FAQ: Decoding The $716 Billion In Medicare Reductions

Q: Where would Medicare spending be reduced?
A: The July report from CBO and JCT found that hospital reimbursements would be reduced by $260 billion from 2013-2022, while federal payments to Medicare Advantage, the private insurance plans in Medicare, would be cut by approximately $156 billion. Other Medicare spending reductions include $39 billion less for skilled nursing services; $66 billion less for home health and $17 billion less for hospice. The law does not make any cuts to the amount of benefits beneficiaries receive and adds some new benefits, including closing the “doughnut hole” gap in Medicare prescription drug coverage, and new preventive services, such as an annual wellness visit with a physician.

Medicare’s trustees say the law prolongs the solvency of the Medicare trust fund. In addition, supporters say that hospitals and other health care providers would be able to bear reduced payments because the cuts would be offset somewhat by increased revenues from millions of new customers who would gain health insurance through the law. They also argue that the Medicare Advantage plans were being overpaid since the cost per beneficiary was higher than what beneficiaries of traditional Medicare cost the government. But critics and some independent analysts have questioned whether cutting payments to these providers will result in a loss of quality or push some providers to refuse to participate in Medicare.