Cuts to Medicare Signify Shift in Social Outlook, Some Analysts Claim

Dozens of private insurers that offer Medicare Advantage plans intend to reduce coverage and increase costs for beneficiaries to compensate for lower payments expected under the new health reform law, the Wall Street Journal reports.

The health reform law marks a shift in how social safety-net programs have been funded, according to the Journal.

Shift of Funds

Taxes from younger workers have supported Medicare and Social Security for older individuals since the beginning of the programs. For the first time, funding will be shifted from Medicare to fund health insurance coverage and other programs for younger residents.

About 50% of the funding for health reform -- or $455 billion of the $938 billion legislation -- is slated to come from reducing payments to hospitals, insurers and other health care providers that participate in Medicare.

Although the 44 million U.S. residents covered by traditional Medicare will not experience changes to the benefits they are guaranteed under federal law, the 11.3 million enrolled in MA plans offered by private insurers are likely to see cuts to extra benefits. Such benefits include dental, vision and certain prescription drug coverage.

MA payment cuts are supposed to begin in 2012 and are intended to fund about 15%, or $136 billion, of the overhaul. According to the Congressional Budget Office, MA beneficiaries will receive $68 less monthly in benefits by 2019 under the new reform law.

Arguments for the Shift

Some experts believe the shift in funding is necessary.

Isabel Sawhill, senior fellow at the Brookings Institution, said, "We badly need to, over time and very gradually, reallocate resources from the elderly to younger families and their children."

The White House also defends the decision, saying the new health reform law does not really take money from seniors to help younger generations, but instead reduces overpayments to private insurers.

CMS data support the White House's stance, indicating that lowering payments to MA providers will maintain the solvency of the Medicare program for another 12 years.

Arguments Against the Shift

Meanwhile, conservatives have criticized the overhaul for redirecting Medicare funding toward covering younger U.S. residents.

Stuart Butler, vice president of the Heritage Foundation, said, "It uses [Medicare funding] to create a new entitlement for a separate group of people rather than strengthening" Medicare.

In addition, many elderly U.S. residents are angered by the impending cuts.

Their resistance worries some Democrats because seniors typically vote in large numbers, especially during midterm elections (Adamy, Wall Street Journal, 7/26).