How U.S. Health Care Reform Works

By: Molly Edmonds

Changes to Medicaid and Medicare

Speaker of the House Nancy Pelosi speaks about how the health care overhaul will affect Medicare.
Speaker of the House Nancy Pelosi speaks about how the health care overhaul will affect Medicare.
Associated Press/Harry Hamburg

Those who qualify for Medicare and Medicaid will continue to qualify. The bill also expands Medicaid coverage, so that individuals and families that make less than 133 percent of the federal poverty level will be eligible. The plan will also eliminate the "doughnut hole," which is a gap in coverage under Medicare Part D. This gap has made it very expensive for some elderly people to fill prescriptions in the past few years.

Medicare Advantage, a private plan within Medicare, will be subject to cuts of $132 billion over 10 years. The plans under Medicare Advantage often provide extra benefits like gym memberships and free eyeglasses. The program is paid for by the government, yet administered by the private insurers, and Obama has said that this amounts to a subsidy for the insurance companies -- one that doesn't do much to make seniors any healthier [source: White House]. While seniors can still sign up for Medicare Advantage, it's possible that some of the more expensive perks may be cut. No other Medicare benefits will be cut.


Just as private insurance spending has skyrocketed in recent years, so too has Medicare spending. The Patient Protection and Affordable Care Act aims to curb these escalating costs by eliminating waste and unnecessary services in the system, all while maintaining quality care. To do this, Medicare will have additional oversight and review on how it treats patients. Most notably, Medicare may begin bundling services so that results are rewarded, rather than the number of procedures. That means that instead of paying for each separate test that a person with migraines receives, payment would be given once for the overall treatment of migraines.

In speeches, President Obama often likened this new payment scheme to taking your car to an auto repair shop. If the original problem flared up again just a few days after your car left the shop, you wouldn't pay the shop again for repairs. Rather, you'd want them to fix the car that they hadn't fixed in the first place. To translate this to Medicare, the current proposals call for incentives for providers who treat patients effectively and efficiently, without multiple hospital admissions or diagnostic tests. In this way, we pay for good patient care, as opposed to mediocre patient care. It's possible that such reforms with Medicare may eventually permeate the entire health care system, but that's not currently part of the bill.

Eliminating waste in the system and curbing the costs of Medicare Advantage are two ways that the bill will be paid for. What are the other options for funding?