One of the goals of the Affordable Care Act is to keep health care costs from ballooning. So far, it has done some good; the law has already helped push Medicare costs lower, required insurers to keep administrative spending low or pay customers rebates, and created prevention programs to fight chronic diseases like heart disease or diabetes.
Now, a new report from Fidelity Investments shows that the law is already lowering future costs for retirees. Health care costs have increased for years, but in 2011, the firm projected a decrease as a result of the changes included in the health law. Seniors will now pay $20,000 less for their medical bills through retirement:
Fidelity has calculated an annual estimate of medical expenses for retirees for more than a decade. For many Americans, health care is likely to be among their largest expenses in retirement. The estimate, which is calculated by Fidelity’s Benefits Consulting business, does not include any costs associated with nursing-home care and applies to retirees with traditional Medicare insurance coverage.
The estimate has increased an average of 6 percent annually since Fidelity’s initial calculation of $160,000 in 2002, with the exception of 2011 when the estimate declined $20,000. That one and only decrease in the history of the estimate was due to a one-time adjustment driven by Medicare changes that reduced out-of-pocket expenses for prescription drugs for many seniors.
Those Medicare changes included alterations to the so-called “donut hole,” the coverage gap for prescription drugs for older Americans. Under the law, generic medications in the “donut hole” will be discounted until 2020, when the gap will be eliminated. So far this year, that provision has saved Medicare recipients $3.4 billion, more than for all of 2010 and 2011 combined. Millions more have cut costs by taking advantage of free preventive health services.
This estimate can still change, however. According to the Associated Press, if the Supreme Court strikes down the health care law this summer, Fidelity analysts say they will “update” the number. In all likelihood, that revision would be considerably higher.