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Despite reassurances, health reform plans could affect Medicare benefits

The statement

"I just want to assure (you) we're not talking about cutting Medicare benefits."

President Barack Obama, at an Aug. 11 town hall meeting

The ruling

Experts say it's conceivable or likely that legislation could lead to changes in Medicare Advantage benefits. So it's a stretch for Obama to say recipients would not see changes. We rate this Half True.

Many seniors are worried about a federal health care overhaul, and President Barack Obama thinks he knows why.

"I just want to assure (you) we're not talking about cutting Medicare benefits," he told a town hall audience last week in Portsmouth, N.H.

"AARP would not be endorsing a bill if it was undermining Medicare, okay? So I just want seniors to be clear about this, because if you look at the polling, it turns out seniors are the ones who are most worried about health care reform."

Listening to Obama, you would think that Medicare will remain intact. Yet, others claim Medicare spending will be trimmed quite a bit. AARP has said about $231.4 billion could come out of Medicare's budget, while the 60Plus Association, a group that opposes the legislation, says cuts could top out at $500 billion.


We were, too.

Three versions of a health care overhaul are floating around the House, and each dedicates hundreds of pages to Medicare. For this Truth-O-Meter item, we're going to focus on the biggest changes to the program. (So far, the Senate Finance Committee, which holds the purse strings to all things health care, hasn't put any ideas on paper.)

Before delving into the bill and Obama's claim, a little Medicare 101:

There are two basic ways most people get Medicare coverage.

hey enroll in traditional Medicare and a prescription drug plan through the government, and maybe buy a supplemental policy to cover most out-of-pocket costs. Or they enroll in Medicare Advantage programs (they include a drug plan), which are run by private insurers. They typically have more generous benefits such as dental and vision coverage. Some plans even pay the patient's monthly Medicare premium, which can amount to about $100.

We found some disagreement about whether Obama is correct that Medicare benefits would not be cut.

The House bill would not cut any benefits, said Tricia Neuman, vice president and director of the Medicare Policy Project at the Kaiser Family Foundation.

"What it will do is cut growth in Medicare spending," she said.

Indeed, some of the biggest savings in the bill — about $196 billion — would come from a permanent reduction in the annual payment adjustments for some Medicare services, including inpatient hospital services and ambulatory care, according to the Congressional Budget Office. That doesn't mean health care providers will stop being paid for taking care of the elderly; rather, they won't see pay increases in the future.

Obama also wants to save money on the Medicare Advantage program, which covers about one-fifth of all Medicare patients.

"We do think that systems like Medicare are very inefficient right now, but it has nothing to do at the moment with issues of benefits," Obama said in his speech in New Hampshire. "The inefficiencies all come from things like paying $177 billion to insurance companies in subsidies for something called Medicare Advantage that is not competitively bid, so insurance companies basically get $177 billion of taxpayer money to provide services that Medicare already provides. And it's no better — it doesn't result in better health care for seniors. It is a giveaway of $177 billion."

Indeed, a June analysis by the Medicare Payment Advisory Commission, an independent congressional agency, said that the Advantage plan costs taxpayers on average 14 percent more than the traditional Medicare plan.

The House bills propose to change the benchmarks that set the payments, making them equal to what the government pays for traditional Medicare services. According to the CBO, those changes would translate to a savings of $156 billion over 10 years.

We asked experts from both sides of the debate whether all these changes constituted a cut, and most had the same answer: yes and no.

On one hand, they might not be considered cuts because nowhere in the bill are benefits actually eliminated, they said. And other parts of the bill expand coverage for seniors and ultimately make some components of Medicare less expensive for patients. For instance, the legislation would require the pharmaceutical industry to help pay for prescription drugs. That savings will ultimately help the government cover more drug benefits for more patients.

But experts told us the cuts in the Advantage program could lead to some changes. The basic benefits that mirror regular Medicare would stay the same, but the extra benefits that people receive under Advantage could be changed.

"People enrolled in (Medicare Advantage) get services that people in traditional care do not get under Medicare," said Stuart Guterman, an assistant vice president for the Commonwealth Fund, a private foundation that focuses on health care reform. "Insurance companies can afford to cover these services because taxpayer money is subsidizing them. Plans will most likely not offer those extra services, but in no case will (patients) get less Medicare benefits than people in the rest of the program."

That leaves us with Obama's claim that, under the health care reform proposal, Medicare benefits will not be cut.

He's right that the bill does not directly trim Medicare benefits; instead, the government is proposing ways to slow or eliminate some Medicare spending to beef up other aspects of the plan.

But experts told us it's conceivable or even likely that those financial changes could lead to reduced benefits, particularly for people in the Advantage program.

From that perspective, it's a stretch for Obama say that Medicare patients won't see changes in their plans as a result.

We give Obama a Half True.

This PolitiFact ruling has been edited for print. A fuller version is at

Despite reassurances, health reform plans could affect Medicare benefits 08/17/09 [Last modified: Friday, August 21, 2009 6:34pm]
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