2015 Medicare Legislation: Reaction & Review


The story behind the Medicare Access and CHIP Reauthorization Act of 2015 (H.R. 2)[1] really begins with what’s known as the Sustainable Growth Rate (SGR). This concept, enacted in 1997, led to a culture wherein doctors were paid for quantity rather than quality of service.

According to the SGR, Medicare would formulaically cap payments to physicians if their Medicare spending exceeded a certain level. This led to doctors performing more often as to make up for losses resulting from their cut. Each year, Congress was faced with the problem of cutting doctor payments as a result of SGR.

So, how would Medicare continue to encourage doctors to accept Medicare assignment if they knew each year they risked their income being cut because they reached the SGR threshold? Moreover, how would they maintain a sustainable growth pattern within beneficiary spending? How would they accomplish this without the current capping concept?

This is where H.R. 2 comes in. The bill not only repeals the SGR, but it also pays doctors based on a patient-centered system which reflects results of care and performance goals. Essentially, it realigns the culture to aim for quality instead of quantity.

As is with almost every large scale government legislation,H.R. 2 will cost money. A large portion of the cost will be offset by Medicare, but some will fall upon Medicare beneficiaries.

Here are the two largest changes you will see in the coming years:

1) Starting in 2020, Sec. 401[2] mandates a limitation on Medigap policies for newly eligible Medicare beneficiaries. This eliminates what is known as first dollar coverage (No deductible, coinsurance, or co-pays). Right now first-dollar coverage is offered through Plans F and C.

If you are in a Plan F or C prior to 2020, your current plan will be grandfathered in and you will maintain first-dollar coverage. The top level of coverage for a NEW plan will require you to pay the Medicare Part B deductible (which you’d do under the current Plan G).

2) In 2018, Sec. 402[3] will require those beneficiaries with incomes above $133,500 (couples will be higher) to pay more for Medicare Part B and Part D premiums. While this impacts less than 2% of beneficiaries, it will generate tens of billions of dollars in savings.

We’ve yet to hear about how Medicare will determine quality of care. We will keep a close eye on this and will report on any updates. For the time being, we should celebrate the bipartisan nature of this legislation and understand that this is by and large a good move for Medicare and Medicare beneficiaries.

[1] https://www.congress.gov/bill/114th-congress/house-bill/2/text

[2] https://www.congress.gov/bill/114th-congress/house-bill/2/text#toc-HD9EB8AC02B354CAFB5E6FA5BDB9C0BB3

[3] https://www.congress.gov/bill/114th-congress/house-bill/2/text#toc-H0EAB7BA277DF43F2A96BD8DBA7B2B56D

Note: This is a piece that I wrote for United Medicare Advisors, an independent comparison shopping brokerage for Medicare insurance products. For more info on UMA and Medicare products check out unitedmedicareadvisors.com