The Facts About the Impact of Obamacare on Medicare

The Health Care Reform, also known as Obamacare, already has and will have an even stronger impact on every American. The impact of Obamacare on people age 65 and older will be significant; but not as strong as for people under age 65. A recent AARP paper makes an attempt to clear up some of the confusion about how Obamacare may change Medicare.

Destroying myths about Health Care Reform (Obamacare) and its Impact on Medicare

AARP addresses the following issues:

Medicare Spending Cuts

Medicare spending will be cut by a total of $716 billion between 2013 and 2022. The money will be used to fund Obamacare; including some provisions directed towards senior citizens, such as covering free preventive care and closing the infamous prescription drug “donut hole”. The law prohibits cuts to guaranteed Medicare benefits. There are two prime sources of spending cuts: Payment rate cuts and Medicare Advantage cuts. According to Sara Collins, vice president of the Commonwealth Fund, “savings will come from reining in unreasonable payments to providers, taxing high-premium plans (beginning in the year 2018), cracking down on fraud and waste, and encouraging patient-centered, coordinated care”.

Read Cost of Obamacare

Medicare Advantage Cuts

Medicare Advantage Plans are an alternative to Original Medicare offered by private insurance companies. The plans were created to reduce prices, but they actually cost taxpayers 14% more per enrollee than the Original Medicare.  A decision was made to reallocate some of the Advantage money to the Obamacare program.

Obamacare does not eliminate Advantage plans – you still may continue to select one of them. Rather, through the recently introduced CMS 5 Star Rating system, the law ensures that the best Advantage plans will be rewarded monetarily and the worst will be punished.

Medicare Supplement Market

For the most part the Medicare Supplement market will be largely unaffected by Obamacare.

Do I need to have additional insurance?

No, there is no requirement for people with Medicare to have any additional insurance.

Will I be allowed to join a Marketplace plan?

Yes, you will. But in most cases it may be to your advantage to sign up for or keep your Medicare. If you join a Marketplace plan, you:

  • May pay more for your coverage.  On the other hand, Part B premiums are determined by a formula designed by Congress a decade ago, based on the previous year’s Medicare costs. The Obamacare law did not change that formula, and Part B premiums are not expected to rise significantly.
  • May have to pay a penalty for Parts A, B, and D if you choose to sign up for Medicare later.
  • Will not be eligible for any premium tax credits and cost-sharing reduction.

What still remains to be seen…

But many issues remain. In particular:


It still remains to be seen what impact the substantial cuts in Medicare will have on health care quality. Despite the fact that the law prohibits cuts to guaranteed Medicare benefits, its quality may suffer.


As a result of Obamacare, doctors may get crushed. Many doctors are thinking of dropping out of the system anyway, and the addition of many millions of uninsured people may make the load on remaining doctors unbearable, and the patients’ life miserable. The Medicare payment rate cuts may just aggravate the situation.

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