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Congressional Budget Deal: Good or Bad News for Seniors?

This fall, must-pass legislation will provide opportunities for Congress and the President to strengthen and/or harm the economic and health security of over 50 million older Americans.  Before they leave for recess in December, Congress faces bill approval deadlines to avoid a government shutdown, a default, and to extend transportation funding and certain tax breaks. As part of the annual appropriations process, a deal will be sought to mitigate the full return of the “sequester” – automatic across-the-board limitations on defense and non-defense discretionary spending.  Some or all of the bills that must be passed by the end of the year could be combined into a single legislative vehicle if a larger agreement can be made between the President and Congressional leaders.     

APPROVE FISCAL YEAR 2016 APPROPRIATIONS/SEQUESTER RELIEF 

On September 30, the House and Senate passed, and the President signed into law, a temporary Continuing Resolution to fund the day-to-day operation of government until December 11. The stop-gap measure will give lawmakers more time to negotiate appropriations for the rest of FY 2016 and provide sequester relief.

Some members of Congress opposed the Continuing Resolution because it did not defund Planned Parenthood.  Many of them have said they are willing to shutdown the federal government when spending authority expires in December if subsequent appropriations legislation
does not defund the women’s health care provider.  While a shutdown would not threaten payment of Social Security checks or Medicare and Medicaid benefits, Social Security Administration employees could face furloughs which could stop or slow the processing of new applications for benefits, and requests by current beneficiaries for changes of address or replacement Medicare cards.  A government shutdown would have a major impact on the processing of initial applications for Social Security Disability Insurance (SSDI).  SSDI processing delays would have the added effect of delaying receipt of Medicare benefits, because SSDI beneficiaries must be eligible for two years of Social Security benefits before they are eligible for Medicare.  In addition, the delivery of services provided under the Older Americans Act – like home-delivered and congregate meals and senior transportation – could be affected by a shutdown. 

The National Committee urges Congress to avoid a costly and disruptive government shutdown by passing a Continuing Resolution or an Omnibus Appropriations bill(s) for all of FY 2016 before December 11.

The Budget Control Act – legislation enacted to avoid a government default in August 2011 – set into motion the sequester process which would cut defense and non-defense discretionary spending categories by $54.7 billion a year each for an unprecedented ten years.  In December 2013, Senate and House Budget Committee Chairs Senator Patty Murray (D-WA) and Representative Paul Ryan (R-WI) negotiated the Balanced Budget Act which reduced sequestration by $22 billion apiece for defense and non-defense categories in FY 2014 and $9 billion for each category in 2015.  The Murray-Ryan agreement expires on October 1, 2015 and absent Congressional action, full sequestration returns in FY 2016 and remains through FY 2021.  To mitigate the harmful cuts included in sequestration, President Obama proposed to increase spending caps in FY 2016 by $38 billion each for defense and non-defense categories. 

Three years of sequester cuts to non-defense discretionary programs have had serious consequences for key cost-effective programs, including the Older Americans Act, the Low Income Home Energy Assistance Program, and for Social Security Administration field offices. That’s why the National Committee supports the President’s plan to ameliorate the sequester in FY 2016.

Unfortunately, some members of Congress will insist that sequester relief for programs like the Older Americans Act be paid for by cutting Medicare and Medicaid. The tenuous economic situation many older Americans face will erode further if Congress trades partial funding relief for some seniors’ programs by cutting others that provide health security and long term services and supports.

Congress is likely to look no further than the Conference Report on the FY 2016 Budget Resolution (S. Con. Res. 11) passed in May for proposals that would shift costs to Medicare beneficiaries and cut Medicaid by $1.4 trillion over ten years.  The National Committee opposed the budget resolution.  While S. Con. Res. 11 proposed to end traditional Medicare and repeal the Affordable Care Act – including Medicare benefit improvements – Congress is more likely to consider the following harmful budget resolution provisions to pay for sequester relief:

  • Ending the Medicaid joint federal/state financing partnership and replacing it with fixed dollar amount block grants, giving states less money than they would receive under current law.  In exchange, states would have additional flexibility to design and manage their Medicaid programs.  The proposed block grants would cut federal Medicaid spending by $500 billion over the next 10 years.  Giving states greater flexibility in managing and designing their programs in no way compensates for the significant reductions that beneficiaries, including nursing home residents and their families, could face by turning Medicaid into block grants.
  • Repealing Medicaid expansion. Since 2014, states have had the option to receive federal funding to expand Medicaid coverage to uninsured adults with incomes up to 138 percent of the federal poverty level ($16,242 for an individual in 2015).  Over half of the states have expanded their Medicaid programs, and others will likely do so in the future.  Repealing this option would result in at least 14 million people losing their Medicaid coverage and state Medicaid programs would lose a total of $900 billion over 10 years. 
  • Cutting Medicare by $431 billion over ten years.  Over half of Medicare beneficiaries had incomes below $23,500 per year in 2013, and they are already paying 23 percent of their average Social Security check for Parts B and D cost-sharing in addition to paying for health services not covered by Medicare.  When coupled with requirements to shift costs to beneficiaries in the Medicare Access and CHIP Reauthorization Act of 2015 (P.L. 114-10), the unspecified Medicare cuts included in S. Con. Res. 11 would be burdensome to millions of seniors and people with disabilities.

The unspecified Medicare cuts in the budget resolution may be achieved by Congress approving four specific proposals included in the President’s FY 2016 budget. The National Committee opposes the following plans because they would significantly increase costs for future beneficiaries: 

  • A $25 increase in the Part B deductible in 2019, 2021, and 2023 for new beneficiaries. This increase would be in addition to the current Medicare Part B deductible and premiums that beneficiaries pay which, along with general revenues, funds Part B physician and outpatient services. This proposal is estimated to cost beneficiaries nearly $4 billion over 10 years.
  • A home health copayment for new beneficiaries beginning in 2019.  A $100 copayment per home health episode would be applicable for episodes with five or more visits not preceded by a hospital or other inpatient post-acute care stay. This proposal is estimated to cost beneficiaries $1.25 billion over 10 years.
  • A Part B premium surcharge for new beneficiaries who purchase comprehensive Medigap coverage.  The surcharge would be equivalent to about 15 percent of the average Medigap premium (or about 30 percent of the Part B premium) for new beneficiaries who purchase Medigap policies with particularly low cost-sharing requirements, starting in 2019.  This proposal is estimated to cost beneficiaries approximately $950 million over 10 years.[1] 
  • Expand means testing of Medicare Parts B and D premiums to the middle class.  Beginning in 2019, the Administration proposes to restructure means-testing in Medicare Parts B and D by increasing the amount of income-related premiums, and freezing the income thresholds associated with income-related premiums until 25 percent of beneficiaries under Parts B and D are subject to these premiums. This means that until the 25-percent target is reached, the thresholds are not adjusted for inflation. As a result, an increasing share of individuals will be required to pay higher premiums.  This proposal would affect individuals with incomes equivalent to $45,600 for an individual and $91,300 for a couple in 2014.  This proposal is estimated to cost beneficiaries $29.5 billion over 10 years.[2] 

DON’T USE SOCIAL SECURITY AS AN ATM TO PAY FOR THE TRANSPORTATION BILL 

Prior to the August recess, Congress approved a three-month highway funding stop-gap bill in lieu of multi-year reauthorization legislation.  Without another extension or longer-term reauthorization, funding for the nation’s roads and public transit will expire on October 29.  Because the Highway Trust Fund no longer takes in enough gasoline tax revenue to cover surface transportation costs, Congress must come up with more funding.

In July, key Senators proposed using at least two Social Security policy changes as partial “offsets” for transportation funding.  One proposal would have barred payment of Social Security benefits for seniors with outstanding warrants for their arrest. However, almost no senior who would be affected by this measure is an actual fugitive from justice and most of the warrants in question are many years old and involve minor infractions. Moreover, the Social Security Administration (SSA) attempted to administer a similar provision for a number of years with catastrophic effect for many vulnerable elderly seniors, employing procedures that did not withstand judicial scrutiny. If this program is to be repeated it should only be after SSA demonstrates the capacity to manage it.

The second provision relates to the concurrent receipt of both Social Security Disability Insurance (SSDI) benefits and unemployment compensation. If Congress wants to encourage Americans with disabilities to return to the workforce, it makes no sense to strip working SSDI beneficiaries of their eligibility to receive unemployment compensation when, through no fault of their own, they lose a job. Concurrent eligibility, which derives directly from a disabled person’s efforts to return to work, is a work incentive. That incentive should be altered only after the committees of jurisdiction have carefully considered all of the ramifications associated with such a change and, after ample opportunity for public comment.

The National Committee opposes any legislation, including bills that extend transportation funding, that is offset by the enactment of Social Security policy changes that reduce benefits to America’s seniors or place a heavy administrative burden on SSA without providing the resources to carry out the new policy.

PAY FOR SEQUESTER RELIEF, THE HIGHWAY BILL & OTHER PRIORITIES BY

REPEALING THE OVERSEAS CORPORATE TAX LOOPHOLE

Some key legislators have proposed paying for highway and transit funding by using revenue from overseas corporate tax reform.  Currently, many U.S. multinational corporations use a tax loophole which effectively allows them to indefinitely defer paying U.S. taxes on most of their offshore profits until they are repatriated to the United States.  This loophole allows companies to avoid the 35 percent income tax on active profits held overseas.   Some lawmakers support paying for the Highway bill and/or making permanent expiring tax breaks by means of a one-time single-digit percentage repatriation tax on profits held abroad but brought back to the United States within a short time period to be determined.   The proposal increases revenue in the short-term to ease the budget gap at the expense of long-term revenue losses, and will also move more profits and jobs offshore as businesses anticipate another tax-holiday being approved by Congress some time in the future. 

Instead, the National Committee supports repealing the overseas corporate tax deferral loophole.  This proposal would generate $600 billion in tax expenditure savings over ten years, which could pay for the Highway bill, sequester relief and reduce the budget deficit without resorting to Social Security, Medicare and Medicaid cuts.    

AVOID A GOVERNMENT DEFAULT

According to the Treasury Department, legislation must be enacted by November 3rd to allow the government to continue borrowing and avoid a government default. Allowing the government to default on its legally binding financial obligations would result in an economic catastrophe and jeopardize the payment of Social Security, Medicare and Medicaid benefits.

While the Social Security trust funds hold nearly $2.79 trillion in U.S. government securities, the Treasury Department must have cash to pay benefits when they are due.  In December, the Treasury Department is required by law to make over $70 billion in payments, mainly to the 59 million retirees, disabled workers, widows, widowers, children and spouses who receive Social Security benefits.  The Treasury may not have enough incoming revenue to make those payments without the authority to cash in these securities.  Absent the legal authority to borrow beyond the current ceiling, Social Security, Medicare, Medicaid and other payments will not be made unless Congress approves an increase in the debt limit.

Even a short delay in the payment of Social Security benefits would be a burden for the millions of Americans who rely on their earned benefits to pay for out-of-pocket health care expenses, food, rent and utilities.  In fact, almost two-thirds of beneficiaries depend on Social Security for half of their income and 40 percent rely on their benefits for 90 percent or more of their income.

In addition, a default would jeopardize Medicare and Medicaid payments to doctors and hospitals and coverage for prescription drugs, which are critical to the health security of millions of Americans.

Avoiding a default by raising the debt limit simply allows the government to pay bills Congress has previously approved through the enactment of the appropriations bills or authorization legislation for programs like Social Security, Medicare and Medicaid. The National Committee urges Congress to pass a clean increase in the statutory debt limit before the projected default in November or December. 

COMPREHENSIVE BUDGET DEAL 

Some congressional budget observers believe that FY 2016 appropriations, sequester relief, transportation funding, tax provisions and the debt limit could be negotiated as a single budget deal by the end of the year.   In addition, Medicare and Medicaid reductions could be included in Budget Reconciliation legislation that is protected from filibusters in the Senate.  The National Committee opposes cutting Social Security, Medicare and Medicaid to pay for unrelated programs as part of a comprehensive budget deal.  Any savings from changes in social insurance should be used to improve social insurance, not for other purposes.

A BETTER VISION FOR MIDDLE CLASS AND POOR SENIORS 

Benefit battles anticipated this fall demonstrate that there could not be a bigger disconnect between what Americans want and what some in Congress want to do with Social Security and Medicare.  In poll after poll, Americans of all political persuasions and age groups overwhelmingly support our social insurance programs.

This disconnect appears to extend to the growing retirement crisis.  Seniors have less income in retirement because employers have scaled back or eliminated defined benefit plans.  The loss of retirement benefits is even worse for communities of color because they have the highest poverty rates and possess the least amount of wealth.

In addition, stagnant wages are grinding away at the middle class’s ability to save for retirement through defined contribution plans.  In other words, you can’t save what you don’t earn.  What little disposable income middle class Americans have is often used to take care of children, grandchildren and aging parents.  That’s why millions of Americans reach retirement age without enough private savings to live on, which results in 40 percent of Social Security beneficiaries depending on the program for 90 percent of their income in retirement.

To ease the retirement crisis, the National Committee has endorsed H.R. 1391 and S. 1904, the “Social Security 2100 Act” legislation introduced by Representative John Larson (D-CT) and Senator Richard Blumenthal (D-CT).  Larson and Blumenthal’s bold plan achieves long term solvency while making needed improvements in Social Security benefits, including:

  • An across-the-board benefit increase that would provide the typical retiree an extra $300 a year;
  • A fully developed Consumer Price Index for the Elderly to provide Social Security beneficiaries with more accurate inflation protection;
  • Income tax relief for Social Security beneficiaries; and
  • Higher benefits to more low income workers by setting the special minimum benefit at 25 percent above the poverty line. Women whose wages are low because their careers are divided between caregiving at home and the paid workforce would benefit from this proposal.

The National Committee supports H.R. 3377, a bill recently introduced by Representative Nita Lowey (D-NY) that would grant Social Security caregiver credits to workers who take time out from the workforce to care for children or elderly family members.  Absences from the workforce to care for loved ones can significantly reduce the amount of a woman’s Social Security benefit.  That’s why enactment of Representative Lowey’s bill is so important.

Enjoying a livable retirement is also threatened by Medicare coverage gaps that will become increasingly burdensome.  The National Committee strongly believes that Congress should equip Medicare for the economic and health care challenges facing seniors in the 21st century by:

  • Covering vision, dental and hearing services,
  • Enacting a catastrophic out-of-pocket limit;
  • Making prescription drugs more affordable by authorizing Medicare to negotiate with drug manufacturers; and
  • Counting all hospital observation days toward meeting eligibility for skilled nursing facility benefits.

The National Committee supports H.R. 1653, legislation introduced by Congresswoman Debbie Dingell (D-MI), that would expand Medicare coverage to include hearing aids.  Her legislation recognizes that hearing loss frequently goes untreated because many older Americans cannot afford to pay $3,000 to $7,000 for hearing aids.  If seniors can’t hear they may get confused, embarrassed or frustrated, and gradually withdraw from their normal routine of activities.  A July 2015 National Committee Foundation report found that this isolation may be linked to the early onset of dementia or Alzheimer’s disease.  If hearing aid coverage could slow these dreaded neurologic diseases, billions of dollars could be saved. 

The National Committee’s interest in the link between hearing loss and Alzheimer’s disease underliesour commitment to seek more federal funding for Alzheimer’s disease research. Increasing research funding could save millions of lives and curb rising Medicare and Medicaid costs associated with Alzheimer’s disease and other dementias.

Seniors understand that Medicare and Social Security are vital to living in dignity throughout their retirement years.  They understand Medicare and Social Security are not just federal programs – they have risen to the level of an American value that is deeply supported by our nation’s citizens.

In July, we celebrated the 50th anniversary of Medicare and in August, we commemorated the 80th anniversary of Social Security. Americans embrace this heritage.  And now is the time for Congress to value these extraordinary programs by expanding Medicare and Social Security benefits to meet the needs of current and future retirees.

 

Government Relations and Policy Department, September 2015



[1] Office of Management and Budget Fiscal Year 2016 Mid-Session Review, Table S-8 lists the President’s budget proposals and their projected effect on outlays.  These estimates take into consideration the Medigap and Medicare Part A and D means-testing provisions in the Medicare Access and CHIP Reauthorization Act of 2015 (P.L. 114-10).

[2] Ibid.





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