How Could the ‘Big Beautiful Bill’ Impact Medicare?

The Senate is currently considering a proposal, what President Donald Trump has dubbed “one big beautiful bill,” that would make some major cuts to government spending while extending the 2017 tax cuts.

We’ll leave debate over the merits or shortfalls of the bill to another forum. What matters to our clients is how this bill, already passed by the House of Representatives, would affect Medicare.

If the Senate passes the bill — which looks uncertain — it will need to go through reconciliation with the House version. Still, as it stands now, here are three ways that the bill would impact Medicare, which would be slated for a $500 billion reduction over eight years, including a big change to health savings account (HSA) donations.

1. Impose Limits on Who Can Get Medicare

Currently, Medicare is available to those over 65 who are either U.S. citizens or have been a permanent U.S. resident for at least five straight years. You must also have worked for at least 10 years total, though they can be nonconsecutive.

The bill would also nominally outline who is not eligible for Medicare benefits, most notably undocumented immigrants. The bill allows some Cuban immigrants and people from Micronesia, Palau and the Marshall Islands (who are in the U.S. under the Compact of Free Association) to receive Medicare benefits.

2. Allow HSA Contributions for Medicare Part A Enrollees

Currently, those who enroll in Medicare Part A cannot donate to an HSA account even if they remain enrolled in a high-deductible health plan. This is common among people 65 and over who are still working.

The bill will let Medicare Part A enrollees continue to contribute to their HSAs. The amount will vary depending on income level:

·        Individuals making less than $75,000 per year can put up to $4,300 in their HSAs annually.

·        Families earning less than $150,000 can put up to $8,550 in their HSAs annually.

Those amounts may adjust for inflation in coming years. Additional amounts phase out for those who draw higher incomes.

3. Expand Rural Emergency Hospitals

Since 2005, nearly 150 hospitals in rural U.S. counties have closed due to financial issues. An additional 81 no longer offer acute care, such as short-term emergency services. One way to help the shrinking roster of rural hospitals remain open is to designate them as Rural Emergency Hospitals (REHs) as recognized by Medicare.

Under the current law, hospitals enrolled in Medicare as of late 2020 could adopt the REH designation. The new legislation will expand the number of qualifying hospitals to include those enrolled in Medicare from Jan. 1, 2014, to Dec. 26, 2020, allowing them to reopen as REHs.

There are so many advantages to adding more REHs, from reducing the cost of transportation for patients who can now access a closer option to saving lives because emergency care is available in a timelier manner.

We have no doubt that the bill’s effect on Medicare will continue to evolve this summer. If you have questions, reach out to Jay for a discussion — he can help you understand more about Medicare changes.