premium.
- Improve benefits and lower out-of-pocket costs for beneficiaries enrolled in Medicare Advantage plans. Payments that Medicare Advantage plans receive in excess of their costs to provide Part A and Part B benefits are required to be used to provide benefits not covered by traditional Medicare, to reduce cost sharing, premiums, or limits on out-of-pocket spending, or both. Thus, if the ACA’s reductions in Medicare Advantage plan payments were repealed, plans could provide extra benefits to Medicare Advantage enrollees and/or reduce enrollees’ costs.
MEDICARE BENEFIT IMPROVEMENTS
The ACA included provisions to improve Medicare benefits by providing free coverage for some preventive benefits, such as screenings for breast and colorectal cancer, cardiovascular disease, and diabetes, and closing the coverage gap (or “doughnut hole”) in the Part D drug benefit by 2020. These benefit improvements increased Medicare Part B and Part D spending.
Repealing the ACA’s Medicare benefit improvements would be expected to:
- Reduce Medicare Part B spending for preventive services and reduce Part D spending on costs in the coverage gap.
- Increase beneficiary cost sharing for Part B preventive benefits.
- Increase beneficiary cost sharing by Part D enrollees who have drug spending high enough to reach the coverage gap. According to MedPAC, in 2013, roughly 25 percent of the 37.8 million Part D enrollees (or around 9 million beneficiaries) had drug spending high enough to reach the coverage gap.7,8
- Reduce Part D premiums, on average, since Part D premiums are set to cover 25.5 percent of program costs, and reinstating the Part D coverage gap would lower Part D spending.
REVENUES TO THE MEDICARE TRUST FUNDS
The ACA established new sources of revenue dedicated to the Medicare program, including a 0.9 percentage point increase in the Medicare Part A payroll tax on earnings of higher-income workers (incomes more than $200,000/individual and $250,000/couple), and a fee on the manufacturers and importers of branded drugs, which has generated additional revenue for the Part B trust fund, including $3 billion in 2015 alone.9
Repealing the ACA’s Medicare revenue provisions would be expected to:
- Reduce revenues to Medicare’s Part A and Part B trust funds.
- Reduce Part A payroll taxes for Medicare beneficiaries (and other taxpayers) with earnings greater than $200,000/individual or $250,000/couple.
MEDICARE PART B AND PART D PREMIUMS FOR HIGHER-INCOME BENEFICIARIES
The ACA froze the income thresholds for the Part B income-related premium beginning at $85,000/individual and $170,000/couple through 2019, which subjected a larger share of Medicare beneficiaries to the higher Part B income-related premium over time.10 The law also added a new surcharge to Part D premiums for higher-income enrollees, using the same income thresholds as Part B premiums.
Repealing the ACA’s income-related premium provisions would be expected to:
- Reduce the number of higher-income Part B enrollees paying income-related premiums.
- Reduce Part D premiums for beneficiaries with incomes above $85,000/individual and $170,000/couple.
PAYMENT AND DELIVERY SYSTEM REFORMS AND NEW QUALITY INCENTIVES
Through a new Center for Medicare & Medicaid Innovation (CMMI, or Innovation Center) within the Centers for Medicare & Medicaid Services (CMS), the ACA directed CMS to test and implement new approaches for Medicare to pay doctors, hospitals, and other providers to bring about changes in how providers organize and deliver care. The ACA authorized the Secretary of Health and Human Services to expand CMMI models into Medicare if evaluation results showed that they either reduced spending without harming the quality of care or improved the quality of care without increasing spending. CMMI received an initial appropriation of $10 billion in 2010 for payment and delivery system reform model development and evaluation, and the ACA called for additional appropriations of $10 billion in each decade beginning in 2020.
The ACA also created incentives for hospitals to reduce preventable readmissions and hospital-acquired conditions, and established new accountable care organizations (ACO) programs. Research has shown declines in Medicare patient readmissions since the Hospital Readmission Penalty Program provisions were introduced.
Repealing these ACA’s payment and delivery system reform provisions would be expected to:
-
Increase Medicare spending due to elimination of CMMI and other quality incentive programs. On net, CBO has estimated that CMMI’s operations will generate savings of $34 billion over the 2017-2026 period, with gross savings of $45 billion over this period. These savings are attributed to the expansion of successful payment and delivery system reform models into Medicare. In addition to eliminating the savings generated from CMMI, Medicare spending could also increase if the incentives to reduce preventable readmissions and hospital-acquired conditions are included in proposals to repeal and replace the ACA.
