The House and Senate Budget Resolutions for Fiscal Year 2016 would make cuts to the Medicare and Medicaid programs and repeal the Affordable Care Act, actions which would jeopardize health care for millions of Americans. Moreover, the House of Representatives would obstruct commonsense proposals that would strengthen the finances of the Social Security Disability Insurance (SSDI) program.
The House Budget Resolution for Fiscal Year 2016, H. Con. Res. 27, introduced by House Budget Committee Chairman Tom Price (R-GA), was passed by the House on March 25, 2015. The Senate Budget Resolution, S. Con. Res. 11, introduced by Senate Budget Committee Chairman Mike Enzi (R-WY), was passed by the Senate on March 27, 2015. These budgets propose drastic cuts in federal spending for programs of importance to most low- and middle-income Americans while proposing tax breaks to benefit the very wealthy and large profitable corporations. This paper summarizes some of the key proposals in the House and Senate Republican FY 2016 budgets that would affect seniors and people with disabilities who rely on Medicare, Medicaid and Social Security.
The House Republican budget ends traditional Medicare and increases health care costs for beneficiaries. Chairman Price's plan privatizes Medicare and achieves savings for the federal government by shifting costs to Medicare beneficiaries. Chairman Enzi’s budget reduces Medicare spending without recommending specific changes to the program.
Privatizing Medicare with Vouchers/Premium Support Payments
Under H. Con. Res. 27, beginning in 2024, when people become eligible for Medicare they would not enroll in the current traditional Medicare program which provides guaranteed benefits. Rather they would receive a voucher, also referred to as a premium support payment, to be used to purchase private health insurance or traditional Medicare through a Medicare Exchange. The amount of the voucher would be determined each year when private health insurance plans and traditional Medicare participate in a competitive bidding process. Seniors choosing a plan costing more than the average amount determined through competitive bidding would be required to pay the difference between the voucher and the plan's premium. In some geographic areas, traditional Medicare could be more expensive. This would make it harder for seniors, particularly lower-income beneficiaries, to choose their own doctors if their only affordable options are private plans that have limited provider networks. The voucher would be adjusted so that wealthier beneficiaries would be required to pay a greater share of their premiums than lower-income seniors.
The Price budget proposal requires private plans participating in the Medicare Exchange to offer insurance to all Medicare beneficiaries. However, it is likely that plans could tailor their benefits to attract the youngest and healthiest seniors and still be at least actuarially equivalent to the benefit package provided by fee-for-service Medicare. This would leave traditional Medicare with older and sicker beneficiaries. Their higher health costs would lead to higher premiums that people would be unable or unwilling to pay, resulting in a death spiral for traditional Medicare. The voucher proposal would adversely impact people age 55 and older, including people currently enrolled in traditional Medicare.
Raising the Medicare Eligibility Age
Beginning in 2024, the Price budget would gradually increase the age of eligibility for Medicare to correspond with Social Security’s retirement age which is increasing from 65 to 67. Raising the Medicare eligibility age is a benefit cut. Although this proposal would save money for the federal government, it would increase system-wide health spending by increasing costs for: everyone 65 and 66 years old who would have to buy private insurance, which can be age rated; younger people buying health insurance coverage in an older risk pool; Medicare beneficiaries left in an older and less-healthy risk pool; employers providing health insurance to workers and retirees and State Medicaid programs.
Increasing Beneficiaries’ Out-of-Pocket Costs
H. Con. Res. 27 would redesign the Medicare benefit beginning in 2024 by combining the Part A and Part B deductibles and making changes to supplemental insurance (Medigap) policies, changes that would likely increase costs for people with Medigap policies. Medicare could be improved for beneficiaries by simplifying its cost-sharing and adding a catastrophic cap. However, the National Committee is opposed to proposals to restructure Medicare’s benefits that would reduce federal spending by requiring beneficiaries to pay more.
We also oppose a proposal in the Price budget plan to expand income-related premiums under Medicare Parts B and D until 25 percent of beneficiaries 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 today.
The Senate Budget Resolution calls for $430 billion in cuts to Medicare without saying how the cuts would be made. However, it points out that this amount of savings is comparable to the Medicare savings in the President’s budget, which includes savings from proposals that increase costs to beneficiaries.
Repealing the Affordable Care Act
Both the House and Senate Budget Resolutions repeal the Affordable Care Act (ACA), which would eliminate improvements already in place for Medicare beneficiaries – closing the Medicare Part D coverage gap, known as the “donut hole;” and providing preventive screenings and services and annual wellness exams without out-of-pocket costs. The Centers for Medicare and Medicaid Services recently reported that since the passage of the ACA, over 9.4 million Medicare beneficiaries in the Medicare Part D donut hole have saved over $15 billion on their prescription drugs, an average of $1,595 per person. An estimated 39 million people with Medicare took advantage of at least one preventive service with no cost sharing in 2014.
The House Budget Resolution keeps the Medicare savings in the ACA and directs that they be used to improve Medicare solvency. It also assumes the same level of revenue from the law’s tax increases even though they would be repealed.
The Senate Budget Resolution uses the ACA’s Medicare savings and tax increases to bring their budget into balance while repealing all of the law’s benefits. It instructs the Finance Committee and the Health, Education, Labor and Pensions Committee to develop a plan to replace Obamacare.
Although thought of as strictly a health program for the poor, the fact is Medicaid pays for about 62 percent of all long-term services and supports provided to seniors and people with disabilities. Consequently, any major change in Medicaid will have a dramatic affect on seniors who have spent their life savings on basic needs and now find themselves in a nursing home they could not afford absent the Medicaid program.
The House and Senate Republican budgets would be devastating to the current Medicaid program and slash benefits for low-income individuals. They call for making major cuts to Medicaid funding and repealing the Medicaid expansion in the ACA.
Block Granting Medicaid Payments to the States
Medicaid provides funding for health care to help the most vulnerable Americans, including low-income seniors, people with disabilities, children and some families. The House budget would end the current joint federal/state financing partnership and replace it with fixed dollar amount block grants – State Flexibility Funds – giving states less money than they would receive under current law. The proposed block grants would cut federal Medicaid spending by $913 billion over the next 10 years (2016-2025).
The Senate budget would change Medicaid to be more like the Children’s Health Insurance Program (CHIP) block grants to the states. The estimated cut in federal spending is $400 billion over 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 to the states.
Repealing Medicaid Expansion under the Affordable Care Act (ACA)
Both the House and Senate budgets would repeal the Medicaid expansion in the ACA. Beginning in 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 participate in the future. The budget resolutions would repeal
Medicaid expansion, taking away $900 billion from the program over 10 years. This would hurt states and low-income individuals by:
- Eliminating billions of federal dollars to states to provide their residents with health care and financial protection. Under the ACA, the federal government will pay 100 percent of the cost for newly eligible low-income adults in Medicaid for the first three years (2014-2016), phasing down to 90 percent by 2020.
- Preventing low-income adults from receiving access to health care services. Repealing Medicaid expansion would result in between 14-17 million people losing access to coverage.
Altogether, the House budget cuts the Medicaid program by more than $1.8 trillion over 10 years, compared to current law, and the Senate budget cuts it by $1.3 trillion.
The House Budget Committee’s Budget Resolution calls for a “bipartisan” approach for reforming Social Security. Reflecting its approach as an example of a possible way forward, Rep. Price’s budget suggests convening a bipartisan commission that would study the “structural deficiencies” within the current Social Security program and recommend specific legislative proposals that would then be considered by the Congress and the President.
The National Committee continues to believe that issues relating to the solvency of the Social Security Trust Funds and benefit adequacy should be considered separate and apart from any discussion of the nation’s debt or deficit. Moreover, Congress should develop changes to Social Security in the full light of day through the use of regular order and procedures in both bodies rather than convening commissions that meet in private, thus depriving Americans of their right to full participation in the development of reform proposals.
H. Con. Res. 27 reaffirms a House rule that puts 11 million severely disabled Social Security Disability Insurance (SSDI) beneficiaries at risk of a 20 percent benefit cut next year by requiring that legislation to make the program solvent be accompanied by revenue increases or, much more likely, benefit cuts. As Acting Social Security Commissioner Carolyn Colvin recently told the Senate Budget Committee, a 20 percent benefit cut would be a “death sentence” to disabled workers who are “barely surviving” on their modest benefits.
The need to strengthen the financing of the DI program is not a surprise. As far back as 1995 the DI trust fund has been projected to face a funding shortfall. The reasons for this have been well known for many years. They are primarily demographic in nature and are expected to stabilize in the years to come.
The 2014 report of the Social Security Trustees projects that the DI trust fund will be substantially depleted sometime in late 2016. In addition, the trustees reported that the income to the DI trust fund at that time will equal only about 80 percent of the trust fund’s obligations. Without action by Congress, in 2016 disability benefits that are currently being paid to about 11 million disabled workers and their dependents will either be delayed or will be reduced across-the-board by 20 percent.
The Price budget dismisses a simple common-sense option for resolving this problem, which is to rebalance income between the Social Security trust funds. Congress has rebalanced income across the trust funds 11 times over the last 60 years—from the Old-Age and Survivors Insurance trust fund to the DI trust fund and vice versa. The last such rebalancing occurred in 1994.
The National Committee supports rebalancing of revenue between the OASI and DI trust funds to make sure that both programs can continue to meet their obligations to the American people. Such a rebalancing would ensure that both funds can pay full benefits until 2033. This approach will reassure disabled Americans that they can continue to count on receiving their full benefits without interruption while providing the Congress with the time to develop needed reforms that will assure the long-term financial health of both of these vital programs.
Supplemental Security Income (SSI)
Children’s SSI benefits serve as a critical lifeline for low-income families caring for children with severe physical and/or mental impairments. SSI benefits replace lost income when a parent must stay home to care for the child, and also cover various extra expenses for children with special needs, enabling families to stay together and care for their children at home instead of in costly publicly-funded institutions. We were dismayed to learn that the Price budget calls for reducing SSI benefits for children who are raised in families where more than one individual also receives SSI benefits. We believe that the benefit structure for the SSI program is woefully out of date; reflecting the neglect the program has received from Congress for decades. Rather than looking for ways to cut benefits to disabled children, Congress should move to update this critical program so that it provides an adequate benefit to those who qualify for it.
NATIONAL COMMITTEE POSITION
The National Committee opposes provisions included as part of the House and/or Senate Budget Resolutions that would reduce health care coverage through Medicare, Medicaid and the Affordable Care Act, as well as proposals that would be detrimental to the Social Security program, particularly the following:
- Ending traditional Medicare by converting it from a defined benefit to a defined contribution program;
- Raising the Medicare eligibility age;
- Increasing costs for Medicare beneficiaries through higher cost sharing and income-related premiums and by restructuring the program and Medigap in ways intended to reduce federal spending;
- Repealing the Affordable Care Act, which is helping Medicare beneficiaries with their prescription drug costs and providing preventive screening and wellness visits with no out-of-pocket costs;
- Transforming the Medicaid program from a federal/state partnership into a block grant program, which would result in arbitrary cuts to vulnerable seniors and other individuals;
- Repealing Medicaid expansion, which would hurt states financially and negatively affect low-income adults who need access to health care services;
- Reaffirming a House rule which would require legislation to make SSDI solvent to be accompanied by revenue increases or, much more likely, benefit cuts;
- Proposals to convene an unelected Social Security commission designed to “fast track” legislation to cut earned benefits and insulate lawmakers from the devastating effect benefit cut proposals would have on retirees, workers with disabilities and survivors.
Government Relations and Policy, March 2015