December 13, 2012
Medicare Benefits Still At Risk in Deficit Talks
Policymakers continue to negotiate deficit reduction terms, and Medicare sits squarely in the midst of the debate. Some policymakers demand higher revenues through increased taxes on the wealthiest Americans. Others insist on major changes to earned benefits, like Medicare and Social Security. So, what could proposed changes mean for older adults and people with disabilities?
Raising the eligibility age: Some policymakers suggest raising the Medicare eligibility age from 65 to 67 in an effort to cut federal spending. Yet, estimates suggest that raising the age would increase costs for older adults, communities of color, blue collar workers and employers—totaling $11.4 billion in 2014. That’s two times more cost shifting than the anticipated savings to the government of $5.7 billion.
Medigap cost sharing: Some members of Congress propose limiting or prohibiting “first dollar coverage” in Medigap plans—a widely used form of supplemental insurance to Medicare. This increased cost sharing for Medigap plans would bring the most harm to those beneficiaries who have the greatest need for supplemental coverage—the sickest individuals with moderate incomes. As a result, many beneficiaries forced to pay more would forgo needed health care, resulting in poor health outcomes.
Benefit redesign: The most discussed redesign proposals would combine the Medicare Part A and Part B deductibles, implement a single coinsurance rate for health services, and create an out-of-pocket spending cap for beneficiaries. The benefit redesign proposals currently under discussion would increase costs for Medicare beneficiaries, providers, and other insurers. Instead of reducing the costs of services, the most discussed among these proposals merely shift costs to people with Medicare.
Income-related premiums: Some policymakers propose higher cost sharing for the wealthiest 25 percent of Medicare beneficiaries (individuals with annual incomes of $47,000 or couples with incomes of $94,000). According to the Kaiser Family Foundation, such proposals could lead higher-income beneficiaries to drop out of Medicare Part B, resulting in higher premiums for poorer and sicker beneficiaries who remain on Medicare. Already the Medicare Part B and Part D premiums are higher for beneficiaries with annual incomes above $85,000, or couples with incomes over $170,000.
Medicare Rights Center supports proposals that address the real spending problem—rising health care costs in the system overall—not cost-shifting proposals that place the burden of reducing the deficit on Medicare beneficiaries, half of whom live on annual incomes of $22,000 or less and are in no position to pay even more for their health care.
Visit the Medicare Rights deficit reduction webpage.
Kaiser Family Foundation Releases Fact Sheet on Medicare Spending and Financing
The Kaiser Family Foundation (KFF) recently released a fact sheet explaining what the government spends on Medicare and how the program is financed. In 2012, Medicare spending accounted for 15 percent of the federal budget—or $560 million. This amount is expected to double over the next ten years due to rising health care costs overall coupled with an aging population. Yet, Medicare remains an efficient health program. According to KFF, Medicare spending is projected to grow at a slower rate than private health insurance spending over the next decade, and slower than it has in the last ten years.
The Affordable Care Act (ACA) reduces spending in the Medicare program by $716 billion between 2013 and 2022. The ACA also increases the solvency of the Part A Trust Fund, which pays hospital and other inpatient benefits for Medicare beneficiaries. Thanks to the ACA, the Part A Trust Fund is solvent for eight additional years, until 2024. Other ACA improvements and innovations, including Accountable Care Organizations, are also designed to reduce costs while improving the quality of patient care.
As policymakers continue to look to Medicare for savings, they must explore changes that build greater efficiency in the Medicare program—such as the ACA reforms described here—as opposed to reforms that merely increase costs for people with Medicare.