The recent decision by a federal judge in Texas to declare Obamacare unconstitutional is likely to become the center of a lengthy legal battle that could reach the Supreme Court. If the decision to strike down Obamacare is upheld, it could affect the coverage of the 60 million older Americans who get their healthcare coverage through Medicare, and that would result in Congress reconsidering healthcare legislation for better or worse.
Based on information from the non-partisan Kaiser Family Foundation, striking down the 2010 Affordable Care Act (ACA) could be expected to affect Medicare in the following key ways:
- It could increase Medicare Part A deductibles and copayments, as well as Part B premiums and deductibles paid by beneficiaries. The ACA included provisions that adjusted the rate of growth in hospital payments and other healthcare providers. Government data indicates that healthcare costs, which included Medicare, have been growing more slowly since 2010 and this has resulted in slowing the growth rate of Part B premiums. From 2010 when the ACA was passed, to 2019, Medicare Part B premiums increased by 23%. During the decade prior to the passage of the ACA, from 2000 to 2009, Medicare Part B premiums increased almost five times faster — 112%. Should the ruling be upheld, provider costs could be expected to resume growing at faster rates. Because the Part B premiums are set to cover 25% of overall Part B costs, and the deductible is indexed to grow at the same rate as Part B premiums, out-of-pocket costs could start climbing more rapidly for beneficiaries.
- Medicare premiums would take a greater share of Social Security benefits. Part B premiums grow several times faster than annual cost-of-living adjustments (COLAs), which in some years can mean less Social Security to meet other household budget needs. Worse, in years when there’s been a low, or even no COLA, beneficiaries have seen little-to-no growth in their Social Security benefits as well. This flat growth in retirees’ Social Security benefits could occur with increasing frequency if Medicare Part B premiums increase at rates greater than currently estimated, (about 5% per year) because the Congressional Budget Office estimates than COLAs are forecast to grow about 2.5% per year on average.
- Increase cost-sharing for Part B preventive benefits. The ACA included a number of provisions that provide free coverage for some preventive benefits, such as screenings for breast and colorectal cancer, cardiovascular disease, and diabetes. These free screenings could end; and beneficiaries would be expected to have higher costs in screening for these diseases.
- Increase spending by Part D enrollees who hit the doughnut hole coverage gap. Prior to passage of The Affordable Care Act, beneficiaries who had drug spending high enough to reach the Part D doughnut hole paid 100% of the full retail cost of brand and generic drugs until they spent the annual out-of-pocket threshold to qualify for catastrophic coverage. The ACA provided new 70% discounts on brand name drugs in the coverage gap, and slowed the growth in the out-of-pocket threshold required to qualify for catastrophic coverage. In 2019, that threshold is $5,100, and beneficiaries who reach the doughnut hole, pay co-insurance of 25% of the discounted retail cost of brand name drugs, and 37% for generics in the doughnut hole. Should the Obamacare ruling be upheld, it could be expected that beneficiaries would be charged 100% of the undiscounted full retail price of their prescription drugs.
- Ends new sources of funding for Medicare Trust Funds, giving tax cuts to high-salaried workers and drug manufacturers. The ACA established a 0.9% increase in the Medicare payroll tax on earnings of high-earnings workers, who earn more than $200,000 individually (and $250,000 per couple). It also established a fee on manufacturers and importers of brand name drugs, which generated additional revenue for the Part B Trust Fund of $3 billion in 2015 alone. Prior to passage of the 2010 ACA, the Medicare Trustees forecast that the Medicare Hospital Insurance Trust Fund would not have sufficient revenues to pay all Part A benefits by 2017. The current insolvency date is projected to be 2026, but if the ACA were overturned, the stream of revenue keeping the Trust Fund solvent today could cease.
If the ruling is upheld, Congress will be forced to re-examine Medicare changes that were made in the ACA. Most Medicare recipients already struggle to keep up with rising Medicare premiums and prescription drug prices, and all could see higher out-of-pocket costs for their healthcare, and Medicare would face almost immediate insolvency. The Senior Citizens League is keeping a close eye on the status of the Affordable Care Act in the days ahead, and continues to advocate on Capitol Hill for legislative solutions that would protect the Medicare benefits older Americans have earned and deserve.
Sources: 2018 Medicare Trustees Report, June 5, 2018. “What Are the Implications of Repealing the Affordable Care Act For Medicare Spending and Beneficiaries?” Cubanski, Neuman, Jacobson, and Boccuti, Kaiser Family Foundation, December 2016. “Potential Impact of Texas v. U.S. Decision on Key Provisions of the Affordable Care Act,” Kaiser Family Foundation, December 14, 2018.