The nation's Medicare program may have been the singlemost-debated program during the recent Congressional talks aboutour national debt ceiling. Certainly, it was a key cause ofstonewalling by legislators on both sides of the Congressionalaisle, as neither party wants to be associated with anything whichpotentially hurts our Medicare beneficiaries. They are, after all, one ofthe nation's largest voting blocks, and already radio and TVcommercials are resounding about protecting the rights of seniorcitizens to continue their current Medicare program.

Many of the debt reduction proposals put forth by Congress, theWhite House and various independent, bipartisan groups includereducing the growth in Medicare spending over time. In the finaldebt-ceiling deal, Congress spared Medicare from immediate cuts.But they'll be back for round two this fall, and nothing iscertain.

Most important to watch will be the powerful new congressional“super committee” created as part of the debt agreement. These12 delegates will be tasked with scouring the national budget forsavings in the next several months. Since Medicare makes up nearly23 percent of the federal budget, the committee's finalrecommendations are almost certain to contain some modifications tothe program.

As the committee works to achieve a likely unobtainable $1.5trillion target in budget cuts by Thanksgiving, agents and theirMedicare clients need to be aware proposals that were avoided thefirst time could reappear overnight.

Here are some of the most potentially significant Medicarechanges which have been suggested as part of overall deficit anddebt reduction proposals:

Limit federal spending

What is it/how it would work:

A number of proposals would cap our annual growth in Medicareexpenditures in relation to our gross domestic product. In general,proposals call for limiting the growth in federal support perMedicare enrollee to no more than GDP + 1% per beneficiary. Ourdebt-to-GDP ratio would be analyzed for stability, and if spendingexceeds the proposed limits, action would be required by Congressand the president. In simpler terms, this strategy shifts Medicarefrom what is now a defined benefit program to more of a “definedcontribution” program. Cuts in benefits would almost surelyfollow.

Bottom line: When benefits cuts are required,neither political party will want to be responsible for actuallyenforcing it. This would result in savings that are onlytheoretical.

Raise the eligibility age

What is it/how it would work:

Several of the reform proposals include raising Medicare'seligibility age from 65 to 67 as early as 2014. A study by theKaiser Family Foundation predicts this measure would generate anestimated $5.7 billion in net savings to the federal government,but also would result in an estimated net increase of $3.7 billionin out-of-pocket costs for 65 to 66-year-olds, and $4.5 billion inemployer retiree health care costs. This potential changedraws some of the most intense backlash, since it could possiblyforce some individuals into working longer than anticipated beforeretirement or increase the number of uninsured individuals if the2010 health care reform legislation is repealed, changed oroverturned in court.

Bottom line: Though feared by Americans who'llage into Medicare in the next decade, this proposal is a simplerform of change, and could be gradually phased in over a period ofyears, giving consumers time to prepare. Should Obamacare beenacted in 2014 as currently written, those affected would stillhave guaranteed access to care until they reach age 67.

Change to a premium support program

What is it/How it would work:

This measure would transition the Medicare program, where thegovernment directly pays the medical bills, into a “premiumsupport” or voucher program, in which the government would supply adefined sum to each beneficiary to purchase a health plan of hischoice. Market competition would work to keep plan premiumscompetitive, but as with most health insurance, plans with highercost-sharing required from the insured individual would offer thelowest premiums. Compared to our current Medicare program, apremium support program would likely leave beneficiaries footingthe bill for higher deductibles, co-insurance and co-pays.Furthermore, if national costs grew faster than the establishedallowable limits, then beneficiaries could expect to see higherpremiums.

Bottom line: Even under the current program,there's an enormous lack of awareness in the general public aboutwhat Medicare doesn't cover. If pursued, it's likely that we'll seetens of thousands of beneficiaries aging-in each year that areentirely financially unprepared for the Medicare cost-sharing theyare expected to shell out.

Eliminate first-dollar coverage

What is it/How it would work:

The idea for eliminating first-dollar coverage Medigap plans, like the current Medigap Plan F, stems from thesame idea that drove consumer-directed health care plans into play.Proponents of this change argue if the beneficiary had a bit moreskin in the game, they wouldn't be as likely to over-utilize theirhealth care benefits. Proposals suggested prohibiting Medigapinsurers from covering the first $500 or so in expenses, and thenlimiting the insurer's coverage of the next $2750-$7500 to only 50percent. Beneficiaries on fixed incomes would be less likely to runto the doctor for every cough or sneeze when doing so wouldabsolutely mean at least some dollars out of their own pockets.

Bottom line: Considering the success ofconsumer driven-health care programs in the under-65 market, it'slikely this proposal would be effective in reducing Medicarespending. It remains to be seen, however, whether either politicalparty would be able to garner support for a move that prohibitsbeneficiaries who can afford to purchase richer coverage fromactually doing so.

Restructure cost-sharing

What is it/How it would work:

Some proposals called for a simplification of the beneficiary'scost-sharing under the current Medicare program. This would beachieved by unifying Medicare Part A & B (and possibly even D)deductibles into one deductible, after which the beneficiary wouldpay 20 percent of remaining Medicare-approved costs. A maximumannual out-of-pocket would be instituted and reviewed annually forneeded increases. The major way this proposal would affectbeneficiaries would be that it will create cost-sharing in areaswhere none exist currently, such as in home health care or thefirst 20 days of a skilled nursing facility stay.

Bottom line: While this move would perhapsreduce some infrastructure costs within Medicare, opponentsquestion whether any significant savings would result. SinceMedigap plans would likely be revised to offer coverage of thecombined deductible, beneficiaries who buy Medigap plans won't bemotivated to use their benefits any less.

Cut expenditures by changing the Part D drug benefit

What is it/How it would work:

Several reforms called for savings by requiring Medicare to useits federal purchasing power to further negotiate reduced pricesfor prescription drugs and to push pharmaceutical manufacturers forfaster availability of generic alternatives. Lower drug pricing inthe form of discounts or rebates would theoretically lead to lowercosts for Part D, both for consumers and for the federalgovernment, which subsidizes a large portion of the cost of thepopular prescription drug program. At least one proposal called forthe establishment of a federally administered Part D plan whichwould be available for purchase by all beneficiaries. Anothersuggested the repeal of the Affordable Care Act's timeline to closethe Part D coverage gap.

Bottom line: Federally-negotiated drugdiscounts are fine but a federally-administered Part D plan wouldbe a beneficiary's worst nightmare. Throwing consumers to the mercyof a 1-800 line where they reach an hourly government employee in adepartment that is likely to be woefully understaffed would resultin chaos.

Increase advisory board power 

What is it/How it would work:

The PPACA legislation has been much criticized over its creationof the Independent Payment Advisory Board for fear of publicrationing of health care. Though the board doesn't yet exist andisn't likely to until after the next presidential election, severaldeficit-reduction proposals suggested authorizing the board tocontrol excessive Medicare spending. The board would reviewMedicare's benefit structure every few years and recommend reformsto lower spending. Though Obamacare law prohibits rationing, thevery idea of this panel has been widely denounced by many seniorcitizen groups, who fear older Americans will be the first peopleto lose care whenever health care spending increases.

Bottom line: Anything that looks like BigBrother will be viewed with fear and disdain by consumers. Expectthe “let's kill granny” debate to reappear on the national scene.

During the summer debt ceiling stalemate over proposals likethese, we also saw legislation introduced which targets Medigapinsurance carriers. Sen. John Kerry, D-Mass., and House Rep. PeteStark, D-Calif., co-sponsored a bill in late July that wouldincrease Medigap minimum loss ratios to 80 percent for theindividual market and 85 percent for the group Medigap market. TheMedigap Medical Loss Ratio Improvement Act would basically be anattempt to make the MLR for Medicare supplement products consistentwith other insurance products which were affected by the PPACA legislation.

But many think the bill doesn't focus on the real issue withMedicare. “There has been one central problem with MLRs from theget-go: They don't work; they don't mean anything,” says LeeManross, a lobbyist for the Texas Association of HealthUnderwriters. “They're a very poor measure of a carrier'sefficiency or performance for its policyholders.”

Under current law, Medicare supplement carriers must keep theMLR to 65 percent in the individual Medigap market, and 75 percentin the group Medigap market. Nonetheless, the 2010 NAIC supplementexperience exhibit approximated that many carriers are alreadyexperiencing a 79 percent loss ratio on these plans. We seeevidence of this all the time as carriers have a rate increase atleast annually to try to keep up. Squeezing up to 15 percent moreout of the carrier's overhead needed to run all the administrativefunctions would likely push smaller carriers out of the marketentirely, leaving less choices for the more than 9 million Medicarebeneficiaries covered under a Medigap policy. For those playersremaining in the game, agent commissions will be the most likelytarget of the expense cuts necessary to achieve the new MLR.

It's similar to the kind of thinking behind PPACA—that removinginsurance agents from the equation somehow better protects thepublic. Yet hundreds of thousands of beneficiaries seek outinsurance agents who specialize in Medicare each year because theyfind Medicare itself to be so confusing that they can't even beginto tackle the idea of how to financially protect themselves fromthe catastrophically large holes in Medicare.

Ron Iverson, president and executive director of the NationalAssociation of Medicare Supplement Advisors, stresses that cuttingagent commissions will ultimately only hurt the Medicarebeneficiaries, who rely on agents to help them navigate Medicare.“There are several problems here, the most important being that weknow our value to our clients, who may range from age 65 to100-plus. Few people can explain the benefits of their ownpolicies, let alone understand the underlying benefits of Medicare.As producers, that is our job, and one which we value highly,” hesays.

In fact, Iverson says, many producers work overtime explainingand simplifying Medicare and Medicare products. The obligationbegins with those turning 65, and increased with the longevity ofmost clients. “No older person should be expected to remembereverything they need to know about Medicare and their ownplan—that's why we, as producers, are employed by them,” he says.“We are the first line of underwriting, explanation, policydelivery, solving confusing issues, and finally, any changes inMedicare or their own policies. Older people do not callcompanies—they call their agent.”

Kasey Buckner, a veteran Texas insurance agent agrees that, ifpassed, this bill would leave beneficiaries out in the cold. “Itwould mean nothing more than slashing of agent commissions, thusdriving many out of business, and driving the masses to thegovernment for help.”

In a nutshell, if agents specializing in the Medicare marketfelt that we had escaped the MLR rules of PPACA, we apparentlyhaven't. The legislation has considerable backing as well, havingbeen endorsed by organizations such as AARP, the Alliance forRetired Americans, the Center for Medicare Advocacy, the NationalCouncil on Aging and numerous other associations.

As the ongoing national debate over deficit-reduction continues,advocates in many sectors are already preparing for the fight tocontain or delay the potential cuts that affect them. Taxpayers canbe relatively sure if the budget super committee either fails tomeet its obligation or makes recommendations that lawmakersultimately cannot agree upon, then tax increases are sure to beback on the table as the next means of reducing the deficit.

To be sure, these items leave a lot of opportunity for ourlawmakers to squeeze deficit savings out of the Medicare program,and it will be interesting to watch how it all plays out this fall.Perhaps the scariest is that if the debt committee comes tologgerheads and lawmakers are unable to vote on a proposedconstitutional balanced-budget agreement, then the existing dealcalls for automatic widespread spending cuts to take effect. WhileMedicare and Social Security would be exempt from these cuts,Medicare providers and private Medicare health plan insurers wouldnot, and the cuts would be in addition to those already enacted bythe Obamacare legislation. As a result, we could expect to seequite a few physicians stop seeing new Medicare patients at a timewhen Medicare providers are often already hard to find.

As the ongoing national debate over deficit-reduction continues,advocates in many sectors are already preparing for the fight tocontain or delay the potential cuts that affect them. Taxpayers canbe relatively sure that if the budget super committee either failsto meet its obligation or makes recommendations that lawmakersultimately cannot agree upon, then tax increases are sure to beback on the table as the next means of reducing the deficit.

Danielle Kunkle is vice president of Boomer Benefits, anindependent insurance agency specializing in Medicare-relatedproducts, based in Benbrook, Texas. She is president of the FortWorth Association of Health Underwriters, and is a frequent speakeron Medicare topics.