Obamacare’s Second Anniversary: No Gift for Seniors

Alyene Senger / March 19, 2012

This week will mark Obamacare’s second birthday, but there’s little reason to celebrate.

Throughout the week, Obamacare advocates will be emphasizing the law’s supposed benefits on specific groups of Americans, but as Heritage’s research over the past two years has shown, Obamacare harms Americans—even the groups showcased by the left.

Today, the focus is on the impact to America’s seniors. Obamacare supporters claim that the health law protects and strengthens Medicare, but this couldn’t be further from reality. Instead, the law actually uses savings in Medicare to fund other new government spending while threatening seniors’ access to care and ending Medicare as we know it.

At the same time, Obamacare fails to solve Medicare’s devastating fiscal insolvency. The program faces unfunded obligations of $36.8 trillion, and the Part A trust fund is predicted to run dry by 2024.

It perpetuates the flawed price control model. Obamacare cuts Medicare spending by reducing provider payments. The cuts are so severe that the Medicare Actuary predicts:

Providers for whom Medicare constitutes a substantive portion of their business could find it difficult to remain profitable and, absent legislative intervention, might end their participation in the program (possibly jeopardizing access to care for beneficiaries). Simulation by the Actuary suggests that roughly 15 percent of Part A providers would become unprofitable within the 10-year projection period as a result of the productivity adjustments.

It cuts seniors’ benefits. Obamacare makes extreme cuts to Medicare Advantage (MA), which allows seniors to receive their Medicare benefits through a private health care plan of their choice. In 2012, MA premiums decreased by 7 percent and enrollment increased by 10 percent. Despite its increasing success and popularity, Obamacare makes drastic cuts to MA—to the tune of $145 billion—which the Actuary predicts will decrease enrollment by 50 percent by 2017.

The result of the cuts will be reduced benefits, increased costs, lower enrollment, or some combination of the three. According to Heritage research, “By 2017, Medicare beneficiaries who would have enrolled in Medicare Advantage under prior law will lose an average of $1,841 due to the MA changes alone and $3,714 when the effects of the entire bill, including the [fee for service] cuts, are considered.” Due to the cuts, the Actuary projects that enrollment in MA plans will have decreased by 50 percent in 2017.

It puts an unelected board in charge. Obamacare will attempt to curb Medicare spending using the Independent Payment Advisory Board, a group of 15 unelected officials tasked with finding cuts in Medicare to meet a new hard spending cap. Heritage health policy expert Bob Moffit writes that “the board is prohibited by law from proposing real structural reforms. The only cuts it is allowed to make would be cutting providers’ reimbursements—including administrative costs and profit margins of Medicare Advantage plans.” As physicians’ Medicare payments get slashed, they will be forced to deny Medicare patients. One senior voices her concerns in this Heritage video.

Medicare can be made fiscally solvent and permanently sustainable through reform that uses the proven successes of free market principles to improve value in the program. To learn more about this alternative approach to Medicare reform, check out Heritage’s Saving the American Dream proposal.