On March 4, 2014, President Obama submitted his Fiscal Year (FY) 2015 budget to the Congress. The budget proposes a total spending level of $1.014 trillion in FY 2015. This paper summarizes some of the key proposals affecting seniors in the President’s FY 2015 budget.
The President’s budget no longer includes the chained consumer price index (CPI) that would have reduced Social Security cost-of-living adjustments. Thanks to the tireless efforts of the National Committee and its members, the FY 2015 budget does not include any Social Security proposals that would negatively impact benefits for current or future beneficiaries.
The President is requesting $12.1 billion for the Social Security Administration’s (SSA) FY 2015 appropriation for administrative funding, a $327 million increase over the 2014 enacted level. His budget intends for the Social Security Administration to invest in, and improve, customer service. As part of its new customer service modernization initiative to improve internet and in-person services at SSA, the National Committee encourages the Acting Commissioner to develop a plan to significantly increase the number of individuals who receive Social Security statements annually. We also encourage the Acting Commissioner to address the issue of closing Social Security field offices and develop a more transparent process for dealing with office closures. Finally, we urge the Commissioner to consider customer service with regard to benefit verification letters and Social Security number printouts for current beneficiaries.
The National Committee opposes proposals in the President’s budget which would shift additional costs to Medicare beneficiaries. Over half of Medicare beneficiaries had incomes below $23,500 per year in 2013, and they are already paying 26 percent of their average Social Security check for Part B and D cost-sharing in addition to paying for health services not covered by Medicare. Medicare beneficiaries with annual incomes over $85,000 for individuals and $170,000 for couples are paying higher income-related premiums. We do not share the Administration’s view that people will make wiser choices about using health care services if they have to pay more of the cost. Rather, we agree with research that shows these additional costs could lead many seniors to forego necessary care, which, in turn, could lead to more serious health conditions and higher costs.
The President’s budget includes the following four proposals which would increase costs for future beneficiaries:
1. Applies a $25 increase in the Part B deductible in 2018, 2020, and 2022 for new beneficiaries. This increase would be in addition to the current Medicare Part B deductible that beneficiaries pay which, along with general revenues, funds Part B physician and outpatient services. This proposal is estimated to save approximately $3.4 billion over 10 years.
2. Imposes a home health copayment for new beneficiaries beginning in 2018. 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 save approximately $820 million over 10 years.
3. Assesses 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 2018. Other Medigap plans would be exempt from this requirement while still providing beneficiaries options for protection against high out-of-pocket costs. This proposal is estimated to save approximately $2.7 billion over 10 years.
4. Expands income-related premiums under Medicare Parts B and D. Beginning in 2018, the Administration proposes to restructure means-testing in Medicare Parts B and D by increasing the amount of income-related premiums, and maintaining the income thresholds associated with income-related premiums until 25 percent of beneficiaries under Parts B and D are subject to these premiums. A Kaiser Family Foundation study found that this proposal would affect individuals with incomes equivalent to $45,600 for an individual and $91,300 for a couple. This proposal is estimated to save approximately $52.8 billion over 10 years.
The President’s budget includes numerous proposals to strengthen Medicare’s financing and improve the quality of care provided to beneficiaries. We support many of these proposals, including:
- Building on provisions in the Affordable Care Act that will provide better care to Medicare beneficiaries and reform Medicare payments to physicians.
- Supporting initiatives to prevent, detect and recover improper payments, including fraud, waste and abuse.
- Allowing Medicare to receive the same rebates as Medicaid for brand name and generic drugs provided to beneficiaries who receive the Part D Low-Income Subsidy, beginning in 2016. Increasing manufacturer discounts for brand name drugs in Medicare Part D to 75 percent, effectively closing the coverage gap “donut hole” for brand name drugs in 2016, four years sooner than under current law.
- Promoting lower pharmaceutical costs by providing for faster development of generic versions of biologic drugs, and prohibiting “pay-for-delay” agreements between brand name and generic pharmaceutical companies that delay entry of generic drugs into the market.
The National Committee is pleased that the President’s budget does not make major structural changes to the Medicaid program. Medicaid pays for about 62 percent of all long-term services and supports and many older adults and people with disabilities depend on the program for their health care needs.
The President’s budget maintains funding for the Qualified Individual (QI) program and extends the program through 2015. The QI program pays for Medicare Part B premiums for qualified beneficiaries with limited income. Specifically, the QI program provides states 100 percent federal funding to pay the Medicare Part B premiums of low-income beneficiaries with incomes between the 120 and 135 percent of the federal poverty level ($13,700 to $15,300 and assets less than $7,080).
The President’s budget provides the Secretary of Health and Human Services with the authority to integrate the appeals process for low-income individuals who are dually eligible for Medicare and Medicaid benefits. Streamlining the appeals process will reduce confusion for beneficiaries and administrative burden for states and providers.
Administration for Community Living
The President’s budget includes $2.1 billion (up from $2 billion last year) for the Administration for Community Living, which administers the Older Americans Act programs, as well as other programs to support independent living for seniors.
Low-Income Home Energy Assistance Program (LIHEAP)
The President’s budget includes $2.8 billion (down from $2.1 billion last year) for the Low-Income Home Energy Assistance Program. Many older adults, individuals with disabilities and low-income families receiving LIHEAP are struggling to meet basic needs, and should not have to choose between buying food and medicine or paying for home energy.
Government Relations and Policy, March 2014