Health care court ruling could paralyze Medicare

CHICAGO Tue Jun 5, 2012 8:31am EDT

Opponents of Obama health care legislation rally on the sidewalk during the third and final day of legal arguments over the Patient Protection and Affordable Care Act at the Supreme Court in Washington, March 28, 2012. REUTERS/Jonathan Ernst

Opponents of Obama health care legislation rally on the sidewalk during the third and final day of legal arguments over the Patient Protection and Affordable Care Act at the Supreme Court in Washington, March 28, 2012.

Credit: Reuters/Jonathan Ernst

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CHICAGO (Reuters) - Opponents of President Barack Obama's health care law have been predicting dire consequences for seniors on Medicare ever since the legislation was signed last year. The warnings are mostly political spin, but there could be real problems if the U.S. Supreme Court strikes down the Affordable Care Act this month.

The ACA, a cornerstone of President Obama's health care plan, would extend health insurance to an additional 23 million Americans by 2019. But it's run into significant roadblocks as opponents argue that key components are un-Constitutional.

The Supreme Court could decide to uphold the law, strike down specific portions or toss it out entirely. A decision is expected by late June.

Important improvements to Medicare would disappear if the high court decides to toss out the entire law. The decision could paralyze the Medicare system because the act lays out the benefits, payment rates and delivery systems. Some of the changes already have been implemented, and others are works in progress.

"If the law is struck down, there will be a high level of chaos and confusion the very next day, especially in Medicare," predicts Bonnie Washington, senior vice president of Avalere Health, a health policy consulting firm. "Every single provider payment that Medicare makes now has been modified one way or the other by the Affordable Care Act."

The Centers for Medicare & Medicaid Services, which runs Medicare, is not commenting on how it might proceed if the law is nullified. But the administration has warned the court of "extraordinary disruption" to the system.

CMS might attempt to assert its own administrative authority - and perhaps use executive orders from President Obama - to continue paying claims and providing benefits so the Medicare system doesn't freeze up. But disruption will be virtually unavoidable.

"Some of this could be fixed with administrative authority," said Joe Baker, president of the Medicare Rights Center, a non-profit consumer rights group. "But I don't think most of it would be."


The most immediate change would hit seniors who enter the "doughnut hole" in Medicare's Part D prescription drug program - the gap in coverage that starts if total annual drug spending by a senior and his or her insurance company exceeds a certain level. In 2012, coverage stops when spending reaches $2,930, and resumes at $4,700.

This year, the Affordable Care Act calls for pharmaceutical companies to provide a 50 percent discount on brand-name drugs to most beneficiaries who find themselves in the gap; there's also a 14 percent discount on generic drugs.

Last year, 3.6 million seniors hit the gap and saved a collective $2.1 billion due to the health care law, according to the U.S. Department of Health and Human Services. In the first four months of 2012, more than 416,000 people saved an average of $724 on prescription drugs bought after they hit the cap, for a total of $301.5 million. Last year, 3.6 million seniors entered the gap and saved $2.1 billion, the health department says.

The Supreme Court ruling could come just as many seniors hit the gap, and they could lose prescription drug insurance protection they were counting on this year.

"The contracts between the government and pharmaceutical companies are made possible by the ACA," says Anne Hance, a partner at the law firm McDermott Will & Emery, who specializes in federal and state health insurance. "If the ACA is struck down, the question will be whether there is still a statutory obligation for the pharmaceutical companies to provide the discounts."

Pharmaceutical companies could decide to continue the drug discounts voluntarily in order to protect sales of their branded drugs in the Part D program, and to avoid patient shifts to generics. Drug companies also might want to continue the discounts for public relations reasons.

But seniors worried about gap coverage should review the branded drugs they are taking.

"Ask your doctor if there are lower-cost alternatives that you could use if necessary that are just as effective," says Washington, of Avalere Health.


This fall's enrollment season for prescription drug plans also could be affected by a court ruling. Enrollment runs from mid-October to early December, and pharmaceutical companies are submitting their bids this week to the Centers for Medicare & Medicaid Services based on the terms of the Affordable Care Act.

"The timing for CMS would be very difficult," says Tricia Neuman, vice president of the Henry J. Kaiser Family Foundation and director of its Medicare Policy Project. "They would need to scramble very quickly to make decisions on payments for 2013 just as the bids are coming. There wouldn't be a lot of time to make adjustments."

Medicare's new free annual wellness visit and other screening services also could disappear.

Starting next year, seniors could expect to pay higher premiums than they otherwise would have faced for Medicare Part B (physician visits and other outpatient services). The law was expected to reduce Medicare spending by $428 billion between 2010 and 2019, through cuts in payments to doctors and hospitals, and changes in the way health care is delivered, according to the Kaiser Family Foundation.

If the law is struck down and those savings provisions do not take effect, Medicare spending will rise, which would lead to higher Part B premiums. By law, Centers for Medicare & Medicaid Services sets the Part B premium so that beneficiaries cover 25 percent of the program's cost.

"That means if Part B spending rises, beneficiaries will pay higher premiums," Neuman warns.

(The writer is a Reuters columnist. The opinions expressed are his own.)

(Editing by Jilian Mincer, Chelsea Emery and Dan Grebler)

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Comments (2)
DennisByron wrote:
What a biased article? How about mentioning the flip side: that the $200 billion in Obamacare-law cuts in Medicare Part C will NOT happen.

And the last sentence is total Democratic party BS. Seniors have been told since 2009 — probably by this left-wing columnist — that the $200 billion in Obamacare-law Medicare cuts to hospitals and other providers will not affect us one way or the other (that is, that the savings will simply extend the life of the Part A trust fund and not reduce our Medicare Part A benefits).

So how could not making the Part A cuts now affect us seniors… and how could not making cuts that relate to the Part A trust fund affect Medicare Part B premiums?

Jun 05, 2012 1:24pm EDT  --  Report as abuse
Carly_EngAmer wrote:
The latest report of the Social Security and Medicare trustees shows an unfunded liability for both programs of $63 trillion. That is equal to about 4.5 times the entire U.S. gross domestic product (GDP). However, the actual liability is almost twice what the government is reporting. The reason: “ObamaCare.” The minute President Barack Obama signed his health reform bill, he cut Medicare’s unfunded liability by more than $50 trillion.

ObamaCare uses cuts in Medicare to pay for more than half the cost of expanding health insurance for young people. So even if the Medicare cuts take place, they won’t reduce the government’s overall obligations — they just replace entitlements for seniors with entitlements for young people.

So the only realistic way to make cuts in Medicare spending is a mechanism that will pay less and less to doctors and hospitals over time.

The Center for Medicare & Medicaid Services’ Office of the Actuaries has predicted what this can mean for seniors. By the end of this decade, the fees that Medicare pays to doctors will be lower than what Medicaid pays. Also by the end of the decade, one in seven hospitals will be forced out of business.

To address these defects, Medicare must be truly reformed. That means shifting from the current “pay as you go” system to one in which workers pay their own way. John C. Goodman and his colleagues have calculated that workers (and their employers) must save and invest 4% of payroll.

Eventually, we will reach the point where each generation of retirees will pay for the bulk of its own post-retirement medical care — with a payroll tax no higher than the one we have today (

Jun 07, 2012 3:41pm EDT  --  Report as abuse
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