The Affordable Care Act: Montana's second steps.

• Author: Davis, Gregg

Why the Bull's-Eye on Medicare?

Over the next decade, the Affordable Care Act transforms the health care landscape each year as new provisions take effect. This year, several provisions affect Medicare, and it's no wonder given the magnitude of federal spending on the nation's health insurance program for Americans age 65 and older. Medicare accounts for 11 percent of $10.8 trillion in federal government spending, second only to Social Security (23 percent) among the three main federal entitlement programs. The other entitlement program, Medicaid--including the State Children's Health Insurance Program--accounts for 9 percent of total federal spending (U.S. Census Bureau, 2010). Federal payments for 167,000 Medicare beneficiaries living in Montana were more than $1.2 billion in 2010, the latest year for which data are available.

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All four components of Medicare are affected this year. Part A, the Hospital Insurance (HI) program, covers inpatient, skilled nursing facilities, home health, and hospice services. Part B, Supplementary Medical Insurance (SMI), covers physician, outpatient, home health, and preventive services. Part C, Medicare Advantage (MA), provides a private alternative to the traditional fee-for-service Medicare plan. Part D provides outpatient prescription drug benefits delivered by private plans under contract with Medicare.

This year, the Affordable Care Act has provisions that transfer more of the cost directly to Medicare beneficiaries. Since general revenues finance three-quarters of all Medicare Part B and Part D programs (Figure 1), shifting some of the burden from taxpayers to Medicare beneficiaries has political appeal in an environment where there's interest in reducing federal spending.

The challenges facing Medicare are obvious. An aging population, health care costs that continue to outpace general inflation, and longer life expectancies will double Medicare spending in the next decade. A decline in the number of taxpaying workers per Medicare beneficiary will further strain the ability of general revenues to sustain Medicare spending.

Changes in Medicare for 2011

This year Medicare beneficiaries will notice several changes, including:

* higher deductibles for Medicare Part A and higher premiums for Part B and Part D coverage for high-income individuals;

* possible reduction in benefits in Medicare Advantage plans;

* bonus payments to primary care providers and possibly better access;

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