Estimated Savings of $5,000 to Each Medicare Beneficiary from Enactment Through 2022 Under the Affordable Care Act. Summary

09/17/2012

The Affordable Care Act, enacted in 2010, makes many changes to strengthen Medicare and provide better benefits to seniors, while slowing cost growth. As a result, average Medicare beneficiary savings in traditional Medicare will be approximately $5,000 over the 2010 to 2022 period (see Table 1). Beneficiaries who have high prescription drug spending will save much more – more than $18,000 over the same period.

This issue brief provides estimates of savings to seniors and people living with disabilities enrolled in traditional Medicare from the provisions in the Affordable Care Act. The Affordable Care Act favorably affects beneficiary expenditures in four ways. First, premiums for Part B physician and certain other services are expected to increase at a slower rate than would have occurred without the Affordable Care Act, resulting in lower Part B premiums over time. Second, beneficiary copayments and coinsurance under Parts A and B will increase more slowly because the Affordable Care Act slows the rate of growth in payments to hospitals and other providers. Third, closing the Medicare prescription drug coverage gap, often called the “donut hole,” will lower costs for beneficiaries who otherwise would have been required to spend thousands of dollars out of their own pockets for their prescription drugs. Finally, the Affordable Care Act provides many preventive services to people with Medicare at no additional cost.

The Affordable Care Act will lower Medicare spending compared to the baseline prior to the law’s passage through reductions in extra subsidies paid to Medicare Advantage plans; reductions in the rate of growth in provider payments; efforts to make the Medicare program more efficient, coordinated, and quality-oriented; and reductions in waste, fraud and abuse. These provisions will lead to corresponding savings for beneficiaries through lower copayments and premiums. An expected slower rate of growth in Medicare spending leads to a slower rate of growth in beneficiary out-of-pocket payments, and a slower rate of growth in Part B premiums. In addition, the closing of the donut hole will result in large savings for beneficiaries with high levels of prescription drug spending.

Average savings per Medicare beneficiary in traditional Medicare are estimated to be $160 in 2012, increasing to $812 in 2022 (see Table 1). For a beneficiary with spending in the donut hole, total estimated annual savings increase from $735 in 2012 to $2,599 in 2022.

Table1. Annual Savings per Beneficiary in Traditional Medicare Under The Affordable Care Act

  ActBeneficiary Not Reaching theDonut Hole ($) Beneficiary Reaching the Donut Hole ($) All Fee-For-Service Beneficiaries ($) 
2010 -6 244 20
2011 27 631 90
2012 92 735 209
2014 168 996 251
2015 212 1.152 303
2016 261 1.327 362
2017 310 1.555 426
2018 354 1.799 488
2019 405 2.075 559
2020 462 2.196 623
2021 539 2.386 710
2022 629 2.599 812
 
Total 2010-22 3.587 18.553 5.013
Total 2013-22 3.474 16.943 4.743

Notes:

  1. Savings include parts A, B, and D effects. Part A & B, and D premium savings for 2010-19 estimated by OACT.
  2. Parts A and B estimates for 2010-19 are provided by OACT, John Shatto's memo on October 5, 2010.
  3. Estimates for 2020-22 are computed by ASPE in consultation with OACT.
  4. Savings for beneficiaries in the donut hole estimated by ASPE, using Medicare Part D data in 2010 generated by Acumen for ASPE (Non-LIS FFS Beneficiaries with at least 1 Month in D in 2010) and the discounts to beneficiaries in 2011 are benchmarked to CMS analysis of 2011 PDE claims data.

Changes in premiums and cost-sharing will also occur in the Medicare Advantage (MA) program. The Affordable Care Act strengthens this program by gradually eliminating excessive payments to health plans, rewarding quality, and improving protections for beneficiaries against overly high cost sharing. The most recently available data on Medicare Advantage plans suggest that enrollment for 2013 in the MA program is projected to increase by 11 percent from 2012 and premiums will remain steady.1


1 “Medicare Advantage remains strong,” Press Release, U.S. Department of Health and Human Services, September 19, 2012, available at http://www.hhs.gov/news/press/2012pres/09/20120919a.html.
To find recent press releases on MA and Part D contract and enrollment, visit: http://www.cms.gov/apps/media/press_releases.asp

 

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