Will New Health Care Provisions Hold Up Long Term?

New incentives and physician payment updates put in place by the Medicare Access and CHIP Reauthorization Act have helped fix short-range physician payment issues, but as the Boards of Trustees for Medicare noted in its June 22 report, these changes raise some long-term concerns.1

The board is concerned these measures will not adjust for economic conditions such as inflation, or for the normal upward trend of physician costs. In addition, the board questions how much the Patient Protection and Affordable Care Act will help in the long run.

The act contains 165 provisions designed to reduce costs and improve the quality of care delivered through the Medicare program. The Trustees believe the cost-reduction measures will continue to work if health care providers are able to realize productivity improvements at a faster rate than experienced historically. However, it’s their opinion that if the health sector can’t transition to the more efficient models of care delivery currently being tested, the availability and quality of health care for Medicare beneficiaries may suffer.2

The good news is that, since 2008, national health spending growth in the U.S. has been below historical averages, even when you factor in that more people now have health insurance coverage.3

That said, even a healthy 75-year-old can expect to spend upward of $5,000 per year in out-of-pocket medical expenses.4 Naturally, that number is much higher for any retirees who suffer a chronic condition at some point.

One thing to consider when planning for retirement is how you will pay for possible increased health care expenses. Some insurance products, such as life insurance and annuities, provide various options you may want to consider. We’d be happy to discuss your options based on your unique situation.

As more baby boomers transition from private health care plans into the Medicare system, Medicare Advantage (MA) — the managed-care version of the program — has grown exponentially. More than half of those MA beneficiaries are covered by the four largest insurers in this space: UnitedHealth Group, Humana, Kaiser Foundation Health Plan and Aetna.

This demographic has provided MA insurers with significantly more taxpayer-funded revenue, which many are investing to improve the quality of their plans. For example, UnitedHealth projects that 80 percent of its Advantage members will in 4- to 5-star plans by 2018.5

Likewise, Medicare is continuing to improve with initiatives for quality care, including its recent announcement of a new Oncology Care Model. The new payment program encourages greater collaboration and information sharing among health care providers, while at the same time lowering costs.6

Medicare and its partner insurance companies have led the charge to reduce costs and improve care via these types of values-based payment programs. It is projected that 90 percent of all Medicare payments will be tied to quality/value criteria by 2018.7 The goal of this criteria is to base physicans’ pay on their ability to achieve better clinical outcomes for their patients, and not waste money doing it. That’s something from which we can all benefit.

Our firm assists retirees and pre-retirees in the creation of retirement strategies utilizing investment and insurance products. Advisory services offered through B.O.S.S. Retirement Advisors, a Registered Investment Advisory firm.. Insurance products and services offered through B.O.S.S. Retirement Solutions. To see a list of services please visit us at bossretirement.com/services.

This content is provided for informational purposes only. It is provided by third parties and has been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed. The information is not intended to be used as the sole basis for financial decisions, nor should it be construed as advice designed to meet the particular needs of an individual’s situation.We are not affiliated with any government agency including the Social Security Administration.

1 The Boards of Trustees for Medicare. June 22, 2016. “2016 Medicare Trustees Report.” https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/ReportsTrustFunds/Downloads/TR2016.pdf. Accessed July 1, 2016.
2 Ibid.
3 Ibid.
4 Robert Berger. U.S. News & World Report. Jan. 29, 2016. “Retirement Spots With Affordable Health Care.” http://money.usnews.com/money/blogs/on-retirement/articles/2016-01-29/retirement-spots-with-affordable-health-care. Accessed July 1, 2016.
5 Bob Herman. ModernHealthcare.com. March 26, 2016. “Largest Medicare Advantage plans bulk up even more.” http://www.modernhealthcare.com/article/20160326/MAGAZINE/303289995. Accessed July 1, 2016.
6 U.S. Department of Health & Human Services. June 29, 2016. “HHS Announces Physician Groups Selected for an Initiative Promoting Better Cancer Care.” http://www.hhs.gov/about/news/2016/06/29/hhs-announces-physician-groups-selected-initiative-promoting-better-cancer-care.html. Accessed July 1, 2016.
7 Bill Frist. Forbes. June 30, 2016. “From Volume To Value: Achieving Bold Change in Our Healthcare Payment Systems.” http://www.forbes.com/sites/billfrist/2016/06/30/from-volume-to-value-achieving-bold-change-in-our-healthcare-payment-systems/#10617cae31db. Accessed July 1, 2016.