Health Reform Bill Includes Major Changes for Seniors

Access to affordable healthcare may be the focus, but proposals have big changes for older consumers.

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When a health reform bill finally lands on President Obama's desk—this fall, or perhaps even later—it will contain far-reaching changes of major interest to older consumers. And it will reflect what's likely to be a brutal political and legislative process in coming weeks as detailed proposals emerge from the Senate and, later, the House. As the drama unfolds, here's what you should be looking for:

Boomers ages 45 to 54. People in this group are experiencing rising healthcare costs, but they're too young to qualify for Medicare. And they've been hit hard by the recession. According to David Certner, AARP's legislative policy director, access to affordable coverage would be a major victory for this group. He says that there are as many as 7 million uninsured people in this age group and that the numbers of uninsured people jumped 36 percent from 2000 to 2007—and that's before the economy began its nose dive.

[See 8 Tips for Paying for Health Care in Retirement.]

Pre-existing conditions. There seems to be general agreement that insurers are willing to waive use of pre-existing conditions when deciding who gets coverage. Is it an affordable change? Probably, if the pool of people covered is large enough. We would all pay the higher insurance costs for people known to have serious health problems, but society pays this bill anyway—in different ways. This would be a huge change in private insurance for those not eligible for Medicare.

Age rating. Certner notes that getting rid of pre-existing conditions won't solve the problem of insurance affordability if insurers are still permitted to charge older consumers substantially higher rates. Such age-rated premiums are acceptable to AARP, he says, if the ratio of the most to the least expensive rate is no more than 2 to 1. But some proposals include ratios as high as 5 to 1, which he says would allow unacceptably steep premiums.

[Also see 10 Ways to Lower Retirement Costs.]

Medicare. Yes, Medicare recipients will continue to have health insurance under any health reform program. But proposals could have a large impact on this group. The Senate Finance Committee will take the lead on Medicare issues. Its detailed proposals, due out in the next two weeks, will emphasize major changes in how Medicare delivers health services, a committee staffer says. "The proposals will focus on shifting our system from one that incentivizes a higher volume of care to one that incentivizes a higher quality of care." And while most eyes are focused on healthcare changes for people who lack insurance, the staffer says the Medicare system will be the trailblazer in how care is delivered to everyone: "Medicare is our single largest healthcare delivery system. Insurers and healthcare providers will be looking to Medicare to be the model for reform efforts."

The Senate's other major reform bill is coming from the Health, Education, Labor, and Pensions Committee, chaired by Massachusetts Democrat Ted Kennedy. This bill emphasizes improvements in healthcare communications technology, leading to unified health records and enhanced communications among caregivers. Reform proposals also are expected to encourage a stronger role for primary-care physicians, who would be compensated for providing stronger oversight and coordination of their patients' care. This would be of great help to older consumers, who often have multiple health problems that are treated by separate specialists who may not coordinate care with their patients' other doctors.

Preventive health services. Shifting the payment structure to better compensate the health industry for keeping people well would be a huge change, particularly for older consumers who are more likely to develop health problems. Also, under what's known as secondary prevention, reform proposals would provide payments and support services to keep such conditions from becoming worse. Today, Medicare generally does not cover preventive treatment.

Medicare Part D "doughnut hole." AARP's Certner says proposals to reduce or remove the current coverage gap in Medicare's prescription drug program are a major priority. Under 2009 rules, the Part D program ceases providing insurance after the first $2,700 in drug costs and doesn't resume coverage until total out-of-pocket spending exceeds $4,350. This gap, known as the doughnut hole, is No. 1 on the list of Medicare complaints to AARP, Certner says.

Biologic drugs. Drugs made from living organisms have become a major prescription drug option, particularly in treating serious illnesses. They also tend to be very expensive. Currently, Certner says, the U.S. Food and Drug Administration does not have the legal authority to approve generic versions of these drugs. The companies that created the drugs are, not surprisingly, interested in keeping exclusivity as long as possible, Certner says. News reports last week said drug companies might be persuaded to allow generic biologics to move ahead in exchange for enhanced Medicare drug benefits that would create more business for them and reduce seniors' drug bills.

Long-term services and support. The Senate health committee's bill includes a provision creating a basic insurance program that would give at least $50 in daily benefits that consumers could use to defray the costs of in-home care and support services for progressive conditions that make it difficult for them to live independently. Today, private long-term-care insurance is the only private product that offers such protection, but it's expensive and not widely used. More commonly, people spend down their resources and receive long-term-care coverage by going on Medicaid and, most often, entering a nursing home. At-home care is strongly preferred by most consumers and costs much less than a nursing home. Providing a base-level product that all Americans could buy would create new flexibility in funding long-term-care needs, be largely paid for by consumers, and take a lot of financial heat off the troubled Medicaid program.

According to William L. Minnix Jr., head of the American Association of Homes and Services for the Aging, the voluntary program would create a new floor supporting long-term care. Premiums would be only $5 a month for students and those with low incomes and would peak at perhaps $60 a month. All those who want the insurance would be covered, with the understanding that they would have to pay premiums into the product for five years before being eligible to file a claim. The delay is designed to allow the program to build up enough insurance reserves so that it does not require government subsidies. Minnix says it's not clear whether the program would be privately or publicly managed. His group does not care so long as the coverage is provided and is affordable, he says.

[See also Long-Term-Care Insurance Getting Attention.]