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11 Myths About Health Care Reform

The hype about the law, including its impact on Medicare, is confusing — and scary. Here’s the truth

MYTH 5: The new law "raids Medicare of $716 billion."

It's simply not true. The Congressional Budget Office (CBO), Congress' independent and nonpartisan budget scorekeeper, recently estimated that the changes to Medicare in the ACA will reduce spending by a total of $716 billion between 2013 and 2022.

"That's where the number comes from," says Guterman. The largest portion of these savings would come from changes to provider payments and correcting overpayments to insurance companies that offer private Medicare plans. "And that projected savings will be used to close the prescription drug 'doughnut hole'; to pay for free, preventive care for consumers; and to increase coverage for the uninsured," Lavarreda says.

All guaranteed benefits in Medicare were protected. These measures actually strengthen Medicare's fiscal viability: Before the ACA was passed, Medicare's Hospital Insurance Trust Fund, which is used to pay hospital bills for Medicare beneficiaries, was projected to run out of money by 2017; after the law was passed, that date was pushed back to 2024.

MYTH 6: The law is going to bankrupt America.

Not according to the CBO and the Joint Committee on Taxation, nonpartisan entities that estimated health reform will actually reduce the nation's deficit by $210 billion between 2012 and 2021, by reducing subsidies to private insurance companies, cracking down on waste and fraud, and reining in profits.

"If we don't get health care spending under control, that's going to bankrupt America," says Shannon Brownlee, acting policy director at the New America Foundation, a nonpartisan think tank.

MYTH 7: The new law will drive up premiums astronomically.

That's an unlikely scenario. "A significant number of the uninsured people who will be brought into the system with the ACA are the 'young invincibles,' " says Brownlee, describing the 18-to-29 age group. "Their relative good health helps to subsidize care for less healthy people."

The law also strengthens states' power to question unreasonable rate increases, whether because of age, preexisting conditions or any other reason. And the law's "medical loss ratio requirement" dictates that 80 to 85 percent of premiums be spent on medical costs. As of Aug. 1, approximately 12.8 million Americans received an estimated $1.1 billion in rebates from insurance companies in cases where overhead expenses exceeded 15 to 20 percent of premiums charged in 2011.

As for Medicare Part B premiums (which cover doctors' services and outpatient care), those are determined by a formula designed decades ago by Congress, based on the previous year's Medicare health care costs. In essence, the government pays 75 percent of Part B costs, and Medicare beneficiaries pay the remaining 25 percent. The law did not change this formula. (There is no truth to a rumor that Part B premiums will rise from $99.90 a month in 2012 to $247 a month by 2014, Lavarreda says.)

MYTH 8: If I can't afford to buy health insurance, I'll be taxed — or worse.

If you can't afford health insurance because of financial hardship (if the cheapest plan exceeds 8 percent of your income), you will be exempt from the tax penalty. Special taxes (from $95 the first year to $695 a year by 2017) will be phased in over the next seven years for those who choose to forgo coverage. Even then, the government will not criminally prosecute or place property liens on people who ignore the tax. At worst, the IRS will withhold the tax amount from individuals' tax refunds.

Next: Will small businesses be fined for not providing health insurance to its employees? »

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