Fiscal Year 2013 Budget Letter

December 7, 2011

President Barack Obama
The White House
1600 Pennsylvania Avenue, NW
Washington , DC 20500

Dear Mr. President:

On behalf of the millions of members and supporters of the National Committee to Preserve Social Security and Medicare, I am urging you to protect Medicare, Medicaid and Social Security - programs of extreme importance to today's seniors and future retirees - as you develop your Fiscal Year 2013 budget. I ask you to consider our concerns about proposals you and others have put forth with respect to these programs.

Increasing health care costs for Medicare beneficiaries. Medicare beneficiaries already pay 27 percent of their average Social Security benefit for Medicare Parts B and D cost-sharing. This is in addition to significant out-of-pocket health care costs not covered by Medicare. With half of Medicare beneficiaries living in households with incomes below $22,000, they cannot afford to pay more for health care. We are opposed to proposals that increase the Part B deductible, introduce home health copayments, and institute a Part B premium surcharge for beneficiaries who purchase Medigap coverage. It is likely that these additional costs could lead many seniors to forego necessary care, which, in turn, could lead to more serious health conditions and higher costs down the road.

Raising Medicare's eligibility age from 65 to 67. We are also deeply concerned about a plan to cut Medicare by raising the eligibility age from 65 to 67. This would simply shift the costs saved by the federal government to the 65 and 66 year-olds losing Medicare coverage, employers and employees, the states and younger people buying health insurance through the new health insurance exchanges. It would also affect current retirees whose Medicare costs would increase as younger retirees are eliminated from Medicare's risk pool. The Kaiser Family Foundation estimates that increased state and private-sector costs would be twice as large as the net federal savings. Older Americans between the ages of 65 and 67 would experience the deepest cost-shifting, as two out of three would see cost increases averaging $2,200 a year as a result of losing their Medicare coverage.

Expanding Medicare means testing . Medicare Part B has been means tested since 2007 for beneficiaries at the $85,000 and above income level for an individual, and $170,000 and above for a couple. In 2012, they will be paying premiums ranging from $139.90 to $319.70 per month, depending on their level of income, compared with the standard premium of $99.90. The number of beneficiaries subject to this means-tested premium is expected to increase from 2.4 million in 2011 to 7.8 million in 2019, an increase from 5 percent to 14 percent of Part B enrollees. Medicare Part D, the prescription drug benefit is also means tested with the same income thresholds. The Part A payroll tax will increase in 2013 by an additional 0.9 percent on covered earnings above $200,000 for a individual and $250,000 for a couple. These same income thresholds will also trigger a 3.8 percent surtax on unearned income, such as interest, dividends and capital gains, which will be applied to Medicare.

Additional means testing would undermine the social insurance nature of Medicare, and ultimately raise costs for middle and lower-income seniors who depend on it. If mean-testing results in Medicare becoming increasingly unfair to higher-income beneficiaries, they may opt out and purchase their own policy on the private market. The departure of these higher-income beneficiaries, who tend to be younger and healthier, would increase overall costs and reduce public support for the program.

It is also important to keep in mind that over the past decade Medicare spending per enrollee has grown slower than private health insurance spending. Proposals such as means testing and increasing the age of eligibility to reduce Medicare costs fail to address the underlying reasons for growth in Medicare spending - the increase in general health care inflation nationwide.

Reducing Medicaid funding that would affect low-income seniors. Older adults and people with disabilities account for two-thirds of all Medicaid spending, and Medicaid pays for about 62 percent of all long-term services and supports. Proposed cuts to Medicaid - including the establishment of a federal Medicaid "blended rate" - would affect older Americans by jeopardizing the availability and quality of long-term care both in nursing homes and in the community, and by impairing low-income seniors' ability to receive assistance through the Medicare Savings Programs to help pay their Medicare out-of-pocket costs.

Cutting the COLA by replacing the current the CPI-W with the chained-CPI. This would have the effect of reducing the cost-of-living adjustment (COLA) that seniors depend on in retirement to protect their Social Security benefits' purchasing power against the harmful effects of inflation. The current cost-of-living index, known as the CPI-W, while helpful, does not come close to staying in line with the skyrocketing cost of health care, which eats up a significant portion of every retiree's benefit. Switching to a chained-CPI COLA would cut benefits for all Americans, including those who are already retired , and the harm to beneficiaries would compound over time . Recent analysis estimates that, over time, the annual benefit cut stemming from the chained-CPI will accumulate to almost $1,400

The National Committee looks forward to working with you to protect and strengthen Social Security, Medicare and Medicaid, programs that provide health and economic security to older Americans today and in the future.

Sincerely,

Max Richtman
President & CEO