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Protecting Social Security, Medicare and Medicaid in Deficit Reduction/Budget Talks

As Congress moves forward to deal with the debt limit, the sequester, the Fiscal Year 2013 Continuing Resolution and the Budget for Fiscal Year 2014, the National Committee to Preserve Social Security and Medicare, along with the vast majority of Americans of all ages and political affiliations, urges Congress to oppose all efforts which would adversely affect Social Security, Medicare and Medicaid beneficiaries today and in the future. 

 

  • Almost half of our nation’s workers have less than $10,000 in savings and 30 percent have less than $1,000.  Barely half of all workers have access to retirement plans through their employment and millions retire without enough private savings to provide an adequate income. 

 

  • Medicare beneficiaries are not wealthy; over half have incomes of less than $22,000 per year and many African American and Hispanic beneficiaries have incomes well below this amount.  On average, Medicare households spend 15 percent of their income on health care, which is three times more than non-Medicare households spend. 

 

There are ways to address the deficit that don’t target America’s seniors, disabled and their families. We encourage Congress to focus on improving the economy, creating jobs and providing economic equity for all Americans and to reject proposals that would hurt millions of middle class and poor Americans who depend on Social Security, Medicare and Medicaid.

 

PROPOSALS THAT CUT SOCIAL SECURITY, MEDICARE AND MEDICAID

Social Security/Chained Consumer Price Index

Using the “chained” Consumer Price Index (CPI) to calculate Social Security, Supplemental Security Income (SSI), military and federal civilian retirement and veterans’ benefits cost-of-living adjustments (COLA) would reduce projected benefits for the oldest and most vulnerable Americans, often older women, who would be least able to afford it.  The Social Security Administration estimates that application of the chained CPI would result in a decrease of about $130 (0.9 percent) in Social Security benefits for a typical 65 year-old.  By the time that senior reaches age 95, the annual benefit cut will be almost $1,400, a 9.2 percent reduction from currently scheduled benefits.

For SSI beneficiaries, the benefit would be reduced even before the person has applied.  The COLA for the need-based SSI federal benefit would be reduced by 0.3 percentage points every year.  For example, if the chained CPI is implemented in 2015, an applicant in 2030, 15 years later, would receive an initial SSI benefit more than four percent lower than it would be without the chained CPI.

If the true reason for a change in the COLA calculation is to more accurately reflect changes in the cost of living, and not simply to reduce the nation's debt, then the CPI-Experimental Price Index for the Elderly (CPI-E) would be a better alternative.  The CPI-E factors in the disproportionate amount seniors spend on health care and the more limited opportunities their patterns of consumption allow for making purchasing substitutions.

Shifting Costs to Medicare Beneficiaries

Even with Medicare, beneficiaries face large out-of-pocket costs with no catastrophic cap for Medicare’s premiums; deductibles and co-payments; supplemental insurance; health services not covered by Medicare such as vision, dental and hearing care and for long-term services and supports (LTSS). 

Proposals to increase beneficiary cost sharing - such as increasing the Part B deductible, requiring a home health copayment, instituting a Part B premium surcharge for Medicare supplemental policies and setting premiums to cover a larger share of Part B spending – could lead many seniors to forego necessary care resulting in more serious and costly health conditions.  In addition, once a person seeks care, it is physicians and other health care providers who make decisions about the care, tests and other services they receive.

Requiring “Wealthy” Medicare Beneficiaries to Pay More

Medicare beneficiaries with incomes above $85,000/individual and $170,000/couple already pay higher Part B premiums, which cover physician and outpatient services, and for the Medicare Part D prescription drug benefit.  Proposals to expand Medicare means testing include increasing income-related premiums under Medicare Parts B and D until 25 percent of beneficiaries, up from about five percent today, are subject to these premiums.  This would affect beneficiaries with incomes equivalent to $47,000 for an individual and $94,000 for a couple today.

Wealthy individuals pay more into Medicare during their working years because there is no wage cap on the Medicare payroll tax like there is for Social Security.  And, beginning in 2013, the Part A payroll tax increased by an additional 0.9 percent on taxpayers earning above $200,000 for an individual and $250,000 for a couple.  These same income thresholds also trigger a 3.8 percent surtax on unearned income, such as interest, dividends and capital gains, which will be applied to Medicare.

Raising the Medicare Eligibility Age

Raising the age of eligibility for Medicare would reduce federal Medicare spending by shifting costs to others.  Older adults, aged 65 and 66, would face an average of $2,200 per year in higher out-of-pocket costs.  Communities of color would be hardest hit because they tend to be in poorer health at earlier ages, accumulate less wealth that can be used to pay for health care due to lower lifetime earnings, and have shorter life expectancies.   

Adding older individuals to those buying insurance through the Affordable Care Act exchanges could raise costs for younger individuals, and Medicare beneficiaries age 67 and older would face higher premiums without the younger and healthier 65- and 66-year olds as part of the Medicare risk pool.  

Employers who provide health care coverage to their retirees would face higher costs as more 65- and 66-year olds received primary coverage through their employer rather than Medicare.  State Medicaid programs would have rising costs as some of the people who lost Medicare coverage would shift to Medicaid.

Medicaid Block Grants, Per Capita Caps and Blended Rates

The Medicaid program is a vital safety net for multiple populations.  Seniors and people with disabilities account for two-thirds of all Medicaid spending, and the program pays for 62 percent of all long-term services and supports (LTSS).  Individuals from communities of color represent about 50 percent of beneficiaries.  Many middle and low-income individuals rely on Medicaid in later life to help pay for their LTSS or nursing home care.  Proposals that would cut Medicaid funding and restructure the program through block grants, per capita caps or blended rates do not address rising health costs and could jeopardize the quality of care provided to many vulnerable people.

PROPOSALS TO STRENGTHEN SOCIAL SECURITY, MEDICARE AND MEDICAID

We also support proposals to strengthen the financing of Social Security and Medicare such as increasing the current cap on Social Security earnings, requiring drug manufactures to provide rebates for drugs used by beneficiaries who are dually eligible for Medicare and Medicaid, mandating that the federal government negotiate Medicare Part D prescription drug prices, and expanding on the delivery system and payment reforms in the Affordable Care Act.

Raising the Social Security Cap on Earnings

Gradually eliminating the cap on Social Security payroll contributions (currently $113,700) would eliminate 95 percent of the current shortfall.

Medicare Part D Drug Rebates and Negotiation

The National Committee has endorsed legislation requiring drug manufactures to provide rebates for drugs used by beneficiaries who are dually eligible for Medicare and Medicaid as they were required to do before passage of the Medicare Modernization Act.  The Congressional Budget Office estimated savings of $137 billion over 10 years.  In addition, the National Committee supports negotiating prescription drug prices which has lowered costs for individuals receiving military, veterans and Medicaid benefits.  Under current law, Medicare cannot negotiate for lower drugs costs for Part D, resulting in seniors paying more than necessary for needed medications.  If the U. S. Secretary of Health and Human Services could bargain for lower prices for Medicare beneficiaries, it would help lower overall health expenditures without impairing the quality of care offered.

Building on the Affordable Care Act

Medicare’s costs per capita are growing more slowly than private health spending or per capita gross domestic product (GDP), due to savings achieved in the Affordable Care Act (ACA).  The ACA includes provisions affecting Medicare that are slowing the growth in spending and leading to changes in the way care is delivered and paid for that improve quality and reduce costs.  We support efforts to expand these improvements, including better care coordination, reforms to fee-for-service payments and enhanced support for primary care health providers. 

 

Government Relations and Policy, February 2013



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