Should You Be Afraid of Huge Medicare Changes Under President Trump?


By Keith Speights, MotleyFool

You've probably seen headlines warning that Republicans want to radically change Medicare. Potentially alarming words like "privatization" have been thrown around. Should you be afraid of major changes to Medicare now that President Trump is in the White House?

Donald Trump At Podium


What's being proposed

The most talked-about GOP proposal to change Medicare is House Speaker Paul Ryan's "A Better Way" plan. A key part of this plan is to roll back all of the Obamacare provisions related to Medicare. That effort is already under way.

Specific Medicare provisions in Obamacare that Republicans want to eliminate include several related to Medicare Advantage plans. One Republican proposal is to repeal the benchmark caps for quality bonuses paid to Medicare Advantage plans for providing higher-value, coordinated care. You see, Medicare Advantage plans are paid based on a benchmark set by the government. Obamacare capped this benchmark so it couldn't be raised above levels in place prior to passage of the statute. The GOP thinks these caps eliminate incentives for plans to offer more competitive products.

Other changes sought by Ryan and other House Republicans include combining Medicare Parts A and B and gradually increasing the Medicare retirement age from 65 to Social Security's full retirement age. Combining Medicare Parts A and B would give retirees a single deductible instead of having separate deductibles for hospital stays and physician visits. Increasing the Medicare retirement age would save money and put the two major federal entitlement programs in sync regarding when benefits begin for retirees.

Some of these ideas could be controversial, but none so much as the proposal to transform Medicare into a premium support model. Under the GOP proposal, beginning in 2024, Medicare beneficiaries would be able to choose between private plans or traditional Medicare. Beneficiaries could pick the health plan that best suits his or her needs. The federal program would provide a premium support payment directly to the selected health plan to subsidize its cost. Individuals with more serious health conditions would be entitled to higher premium-support payments. Lower-income Americans would also receive additional assistance for out-of-pocket payments.

Proponents of the premium support model say it would strengthen Medicare over the long run while giving seniors more flexibility to choose their health plans. Opponents, though, claim that this idea could jeopardize traditional Medicare.

What Trump wants

While Paul Ryan and some GOP members of Congress are promoting sweeping changes to Medicare, President Trump seems to have a much different view. During the presidential campaign, he promised supporters that he would leave entitlement programs Social Security and Medicare alone.

President Trump's chief of staff, Reince Priebus, emphasized recently that the new president will keep his word and not "meddle with Medicare." Even Paul Ryan stated that he and Trump aren't in agreement about what to do with the federal healthcare program.

However, President Trump's transition website stated his goal was to "modernize Medicare, so that it will be ready for the challenges with the coming retirement of the Baby Boom generation? -- ?and beyond." Modernizing Medicare and leaving Medicare alone seem to be conflicting goals.

Further, Trump's pick for secretary of Health and Human Services, Rep. Tom Price (R-Ga.), has been an advocate of Medicare reform. Price supported raising the eligibility age for Medicare and increasing Medicare premiums.

What it all means to you

You don't have much reason to worry about potential Medicare changes right now. President Trump doesn't seem to be reversing his stance on major Medicare reform. And if he did, any effort would consume an enormous amount of political capital that perhaps would be wasted in the end.

While the repeal of Obamacare seems likely, stripping away some provisions of the legislation shouldn't be very disruptive to Medicare beneficiaries. Some aspects of a repeal could help seniors, such as restoring some flexibility for seniors to switch Medicare Advantage plans, like they had prior to Obamacare.

Sooner or later, though, huge changes to Medicare must come. Medicare spending is expected to increase over the next few years because of the aging U.S. population. The Medicare Part A hospital insurance trust fund is on pace to run out of money in 2028. Whether it's Trump or not, someone will have to sign Medicare reform into law before the program is in serious jeopardy.

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