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Healthcare Reform

How Health Care Reform Affects Medigap and Medicare Advantage Plans

The health care reform bill that got signed into law on March 23, 2010, will affect all Americans. Most of the changes take place in the small group and individual health insurance markets, but there are also changes that affect older Americans.


The new health care law cuts $575 billion from Medicare spending over the next ten years.  Unfortunately, this will affect hospital profitability and could threaten the existence of some institutions, and it is expected that senior access to physicians may go down.

There is a new tax on investment income on people who earn over $200,000 a year, called a Medicare tax.  However, the revenues generated by the tax are not allocated to the medicare trust funds.

On the positive side, the "doughnut hole" in which Medicare recipients must cover their prescription drug costs will be covered, phased in over the next 20 years.

Changes to Medicare Advantage

Many of the cuts will come from funding for the Medicare Advantage program.  Medicare's Chief Actuary predicts that over half of those on a Medicare Advantage program (7.4 million people) will lose access to this coverage. 

Early Retiree Reinsurance Program

From June 23, 2010 until January 1, 2014, businesses that provide medical coverage to early retirees can take part in a federally-sponsored early retiree program.  This is intended to help early retirees until state health exchanges and federal subsidies on individual health insurance are put in place.  There is currently $5 billion dedicated to this program.  It will reimburse early retiree's (and dependents) health care claims for 80% of the costs between $15,000 and $90,000 (adjusted for inflation).

An early retiree is defined as an individual who is 55 or older, not an active employee, and not yet eligible for Medicare.  The reimbursement goes to the employer, which must pass the savings down to their employee participant.  Starting in 2014 early retirees will have the option of purchasing coverage through the new health insurance exchange.  Once you turn 65 and are no longer covered by a retirement plan, you will want to sign up for a low-cost Medicare Supplement plan or a no-premium Medicare Advantage plan in place to cover any medical needs that may arise before reform takes place.

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Disclaimer: Medigap Advisors is not connected with or endorsed by the U.S. Government or the federal Medicare program. Medicare has neither reviewed nor endorsed the information contained on this website. This is not a complete listing of plans available in your service area. For a complete listing please contact 1-800-MEDICARE or consult (TTY users should call 1-877-486-2048), 24 hours a day/7 days a week.