Statement of Max Richtman
President and CEO
National Committee to Preserve Social Security and Medicare


Subcommittee on Health
Committee on Ways and Means
U.S. House of Representatives

Hearing on “Preserving and Strengthening Medicare.”
Washington, DC

March 16, 2016 

Chairman Tiberi and Ranking Member McDermott:

I am Max Richtman, President and Chief Executive Officer of the National Committee to Preserve Social Security and Medicare, and I appreciate the opportunity to submit this statement for the record.  With millions of members and supporters across America, the National Committee is a grassroots advocacy and education organization dedicated to preserving and strengthening safety net programs, including Social Security, Medicare and Medicaid.  These programs are the foundation of financial and health security for older Americans, but improvements are needed to ensure that beneficiaries receive the care they need and that they are protected from unaffordable out-of-pocket costs.

Medicare’s Success

Last July, we celebrated the 50th anniversary of Medicare – one of our nation's most popular and successful programs – being signed into law by President Lyndon Johnson.  Before the enactment of Medicare in 1965, only 50 percent of seniors had health insurance and 35 percent lived in poverty.

That was a time when even a minor illness or injury could bankrupt older Americans and their families.  Fast forward to 2015 when over 55.3 million Americans are receiving guaranteed health care benefits through the Medicare program regardless of their medical condition or income.  This includes 46.3 million Americans age 65 and above and 9 million Americans receiving Social Security disability insurance benefits.  By the time the last of the baby boomers reaches age 65, it is expected that close to 80 million people will be covered through Medicare.  Together with Social Security and Medicaid, Medicare forms the bedrock of economic security and health security for today’s seniors and for tomorrow’s retirees as well as for individuals who become disabled.

Minding the Gaps in Medicare Coverage

Medicare goes a long way in preventing poverty and promoting greater access to health care for people 65 years of age and older and people with disabilities.  However, Medicare coverage is not comprehensive.  In addition to Medicare’s cost-sharing – for premiums, deductibles and coinsurance – Medicare beneficiaries must pay out-of-pocket for gaps in Medicare coverage.  The standard Medicare benefit does not cover hearing, dental and vision care and most long-term services and supports.  These coverage gaps often come as a surprise to beneficiaries when they need these services, and they are a great financial burden or unaffordable for many people.  In 2014, Medicare households spent over twice as much as the average household on out-of-pocket health care costs even though half of all Medicare beneficiaries had incomes below $24,150.  Older Americans should not have to choose between paying for health care, food or utilities.  Medicare benefits must be improved, not cut, and Medicare’s long-term solvency must be strengthened.

In its 50 year history, Medicare has demonstrated that it is a dynamic program, meeting the changing demographic and health security needs of older Americans.  Starting in 1966, Medicare provided only hospital and outpatient coverage, through Medicare Part A and B, and only to people 65 and older.  In 1972, coverage was added for individuals with disabilities and end-stage renal disease.  Starting in 1982, Medicare provided coverage for hospice care, a prescription drug benefit was added in 2003 and mental health benefits were significantly improved in 2008.  And the Affordable Care Act, passed in 2010, includes many Medicare improvements to promote better health and save money.

The Affordable Care Act Strengthens Medicare

Medicare’s solvency and benefits were strengthened by the Affordable Care Act (ACA).  It improves care for Medicare beneficiaries by eliminating out-of-pocket costs for preventive screenings, annual wellness visits and personalized prevention plans; providing discounts on prescription drugs in the Part D coverage gap known as the “donut hole,” which will be phased out by 2020; and providing incentives to improve the quality of care.  The ACA strengthens Medicare's financing by reducing waste, fraud and abuse; slowing the rate of increase in payments to providers; and phasing out overpayments to private Medicare Advantage plans.  Projections of the solvency of the Part A Trust Fund have increased by 13 years since passage of the ACA.  There’s a lot to celebrate about Medicare’s past and, thanks to the Affordable Care Act, a more hopeful outlook for the present and future.

Improving Medicare’s Payment and Delivery Systems

The National Committee to Preserve Social Security and Medicare’s Legislative Agenda for the 114th Congress 2nd Session, https://www.ncpssm.org/Portals/0/pdf/legislative-agenda-2016.pdf, includes several proposals for strengthening the Medicare program and enhancing benefits.  One of our priorities is strengthening traditional Medicare by building on the Affordable Care Act’s payment and delivery system reforms that are containing costs and promoting high-quality care.  Accountable care organizations, medical homes, bundled payments and value-based purchasing are improving and coordinating care for beneficiaries with multiple chronic conditions as well as reducing costs.  In part because of the savings in the ACA, the growth in Medicare spending per enrollee has slowed significantly in recent years.  Spending per enrollee in 2015 was about

$1,200 lower than was projected in 2010 (Source: http://kff.org/medicare/fact-sheet/medicare-spending-and-financing-fact-sheet/).

Expanding Medicare Benefits

The National Committee’s legislative agenda includes many proposals to improve current Medicare benefits, including:

  • Enact a Catastrophic Out-of-Pocket Limit for Spending in Traditional Medicare.

There are various deductibles and copayments for services which are covered by Medicare.  The Part A deductible and other cost-sharing are quite high.  Medicare does not have a limit – a so-called “stop-loss” or catastrophic cap – on annual out-of-pocket spending.  A catastrophic out-of-pocket limit on spending and a combined Part A and Part B deductible would bring Medicare more in line with large-employer plans and the Federal Employees Health Benefits Program (FEHBP).  A recent version of this approach – Medicare Essential – would provide a new public plan with a comprehensive benefit package as an alternative to traditional Medicare and Medicare Advantage.  It would combine Medicare’s hospital, physician and prescription drug coverage into an integrated benefit with an annual limit on out-of-pocket expenses for covered benefits.

  • Count Observation Days Toward Meeting the Three-Day Rule.

Medicare beneficiaries are being denied access to Medicare’s skilled nursing facility (SNF) benefit because acute care hospitals are increasingly classifying their patients as “outpatients” receiving observation services, rather than admitting them as inpatients.  Under the Medicare statute, patients must have an inpatient hospital stay of three or more consecutive days, not counting the day of discharge, in order to meet Medicare criteria for coverage of post-acute care in a SNF.  As a result, although the care received by patients in observation status is indistinguishable from the care received by inpatients, outpatients in observation who need follow up care in a SNF do not qualify for Medicare coverage.  Observation stays must be counted toward the three-day mandatory inpatient stay for Medicare coverage of SNF services.  Consideration should also be given to limiting beneficiaries’ payments to the lesser of inpatient or outpatient costs.

  • Provide Vision, Dental and Hearing Coverage.   

Medicare does not pay for routine dental care and dentures, routine vision care or eyeglasses, or hearing exams and hearing aids, all services of great importance to many older people and which contribute to their high out-of-pocket health care costs.  Medicare benefits should be expanded to cover vision, dental and hearing health services and equipment because they are important for healthy aging.

With respect to hearing benefits, the National Committee supports H.R. 1653, the “Medicare Hearing Aid Coverage Act,” legislation introduced by Congresswoman Debbie Dingell to expand coverage in the Medicare program to include hearing assessments and hearing aids.  Passage of this legislation would mean that millions of seniors with hearing loss could finally get the help they need to pay for assessments and treatments.

The National Committee Foundation has published an issue brief “The Case for Expanding Medicare Hearing Loss:  The Economic, Social and Medical Factors Impacting Healthy Aging” to demonstrate why Medicare should cover hearing aids which can range anywhere from $3000 – $7000.  Many older Americans on modest, fixed incomes simply cannot afford to pay out-of-pocket for their hearing, vision and dental care.  They go without needed treatments.  In the case of hearing loss, this means that safety risks are increased because they can’t hear a car coming or can’t hear the phone ringing or an alarm going off.  They can’t clearly hear the instructions from their doctor during a check-up which could lead to mistakes in taking their medications.  They can’t hear – so they get confused, embarrassed or frustrated, and they gradually withdraw from their normal routine of activities.  This isolation may be linked to the early onset of dementia or Alzheimer’s disease.  If hearing aid coverage could slow the onset of these dreaded neurologic diseases, billions of dollars in Medicare and Medicaid spending could be saved.  That’s why Congress should enact Representative Dingell’s bill and consider other proposals to improve Medicare benefits.

Proposals to Make Benefit Improvements Affordable

Enactment of the Affordable Care Act is the most recent example of how lawmakers paid for and expanded Medicare benefits.  Today, there are several proposals available to offset the cost of expanding Medicare benefits that we have included in the National Committee’s legislative agenda.

Curbing high drug costs is a prime area to achieve savings.  For seniors, drug costs are important because of their impact on out-of-pocket costs and their potential to threaten the sustainability of Medicare and Medicaid.  High drug prices are having a direct impact on beneficiaries’ Part D costs.  The ten most popular stand-alone Part D plans, representing more than 80 percent of prescription drug plan enrollment, will see average premium increases of 8 percent in 2016.  Accelerating the closure of the Part D coverage gap would allow beneficiaries to receive needed financial relief.

High drug costs impact the Medicare Part B program as well, as many high cost drugs such as cancer drugs are administered in physician offices.  A Government Accountability Office study found that nearly two-thirds of new Part B drugs had expenditures per beneficiary in excess of $9,000 in 2013.

Due to Medicare Part B coinsurance, beneficiaries who are prescribed drugs shoulder 20 percent of the costs of their drugs.  And there is no out-of-pocket cap for Part B expenses.  In 2013, beneficiaries' share of the cost of these drugs ranged from $1,900 to $107,000 per drug.  While many beneficiaries have supplemental insurance to help pay for their out-of-pocket costs, the impact on beneficiaries who need these drugs and who are without supplemental coverage is potentially devastating. 

Without action, drug prices will continue to put pressure on the Medicare program.  Total per beneficiary costs for the Medicare prescription drug program grew by almost 11 percent in 2014, driven largely by specialty drugs.  According to the Centers for Medicare and Medicaid Services, total Medicare subsidies, known as reinsurance, paid to Part D plans with enrollees that have especially high drug costs have grown by more than three times the rate of premium growth.

 

Over the long term, these trends will continue to unnecessarily drive up costs for the program.  Total Medicare Part B drug expenditures grew at an average annual rate of 4.4 percent from 2007 through 2013, which is at a much higher rate than inflation over that time.  Things will only get worse as hundreds of expensive new drugs currently in development make their way to market.

We therefore support a range of policies that would reduce drug prices for the Medicare program.  As a threshold matter, the cost of drug development needs to be made more transparent.  Greater transparency is needed around pricing.  Purchasers and payers need a better understanding of what a reasonable price for a product is based on clinical evidence of effectiveness and on a reasonable return on the cost of development.  When considering ways to make Medicare more efficient, the Ways and Means Committee should monitor the implementation of various state laws that require drug manufacturers to divulge the costs associated with conducting clinical trials, the costs associated with manufacturing drugs, and the amount of government subsidies received for research.  The committee should consider ways that Medicare and Medicaid could collect and use this kind of information to inform reimbursement decisions.

Sole source drugs create a particular problem for policy makers.  The issue is especially problematic for Medicare, which does not receive manufacturer rebates and is prohibited from direct price negotiation with drug manufacturers.  The National Committee supports lifting this prohibition.  That is why we support H.R. 4207, the Medicare Fair Drug Pricing Act, introduced by Representative Jan Schakowsky, which provides such authority to the Secretary of Health and Human Services for sole source drugs.

Additional savings could be achieved from restoring the pharmaceutical drug company rebates for medicines prescribed to dual-eligibles, those on both Medicare and Medicaid, which could generate $121 billion over ten years.  In addition, more savings could be acquired by allowing the government to negotiate Part D prescription drug prices, stopping pay-for-delay agreements that keep less expensive generic drugs off the market, promoting faster development of generic biologic drugs, aligning Medicare Advantage (MA) and traditional Medicare payments, and halting the practice of “upcoding” that some MA plans engage in to receive higher payments.  Finally, increasing National Institutes of Health Alzheimer’s research funding could curb rising Medicare costs associated with the disease and other dementias, and save millions of lives.

Conclusion

Medicare has provided five decades of quality health care coverage to seniors and people with disabilities while lifting generations of Americans out of poverty.  It has accomplished this at a cost consistent with or lower than the increase in private health insurance premiums.  Medicare’s success has made the program tremendously popular.  Across party lines and all age groups, large majorities support our efforts to protect and improve Medicare benefits for all Americans.

Since 1965, Congress has gradually erased some of Medicare’s coverage gaps, but more must be done to make benefits comprehensive and health care delivery more efficient without compromising the quality or accessibility of care.

We urge Congress to focus on improving Medicare with a new sense of urgency because the program – when combined with Social Security – has become increasingly important to the economic security of millions of retirees.  Stagnant wages are grinding away at the middle class’s ability to save for retirement.  Many employers have significantly scaled back or eliminated the traditional retirement benefits offered to their employees.  As a result, current and future retirees cannot afford proposals to cut benefits, raise the eligibility age or privatize the program.

Now is the time to build on the program’s successes in keeping older Americans healthy and “out of the poor house.”  While containing costs for seniors and the program itself, we should be supporting proposals to expand benefits so that Medicare provides comprehensive and affordable health care coverage.

Thank you again for the opportunity to share the National Committee’s views on the future of Medicare.