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3 ways Obamacare will affect Medicare

Rumors have long swirled about how Obamacare will affect Medicare benefits. It's a question that may worry many of the 49.4 million American seniors now on Medicare.

However, the outlook for seniors is mostly good.Medicare and Obamacare

The Affordable Care Act (ACA) specifically prohibits any cuts to Medicare coverage. The law actually improves the program's benefits in several key areas.

"There are a number of things in the Affordable Care Act that are helpful to seniors," says Nicole Duritz, vice president for health and family education and outreach for AARP, an advocacy group for retired people. "There's a lot of confusion out there. And, unfortunately, there's also been some misinformation."

One rumor that circulated is that Medicare recipients will no longer be able to choose their own doctor. However, this isn’t the case.

"People in traditional Medicare will be able to go to whatever provider they like," says Josh Fangmeier, a health policy analyst with the Center for Healthcare Research and Transformation at the University of Michigan.

Also if you have Medicare, this fulfills the requirement that everyone has health insurance, so you won’t have to pay the individual mandate penalty. The penalty for not having insurance will be:

$95 per adult (or 1 percent of household income, whichever is greater) in 2014.

$395 per adult (or 2 percent of household income) in 2015.

$695 per adult (or 2.5 percent of household income) in 2016.

3 ways Obamacare will affect Medicare

1. Medicare Advantage

Obamacare includes big changes to Medicare Advantage, a health plan offered by private insurers contracted by Medicare that provides all Medicare Part A and Part B benefits.

Seniors in Medicare Advantage will not see their benefits reduced. However, their current insurance provider might leave the program.

Since 2003, private insurance companies receive extra money if they participate in Medicare Advantage. It's meant to lure private insurers into the program.

The subsidies worked and enrollment in Medicare Advantage more than doubled. About 28 percent of Medicare seniors are in Medicare Advantage, Fangmeier says.

Unfortunately, that success increased Medicare costs.

"The people enrolled in Medicare Advantage are costing the government more,” Fangmeier says, “not only for their coverage, but also [because of] the incentive payments [to insurers]."

One provision of Obamacare is that only insurance plans that provide quality care at controlled prices can receive these cash incentives.

"The only Medicare Advantages plans that will receive that bonus are the plans that perform the best," Duritz says. "Underperforming plans will lose their subsidy. You may well see those low-performing plans leave the marketplace."

The plans will be judged on the quality and cost-effectiveness of the care provided. People will be able to review the Medicare Advantage Plan Star Ratings for each insurer on the Medicare website.

People will still be able to opt into Medicare Advantage after the ACA kicks in, Duritz says. And if their current insurer leaves the program, they can switch to a new company.

2. Prescription drugs

One of the biggest Obamacare benefits for seniors involves the plan to close the Medicare prescription drug "doughnut hole." It's a program coverage gap that has troubled beneficiaries for years.

The doughnut hole is a gap in Medicare's prescription coverage. Medicare covers prescriptions until seniors reach an initial coverage limit. This year it is $2,970.

After that, seniors receive no help. They must pay for everything until the total cost of their medications reaches $4,750. Then they qualify for catastrophic coverage.

That period in which they must pay 100 percent of their medication costs is referred to as the doughnut hole.

Initially, Obamacare will give discounts on prescription drugs. These discounts will help seniors with the doughnut hole.

The discounts will gradually increase until the doughnut hole disappears in 2020. In 2013, those discounts amount to 52.5 percent on brand name drugs and 21 percent on generic drugs for people in the "doughnut hole."

"That has saved billions of dollars already for millions of beneficiaries," Duritz says. "We consider that a really, really big benefit of the Affordable Care Act."

3. Preventive care

Obamacare now requires that Medicare provides free annual checkups, screenings and tests. These include services for seniors like mammograms, colonoscopies, flu shots and bone-mass measurement.

"It's a pretty substantial list, and the law leaves open the flexibility to add tests and screenings over time," Duritz says.

There's an even better benefit, she says. You can't be charged for tests or screenings your doctor asks you to get following your annual check-up.

Duritz urges seniors to particularly make use of the annual checkup.

"It is a time when you and your doctor can sit down and say how did my weight change, have any conditions improved or changed?" she says. "Because it's now an approved appointment, doctors can make the time for it. That is a huge benefit."

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