As the electionheats up, Medicare is quickly becoming as important an issue as thePatient Protection and Affordable Care Act itself. 

Though Medicare reform was not the primary intent of the PPACA,the legislation does depend on massive funding changes to Medicarein order to pay for itself. As we head into November, we can expectthe administration to defend those changes while the GOP ticketwill be presenting its own solutions.

First let's take a look at some of the major changes that haveaffected Medicare already under health reform:

• Increases in Medicare Part B and D premiums for higher-incomeMedicare beneficiaries
• Improvement in Part D coverage that began in 2011.Beneficiaries now receive a 50 percent discount on their brand namemedications during the Part D coverage gap, and discounts ongeneric medications as well. These savings under the PPACA willgrow gradually over the next decade so that by 2020, theadministration hopes to see the Part D coverage gap entirelyclosed.
• Annual routine preventive care also was strengthened by thePPACA, whereas Medicare previously only provided a one-timephysical upon initial entry into Medicare. Preventive services alsonow require no cost-sharing by the beneficiary.

These changes—while welcomed by Medicare beneficiaries—come at ahigh price tag. According to the Congressional Budget Office,Obamacare will reduce the growth of Medicare spending by more than$500 billion over 10 years even as baby boomers age into Medicareat record rates. The specific items that make up the major part ofthis reduced spending growth are: 

• Reductions in the scheduled annual increases in payments toMedicare health care providers, including physicians, hospitals andskilled nursing facilities.
• Reductions in payments to Medicare Advantage plans overall, butincluding reform that will allow for the plans to achieve bonusesif they receive high ratings for the quality of care provided.
• A new Independent Payment Advisory Panel is created whoseresponsibility will be to recommend reductions in Medicare spendingto keep spending below specified targets.
• Increases to the Medicare Part A tax from 1.45 percent to 2.35percent on earnings over $200,000 for individuals and $250,000 forcouples, beginning in 2013.

Cuts and concerns

The cuts in doctor payments actually have been called for inprior legislation for many years, but Congress repeatedly steps inat the last minute and kicks the can down the road to stop a massexodus of providers from the Medicare program. Since the PPACAdoesn't address these scheduled cuts, providers fear they'llfinally see their fees cuts under the law. The concern here, ofcourse, is that fewer providers will accept Medicare, but thatremains to be seen.

It should be noted that the PPACA does allow for about $8billion to increase fees paid to primary care physicians in orderto attract more of them into participating in the Medicareprogram.

Regarding the cuts to Medicare Advantage, the CongressionalBudget Office projects the cuts will result in fewer MedicareAdvantage enrollees and fewer benefits offered in the plansthemselves. It's possible we'll see fewer plans available overallin the marketplace.  

The administration feels the government overpays privateMedicare health plan carriers, and that, therefore, those carriershave room to operate at lower reimbursement levels. A major fearamong consumers is that Medicare Advantage companies simply willdiscontinue their plans, leaving beneficiaries with fewer availableoptions in the overall marketplace.

There also are a number of other more minor reforms introducedby the PPACA that address quality and the delivery of health careas well as payment reforms, such as those aimed at reducingpayments for preventable hospitalizations.

Romney's plan

In contrast, the Romney plan takes an entirely differentapproach to Medicare reform that incorporates some of CongressmanPaul Ryan's original GOP proposals. 

In essence, the Romney plan could be called a delayed “definedcontribution” plan. By delayed, they mean people on Medicare rightnow, or approaching the age of Medicare eligibility in the nextdecade, would see no change. 

However, younger Americans (under age 55) would see their futureMedicare reformed into a program in which each beneficiary would begiven a certain amount of money annually from the federalgovernment he or she could then use toward the cost of buying theirown private Medicare health plan or traditional Medicare.

Some of the key components of the Romney plan are:

• Future Medicare insurance plans will be required to providebenefits comparable to what Medicare already offers.
• Seniors with lower incomes still will have access to savingsprograms that help them to get adequate coverage.
• The fixed-benefit amount given to each beneficiary would bemeant as “premium support.” Essentially this means beneficiariesshould understand this program is designed to pay for some of thecosts of their health coverage during retirement, but the definedbenefit might not cover all their expenses.
• Beneficiaries would be able to choose from richer plans and paythe difference between their premium support allowance and theactual cost of the plan. Likewise, if they choose a more affordableplan, they might have leftover money from their premium supportallowance they could use toward copays or deductibles that theirplan might require.

While traditional Medicare still would be available from thefederal government, there is no guarantee the federal plan would becheaper than other alternatives in the marketplace. In fact,federal Medicare would be competing as an insurance plan againstprivate carriers also offering their own Medicare plan options tothe public.

The Romney plan doesn't call for any changes to Medicare'ssystem where people who earn higher incomes pay more for theirMedicare benefits, so it would seem claims by the administrationthat a Romney/Ryan ticket would benefit the rich areunfounded. 

In a Romney-reformed Medicare system, those wealthierbeneficiaries would see less premium support than lower incomebeneficiaries. Instead of externally attempting to slow the growthof Medicare spending, the Romney plan relies on the laws of freemarket supply and demand, whereby natural competition betweenprivate insurance companies would hopefully not only hold costsdown but hopefully drive the quality of care up.

The Obama campaign team is attacking the Romney plan as a“voucher” system that would cost Medicare beneficiaries more than$6,400 a year beyond what they pay now. But Obamacare cuts toMedicare Advantage would also likely make for considerably higherspending by beneficiaries, so there is a lot left up to theindividual consumer here to decide which program he feels is in hisbest interest.

According to Romney's website, his plan intends to address theinherent funding problems in the current Medicare system which hasresulted in the program's unsustainability. 

Whether American voters, including millions of seniors, acceptthe need for such fundamental reform and are willing to make thesacrifices necessary to save the program is something that we won'tknow until Nov. 6.  

Danielle Kunkle is the immediate past president of the FortWorth Association of Health Underwriters, and the co-owner ofBoomer Benefits, an insurance agency specializing in Medicare. Youcan learn more about Medicare legislation by visiting the blog onher agency's website, www.boomerbenefits.com.