Dr. McCracken is Director of Evaluation, The Health Foundation of Greater Cincinnati, Cincinnati, Ohio.
The author discloses that she has no significant financial interests in any product or class of products discussed directly or indirectly in this activity, including research support.
Address correspondence to Ann L. McCracken, PhD, RN, Director of Evaluation, The Health Foundation of Greater Cincinnati, Rookwood Tower, 3805 Edwards Road, Suite 500, Cincinnati, OH 45209-1948; e-mail: firstname.lastname@example.org.
Prior to the introduction of Medicare in 1965, close to half of all older adults were uninsured. Today, nearly all are insured (The Henry J. Kaiser Family Foundation [KFF], 2010d). In 2010, 47 million people were covered with Medicare. Thirty-nine million were 65 and older; the other 8 million had permanent disabilities (KFF, 2010d).
Health care for older adults is expensive, and the cost is not distributed equally across all older adults. Medicare spending in 2010 is expected to be $523 billion, 12% of the federal budget (KFF, 2010c). Forty-three percent of Medicare is financed through general revenues, 37% through payroll tax, and 13% through beneficiary premiums (KFF, 2010c). Despite having Medicare, older adults spend 16.2% of their personal income on health care. Among beneficiaries in fee-for-service Medicare, the top 10% of users account for 58% of total Medicare spending (KFF, 2010c).
The number of beneficiaries—and thus the cost of health care for older adults—is growing. It is expected that in 2030 approximately 80 million people will be insured by Medicare, with the ratio of workers per beneficiary decreasing from 3.5 to 2.3 (KFF, 2010c). A decrease in workers paying into Medicare results in decreased dollars going into the Medicare Part A Hospital Insurance Trust Fund.
Increased Medicare expenses, the economic downturn, and the rising tide of 46 million uninsured adults created a perfect backdrop for health care reform. Health care reform will change the trajectory of health care costs and access. It will result in a third-party payer for up to 95% of Americans, and no one will be denied coverage because of pre-existing conditions.
Health care reform will also prolong the solvency of Medicare. In 2009, Medicare Part A was projected to be solvent for 8 years until 2017 (KFF, 2010b). Before The Patient Protection and Affordable Care Act of 2010 and the Health Care and Education Reconciliation Act of 2010, the average annual growth rate of Medicare spending was expected to be 6.8%. With health care reform it is expected to be 5.5%, reducing the 2019 annual cost from $943 billion to $845 billion (KFF, 2010c). The reduction will come about by reducing growth in Medicare payments to health care providers and Medicare Advantage Plans, establishing policies and programs that increase quality while decreasing cost, and creating a Payment Advisory Board. The Payment Advisory Board will recommend, monitor, and maintain target growth rates. People with higher incomes will also see an increase in the Medicare Part A payroll tax, and increases in Part B and D premiums. With these changes in place, solvency of Medicare Part A is projected to be 19 years until 2029 (KFF, 2010c).
What Will It Mean for Older Adults?
What Older Adults Gain
Three of the areas in which older adults on Medicare will benefit are more affordable prescription drugs, free preventive screenings, and improved quality of care. Currently, costs for prescription drugs vary by plan, but they must at least meet a standard set by Medicare or an alternative equal in value. “The standard benefit in 2010 has a $310 deductible and 25% coinsurance up to an initial coverage limit of $2,830 in total drug costs, followed by a coverage gap in which enrollees with at least $2,830 in total costs pay 100% of their drug costs until they have spent $4,550 out of pocket (excluding premiums)” (KFF, 2009, p. 7). Then, catastrophic payments are activated and enrollees pay 5% of the cost of prescriptions.
Under the new law starting in 2010, older adults who are paying 100% from $2,830 to $4,550 in the nonpayment period, the “donut hole,” will receive a check for $250. Starting in 2011, most drug companies will decrease the price of prescriptions purchased in the donut hole. The price of brand-name drugs will decrease by 50% and generic drugs by 7%. In 2013, Medicare will pay more toward prescriptions until 2020, when beneficiaries will pay no more than 25% of the cost of the drugs and the donut hole disappears (Jaffe, 2010).
Medicare recipients will also receive free recommended preventive services, eliminating cost sharing for Medicare-covered preventive services that receive an A or B grade from the U.S. Preventive Services Task Force (USPSTF, 2008). The Task Force, an expert panel, reviews evidence of effectiveness and makes recommendations for preventive services. Grade A includes services that have a high certainty of substantial net benefits. Grade B indicates a moderate certaiwwnty and a moderate to substantial net benefit.
The belief is that preventive services will lessen the costly consequences of preventable or easily stabilized illnesses. Patients will have an annual wellness visit and no coinsurance or deductibles on prevention services (KFF, 2010e). Starting in 2011, this will include a comprehensive risk assessment and a personalized 5-to-10-year prevention plan (Healthcare.gov, 2010). During the wellness visit, the health professional will establish or update a screening schedule for the next 5 to 10 years, based on recommendations of the USPSTF (Healthcare.gov, 2010).
Quality and Efficiency
Coordination, appropriate and effective care, and accountability for patient outcomes are important aims of health care reform. Currently, health care is delivered in multiple settings. The multiplicity of providers and settings often results in a lack of communication, coordination, and accountability for treatment outcomes. Moreover, fee-for-service payment rewards “volume rather than value” (Guterman & Drake, 2010, p. 2.).
Decreased funding has hampered the creation of innovative evidence-based quality programs. Programs such as the Program of All Inclusive Care for the Elderly and the hospice benefit developed as a result of Medicare demonstration programs. However, research funds to test efficient and effective demonstrations such as these decreased from 6.2% to 1.4% in 2008 (Guterman & Drake, 2010).
A new center is planned to address innovative new approaches to care. The Centers for Medicare & Medicaid Services (CMS) will house the Center for Medicare and Medicaid Innovation. This center will be launched in 2011 with the mandate to develop innovative payment and service delivery models and to implement nationwide models that decrease cost and increase quality (KFF, 2010e). Ten billion dollars will be provided for pilot programs initiated from 2011 to 2019 (Guterman & Drake, 2010). Examples of potential approaches to be tested include medical home effectiveness, accountable care organizations, bundled payment, and pay for performance.
In 2012, the Independence at Home demonstration project, one of the many pilots of interest to gerontological nurses, will explore the effect of the delivery of home-based primary care services by physician- and nurse practitioner-directed teams of health professionals on more costly outcomes such as hospitalization and emergency department visits. Teams will share in cost savings that are more than 5% of traditional office- and hospital-based care.
Accountable care organization pilots will begin in 2012. With accountable care organizations, there is local accountability for the management of a full continuum of care, cost sharing, and measurement of outcomes (Guterman & Drake, 2010). In 2013, a pilot program will begin to explore bundling of costs and services for selected acute care episodes. This pilot includes paying a specified amount for hospital, physician, and post-acute care. If programs meet quality improvement measures and save money, they share in the savings. There is also a provision for a community-based care transition program for high-risk clients moving from one care setting to another, such as hospital to home.
How Will Costs Be Reduced and Funds Raised?
Approximately one in four Medicare beneficiaries, 10 million of 45 million, are enrolled in Medicare Advantage plans, which are private health insurance plans. In 2009, Medicare Advantage plans were subsidized $1,138 more per member than traditional Medicare. Over the next 6 years, the payments will be decreased until Medicare Advantage costs are closer to traditional Medicare (Jaffe, 2010). In addition, by 2014, the law requires that at least 85% of every dollar in these private insurance plans is spent on health care rather than on administrative costs or profits (CMS, 2010).
Hospitals, skilled nursing facilities, home health agencies, and various other providers (other than physicians) will experience reduced annual market basket updated payments (KFF, 2010d). Market baskets are indexes used to update payments and cost limits to adjust for change in cost over time. Payments will also be reduced for unnecessary hospital readmissions and hospital-acquired infections.
In 2011, withdrawals for anything other than approved medical expenses from a health savings account will be taxed at 20%; currently it is 10% (Jaffe, 2010). In 2013, the Medicare Part A tax rate will increase from 1.45% to 2.35% on earnings greater than $200,000 for an individual taxpayer and $250,000 for married couples filing jointly. Tax deductions will only be permitted for medical expenses that exceed 10% of income for taxpayers younger than 65; currently it is 7.5%. For those 65 and older, the change will be waived through 2016 (Jaffe, 2010).
There will also be a new tax of 3.8% on unearned income, including money from investments, dividends, annuities, royalties, and rental income for individuals with modified adjusted gross income that exceeds $200,000 (individuals) and $250,000 (couples filing jointly). Interest on tax-exempt bonds, veterans benefits, excluded gain from the sale of a principle residence, qualified retirement income plans, and IRA distributions are excluded from the tax (Jaffe, 2010).
In 2018, employer-sponsored health plans that cost more than $10,200 for individuals or $27,500 for families will be taxed at 40%. The tax is imposed on the insurers (Jaffe, 2010), and there are some age and situational variations on the tax.
Independent Advisory Board
As a fail-safe measure, the health care reform law established a 15-member Independent Advisory Board to recommend proposals to reduce Medicare spending by specific amounts if Medicare exceeds the targeted growth rates. The President will appoint and the Senate will confirm members for 6-year terms. A 10-member consumer advisory council will advise the Board. The Board is prohibited from rationing care, increasing taxes, changing Medicare benefits or eligibility, increasing beneficiary premiums and cost-sharing requirements, or reducing low-income subsidies under Part D. The “Board was established to mitigate the influence of politics and stakeholders on Medicare payment decisions and give authority to a group of outside experts to recommend savings proposals rather than Members of Congress” (KFF, 2010a, p. 2).
Key Provisions of Health Care Reform Related to Nurses
For individuals to receive health care services, the services must be accessible, affordable, and available. To ensure availability, health care reform has addressed workforce issues of all health care professionals, of which nurses are the largest single group. On its website, the American Nurses Association (ANA, 2010) has outlined the key provisions of the Patient Protection and Affordable Care Act (Public Law 111–148) that affect nursing with the section of the law where the information can be found.
To ensure an adequate supply of nurses, a number of loan programs, loan repayment opportunities, nurse retention grant programs, and advanced nursing education grants are available. Section 5303 of Public Law 111–148 provides for grants for advanced practice nurses to pursue doctoral or other advanced degrees if they agree to teach or practice in geriatrics for a minimum of 5 years (ANA, 2010).
Implications for Nurses
Nurses are named explicitly in a number of service delivery models. Accountable care organizations must serve a minimum of 5,000 Medicare fee-for-service beneficiaries and must include a primary care accountable care organization professional. The accountable care organization professional is defined as a physician and a practitioner. The practitioner is further defined as nurse practitioners, nurse specialists, or physician assistants. From 2011 to 2016, in professional shortage areas, primary care practitioners (including nurse practitioners, clinical nurse specialists, physician assistants, and surgeons) will receive a 10% Medicare bonus payment. Section 3024 of the law delineates that nurse practitioners or physician assistants may lead a home-based primary care team as part of an Independence at Home medical practice. Section 5208 supports nurse-managed health centers that provide comprehensive primary care and wellness services to vulnerable populations (ANA, 2010).
Health care reform may seem complex and overwhelming; however, many organizations, such as those cited in this article, have summarized The Patient Protection and Affordable Care Act information. It is important that gerontological nurses understand the key provisions of the law that affect both themselves and their clients. Nurses will play a key role in health care reform, educating and engaging consumers, providing input into and monitoring implementation, and assisting organizations with transition to new policies. Nurses’ knowledge is vitally important in demonstration programs that are applicable to older adults, including the Independence at Home demonstration project, community care transition, and accountable care organizations.
This is no time for nurses to sit back and see what happens. Nurses have demonstrated efficacy in the health care arena, and it would be tragic if we became retroactive and simply accepted a place designated for us by proactive players. As the largest group of professional health care providers, we must be key players in the actualization of health care reform. If not, our gift to health care will not be fully realized during this time of great opportunity.
- American Nurses Association. (2010). Health care reform: Key provisions related to nursing. Retrieved from http://nursingworld.org/MainMenuCategories/HealthcareandPolicyIssues/HealthSystemReform/Key-Provisions-Related-to-Nurses.aspx
- Centers for Medicare & Medicaid Services. (2010). Medicare and the new health care law—What it means for you (CMS Product No. 11467). Retrieved from http://www.medicare.gov/Publications/Pubs/pdf/11467.pdf
- Guterman, S. & Drake, H. (2010, June). Developing innovative payment approaches: Finding the path to high performance. Retrieved from the Commonwealth Foundation website: http://www.commonwealthfund.org/Content/Publications/Issue-Briefs/2010/Jun/Developing-Innovative-Payment-Approaches.aspx
- Health Care and Education Reconciliation Act of 2010, Pub. L. No. 111-152, 124 Stat. 1029 (2010).
- Healthcare.gov. (2010, July14). Background: The Affordable Care Act’s new rules on preventive care. Retrieved from http://www.healthcare.gov/law/about/provisions/services/background.html
- The Henry J. Kaiser Family Foundation. (2009). Medicare Part D 2010 data spotlight: Benefit design and cost sharing. Retrieved from http://www.kff.org/medicare/upload/8033.pdf
- The Henry J. Kaiser Family Foundation. (2010a). Explaining health reform: Medicare and the new independent payment advisory board. Retrieved from http://www.kff.org/healthreform/upload/7961-02.pdf
- The Henry J. Kaiser Family Foundation. (2010b). Fact sheet: Medicare at a glance. Retrieved from http://www.kff.org/medicare/upload/1066-12.pdf
- The Henry J. Kaiser Family Foundation. (2010c). Fact sheet: Medicare spending and financing. Retrieved from http://www.kff.org/medicare/upload/7305-05.pdf
- The Henry J. Kaiser Family Foundation. (2010d). Medicare: A primer. Retrieved from http://www.kff.org/medicare/upload/7615-03.pdf
- The Henry J. Kaiser Family Foundation. (2010e). Summary of key changes to Medicare in 2010 health reform law. Retrieved from http://www.kff.org/healthreform/7948.cfm
- Jaffe, S. (2010, August2). Health care reform explained. Retrieved from http://www.aarp.org/health/health-care-reform
- The Patient Protection and Affordable Care Act, Pub. L. No. 111-148, 124 Stat. 148 (2010).
- U.S. Preventive Services Task Force. (2008). Grade definitions. Retrieved from http://www.uspreventiveservicestaskforce.org/uspstf/grades.htm