Protecting Medicare and Medicaid

The National Committee to Preserve Social Security and Medicare believes our nation does not have a Medicare spending problem; it has a health care cost growth crisis. Cutting Medicare alone will shift costs to a segment of the population least able to bear it, and will ultimately reduce access as seniors find health care increasingly unaffordable. Finding additional methods for slowing cost growth system-wide will not only help the economy as the rapidly-escalating health care costs paid by workers and their employers are contained, but will ultimately slow the growth of spending on Medicare and other federal health programs as well.

Medicare and Medicaid are programs of extreme importance in providing health security to older Americans today and in the future. The National Committee is working to protect and strengthen these programs. We oppose the following proposals that would be harmful to current and future beneficiaries:

Increasing health care costs for Medicare beneficiaries

We are against proposals that increase the Part B deductible, introduce home health copayments, and institute a Part B premium surcharge for beneficiaries who purchase Medigap coverage. 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.

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. Half of Medicare beneficiaries have incomes below $22,000 and can ill afford to pay more for health care.

Raising Medicare’s eligibility age from 65 to 67

Raising the Medicare eligibility age from 65 to 67 would not only shift the costs saved by the federal government to the 65 and 66 year-olds losing Medicare coverage, but also to 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 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 an 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 more slowly 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

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.

MEDICARE IMPROVEMENTS

 There are many ways we can address the rising cost of Medicare and improve it without dismantling it and making health care costs unaffordable for many older and disabled Americans. These include:

•  Implementing reforms in the Affordable Care Act (ACA) designed to improve quality and reduce unnecessary spending , such as Accountable Care Organizations, bundled payments, and reduced hospital readmissions. We should wait until the ACA reforms are in place before possibly destroying Medicare, a program that works for seniors.

•  Allowing the Secretary of HHS to negotiate prescription drug prices in Part D , which could save hundreds of billions of dollars.

•  Offering a drug benefit in traditional Medicare , which would lower costs for beneficiaries and taxpayers, in part due to Medicare’s lower administrative costs.

•  Reducing payments to private Medicare Advantage plans to 100% of what it costs traditional Medicare to provide care for the same beneficiary.

•  Extending Medicaid rebates for drugs used by beneficiaries who are dually eligible for Medicare and Medicaid.

•  Updating Medicare to include benefits that seniors really need, such as hearing aids, eyeglasses, and dental care, as well as a catastrophic cap on out-of-pocket spending.

Government Relations and Policy, January 2012