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What You’ll Pay for the Medicare ‘Doc Fix’

Beth Braverman
With Medicaid Costs Soaring, Republicans Plan Dramatic Eligibility Changes

After decades of last-minute deals to patch the Medicare payments system, the House of Representatives passed a bill Thursday that would insure that Medicare doctors continue to be paid at current rates. 

“This relentless return to this issue was creating a sense of anxiety around Medicare, so this permanent solution may provide some peace of mind to both people in the program, and their physicians,” says Tricia Newman, senior vice president and director of the Program on Medicare Policy at the Kaiser Foundation. 

Related: How Obamacare Will Impact Your 2014 Taxes 

It appears that the bill will get approval from both the Senate when it returns from a two-week recess, and President Obama. The plan adds $141 billion to the federal deficit in the first decade, with costs rising more sharply after that. But it will also offset some of its costs by pushing some of the expenses onto Medicare customers. 

Here’s how it will affect seniors:  

Higher Medicare premiums for the wealthiest: The bill will require wealthier patients to shoulder a larger percentage of the cost of their insurance starting in 2018. Those with a modified adjusted gross income of $133,500-$160,000 ($267,000-$320,000 for a couple) per year would pay 65 percent of their premium costs for Part B (outpatient services) and Part D (prescription drugs), up from 50 percent now. Those earning $160,000-$214,000 per year ($320,000-$428,000 for couples), would see their share of the premiums increase form 65 percent to 75 percent. 

The Kaiser Family Foundation estimates this change would affect 2 percent of current enrollees. Individuals making $133,500-$160,000 currently pay $272.20 per month, while those making $320,000-$428,000 pay $313.90. 

Higher premiums: Even those individuals making less than $133,500 per year will see their premiums rise. Since all enrollees pay a set percentage of premiums as doctor fees rise, those premiums are expected to increase as well. The Congressional Budget Office estimates that those premiums will increase under this bill by about $10 by 2025 to $181 per month. 

Related: Not Everyone Is Happy with Bi-Partisan Medicare Deal 

Higher Medigap deductibles: About 20 percent of Medicare enrollees buy a supplemental Medigap plan, which helps with out-of-pocket costs and typically pays the deductible for outpatient services. The new Doc Fix plan would block Medigap plans from paying the deductible cost, currently capped at $147 per year, starting in 2020. “The idea is for people to have some exposure to healthcare expenditures when they’re making treatment decisions,” Neuman says. 

More competitive Medicare Advantage plans: Most Medicare enrollees who don’t use Medigap opt for a Medicare Advantage (Part C) plan, which is typically either an HMO or a PPO and provides extra coverage for things like prescription drugs and vision or dental. Such plans offer the convenience of having just one plan and sometimes cost less than combining a Medigap Plan with Part D coverage, but they often have narrower networks and require co-payments. 

Plan operators may see the proposed Doc Fix changes as a way to grab market share by offering prices that can beat the higher premiums in traditional Medicare plans. “Medicare Advantage plan sponsors may try to absorb some of those premium increases in order to grow their enrollment,” says Paul Keckley, the managing director of the Navigant Center for Healthcare Research and Policy Analysis. 

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