Anticipated Congressional Proposals to Cut Medicare, Medicaid and Social Security in 2018

2018-10-23T14:11:40+00:00January 16th, 2018|Medicaid Budget, Medicare Policy Papers, Social Security Policy Papers|

Tax legislation approved by the Congress and signed into law by President Trump on December 22, 2017 (P.L. 115-97) will leave Medicare, Medicaid and Social Security vulnerable to benefit cuts because of its dramatic $1.5 trillion increase in the public debt – an increase that will have to be offset in the future.  Inevitably, current and future generations of older Americans and people with disabilities will be forced to pay a heavy price for this irresponsible law.  Key supporters of the tax bill made clear their intent immediately after its approval.  For example, Senator Marco Rubio (R-FL) said that the tax bill is just the first step before “…instituting structural changes to Social Security and Medicare…” benefits to reduce the federal deficit.  Similarly, House Speaker Paul Ryan (R-WI) said that “we’re going to have to get back next year [2018] at entitlement reform, which is how you tackle the debt and the deficit.”  In other words, the majority leadership will seek cuts to Medicare, Medicaid and Social Security benefits as the next step to pay for the deficits this tax bill will create.

Based on congressional budget resolutions that have been approved in recent fiscal years, the National Committee anticipates that the following benefit cut proposals will receive serious consideration in 2018:

Privatizing Medicare

Nearly $500 billion in cuts to Medicare over 10 years which would be achieved by ending traditional Medicare and increasing health care costs for beneficiaries.  Privatizing Medicare achieves savings for the federal government by shifting costs to Medicare beneficiaries.

Under Medicare privatization, 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. Wealthier Medicare beneficiaries would be required to pay a greater share of their premiums than lower-income seniors.

Medicare privatization proposals require 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.

Raising the Medicare Eligibility Age

Medicare benefits would also be cut by gradually increasing the age of eligibility for Medicare to correspond with Social Security’s retirement age which is increasing from 65 to 67. Although this proposal would save money for the federal government, it would increase system-wide health spending by increasing costs for everyone else, including:

  • 65 and 66-year olds who would have to buy private insurance, which can be age rated;
  • Medicare beneficiaries left in an older and less-healthy risk pool;
  • Younger people buying health insurance coverage in a risk pool with more older enrollees (ages 65 and 66) who tend to have higher health care costs;
  • Employers providing health insurance to workers and retirees; and
  • State Medicaid programs.

Increasing Medicare Beneficiaries’ Out-of-Pocket Costs

Achieve savings from redesigning the Medicare benefit 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.

Expand Means-Testing of Medicare Premiums

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 in 2013.

Changing the Structure of Medicaid from an Entitlement to Per Capita Caps or a Block Grant

Medicaid provides funding for health care to help the most vulnerable Americans, including low-income seniors, people with disabilities, children and some families.  We anticipate proposals will be made that would end the current joint federal/state financing partnership and replace it with per capita caps (or a block grant, at state option) giving states less money than they would receive under current law.

Previous proposals capped the growth in federal per-enrollee payments for most children and nondisabled adults enrolled in Medicaid at the medical care component of the consumer price index (CPI-M) beginning in 2020. For most enrollees who are disabled or age 65 or older, the capped amount would be the CPI-M plus one percentage point, starting in 2020. Historically, the CPI-M has grown more slowly than the rate at which Medicaid expenditures have grown.  States would have the option to convert the federal Medicaid payment to a block grant. This would change Medicaid, making it more like the Children’s Health Insurance Program (CHIP) block grants to the states.

While block grants or per capita caps would give state governments greater flexibility to manage and design their Medicaid programs, such discretion in no way compensates for the significant reductions that beneficiaries, including nursing home residents and their families, would face.

In addition, we expect proposals that would further cut Medicaid by applying work requirements to Medicaid recipients under 65 who are not disabled or pregnant.

Repealing the Medicaid Expansion under the Affordable Care Act (ACA)

Beginning in 2014, states have had the option to receive federal funding to expand Medicaid coverage to uninsured adults with incomes of up to 138 percent of the federal poverty level ($12,060 for an individual in 2017). Thirty-two states have expanded their Medicaid programs.

We anticipate renewed interest in repealing the Medicaid expansion. This proposal 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 paid 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 the Medicaid expansion would result in 14-17 million people losing coverage.

Fast-Track Consideration of Legislation to Cut Social Security Benefits

Require the President to submit a plan to be considered in Congress under “expedited procedures” to reform Social Security if the Social Security Trustees determine the Trust Funds do not meet a 75-year actuarial balance. This “fast-track” procedure has been proposed previously by those seeking a way to circumvent public scrutiny of proposals to reduce Social Security programs.

The National Committee believes 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. In addition, Congress should develop changes to Social Security in the full light of day, through regular order and procedures in both bodies, rather than depriving Americans of their right to full participation in the development of reform proposals.

Eliminate Concurrent Receipt of Unemployment Insurance and Social Security Disability Insurance (SSDI)

This proposal would affect SSDI beneficiaries who work, but get laid off – and as a result – qualify for Unemployment Insurance. These are benefits that Americans have earned through their contributions while working, and it is unfair to deny them their earned benefits in an effort to balance the budget.

NATIONAL COMMITTEE POSITION

The National Committee opposes proposals that would reduce health care coverage through Medicare, Medicaid and the Affordable Care Act, and 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 has extended the solvency of the Medicare Part A Hospital Insurance Trust Fund;
  • Transforming the Medicaid program from a federal/state partnership into either per capita caps or a block grant program, which would result in arbitrary cuts to vulnerable seniors and other individuals;
  • Repealing the Medicaid expansion, which would hurt states financially and negatively affect low-income adults who need access to health care services;
  • Reforming Social Security through program changes that are enacted through “fast track” legislative procedures, depriving Americans of their right to full participation in the development of reform proposals affecting their lives.