Printable Version
LCAO Joint Statement for Mark-up of House Budget
Tuesday, March 4, 2008
(Alliance for Retired Americans)
The Honorable John Spratt
207 Cannon
House Office Building
Washington, DC
20515-6065
Dear Mr. Chairman:
We the undersigned organizations
represent millions of Medicare beneficiaries
across the country. We are devoted to
preserving and improving the Medicare program
so that it can meet the health care needs of
beneficiaries for generations to
come.
As advocates for Medicare
beneficiaries and of the Medicare program
itself, we are uniting to express our utmost
concern with the Medicare policies presented by
the Administration. Last month, President
Bush submitted his Fiscal Year 2009 budget,
which proposes severe cuts to Medicare,
totaling $178 billion over the next five years,
$556 billion over the next 10 years, and more
than $10 trillion over the next 75 years.
These massive and capricious cuts increase
beneficiary cost-sharing and slash
reimbursement rates to providers who serve
beneficiaries in traditional Medicare.
Also, last month the President submitted his
legislative proposal to cut Medicare spending
in response to the arbitrary 45 percent
Medicare funding cap. We are concerned
that the magnitude of cuts proposed by the
President will undermine the strength of
traditional Medicare and negatively impact the
health outcomes of beneficiaries by limiting
their access to care.
As Chairman of the
Budget Committee, you are acutely aware of the
financial challenges facing the Medicare
program. However, these challenges are
not unique to the Medicare program—they
reflect the same pressures driving health care
costs for those under age 65 (e.g., the growing
ranks of the uninsured and underinsured
Americans; rising health care inflation; and
the high cost associated with developing new
technological breakthroughs). Solving the
challenges facing our entire health care system
would also strengthen the sustainability of the
Medicare program. Unfortunately, the
President’s Medicare proposals do nothing to
address the overall pressures that are driving
health care costs. Now that Congress
begins to consider the Fiscal Year 2009 budget,
we would like to take the opportunity to
explain why the President’s proposals are so
detrimental to the Medicare program.
An expansion of means-testing would
increase beneficiary premiums, create costly
problems for beneficiaries, and undermine the
social insurance nature of
Medicare.
President Bush has
repeatedly advocated for an expansion of
means-testing in Medicare. Both his
Fiscal Year 2009 budget and his legislative
response to the 45 percent funding cap
contained means-testing provisions. The
means-testing proposals outlined in his budget
would raise beneficiary premiums by $460
million in FY 2009 and over $5.8 billion in the
five-year budget window. Those with
incomes above certain levels are already paying
higher Part B premiums because of provisions
contained in the Medicare Modernization Act of
2003 (MMA). Currently, the income
thresholds rise each year to reflect inflation,
but these inflation adjustments are eliminated
in the President’s budget. Additionally, the
President proposes to apply means-testing to
Medicare Part D, using the same income
thresholds for the means-tested Part B premium,
which like his proposal for Medicare Part B
would not be adjusted for inflation.
Contrary to Administration
claims, means-testing does not modernize or
improve Medicare for beneficiaries. As
hundreds of thousands of Medicare beneficiaries
can attest, the Centers for Medicare &
Medicaid Services (CMS), the Social Security
Administration (SSA) and the Internal Revenue
Services (IRS) cannot, even under the current
system, accurately determine the Part D
premiums that beneficiaries are required to
pay. Current problems include the failure
to withhold premiums, the failure to cease
withholding premiums, the failure to withhold
the correct amount in premiums, and the failure
to forward deducted premiums to the proper Part
D plan. These failures can create costly
problems for beneficiaries, such as having more
deducted from their Social Security check than
they can afford or being retroactively
disenrolled from their Part D plans.
Income-relating Part D premiums, as
envisioned by the President, would be even more
complex than the current system. It would
require proof, confirmation, and multiple data
exchanges among three governmental agencies -
CMS, SSA, and IRS - and the almost 2,000 Part D
plans nationwide. Based on Medicare
beneficiaries' experiences to date, it is fair
to assume that it would greatly exacerbate
current problems, and create new ones, if
another level of premium calculation is
added. Additionally, State Health
Insurance Assistance Programs (SHIPs) already
have difficulty assisting beneficiaries in
choosing the Part D plan that is most
appropriate for them. There are too many
plans, with too many different variables,
including premium, deductible, coverage gap,
formulary, and utilization management
requirements for formulary drugs. The
President's budget unwisely adds another
variable based on income, making premium
calculations more difficult.
We support
the complete elimination of means-testing
because it undermines the social insurance
nature of the Medicare program in which
everyone contributes for the good of all.
As people with higher incomes are required to
pay higher premiums, they will seek less
expensive options in one of Medicare’s
ever-increasing number of private plans.
Means-testing also raises premiums for those
who have paid the most into the program.
By the time they retire, higher-income seniors
have already paid a greater share of Medicare's
cost compared to low- and middle-income
seniors. For example, higher-income
seniors contribute more in Medicare payroll
taxes since there is no income cap, as there is
in the Social Security program.
Higher-income seniors also pay more income tax
which helps to finance the majority of Part B
and Part D costs. Finally, these seniors
are subject to higher income taxes on their
Social Security benefits, which are used to
strengthen Medicare's Hospital Insurance trust
fund.
As submitted, the
President’s proposals to eliminate the
current inflation adjustment for the
income-related Part B premiums as well as for
the Part D premiums would lead to more and more
middle-income seniors paying higher Medicare
premiums. As the Budget Committee is well
aware, a similar problem has occurred with the
Alternative Minimum Tax (AMT). The AMT
was originally designed to prevent high-income
taxpayers from using loopholes to avoid paying
their fair share of taxes. However, over
time more middle-income workers have found
themselves unfairly subjected to the AMT
because the income thresholds were never
indexed.
The
arbitrary cap on general revenue financing of
Medicare ignores Medicare’s financing
structure and limits meaningful reform.
A provision in the Medicare
Modernization Act of 2003 (MMA) requires the
Medicare trustees to project the point at which
general revenues will finance at least 45
percent of Medicare's outlays. If the
trustees project in two consecutive annual
reports that the 45 percent cap will be reached
in the next six years, Presidential action and
Congressional review are triggered. At
that time, the President is required to submit
a proposal to Congress that would likely
require severe Medicare cuts to reduce general
revenue financing. The 45 percent cap was
officially triggered with the release of the
Medicare Trustees report last spring.
Consequently, this has triggered both a budget
proposal and a legislative proposal by
President Bush to reduce general revenue
financing. The President’s budget
proposal would require automatic payment
reductions of 0.4 percent per year to health
care providers when the cap is breached.
These reductions would increase each year by
0.4 percent until general revenue funding is
brought back to 45 percent. And the
President’s legislative proposal contains a
number of provisions including an expansion of
means-testing in Medicare.
This 45
percent cap represents an arbitrary measure of
the Medicare’s health and ignores its
financing structure, which was designed to rely
on general revenues to finance about 75 percent
of Part B and Part D. This structure
allows the revenue raised by income taxes to
shoulder a higher portion of responsibility for
Medicare's funding, placing the burden on a
revenue source which is relatively progressive
and taxes all income. If general revenue
contributions are limited, the burden would
shift to beneficiaries (who are typically on
fixed incomes) or increased payroll taxes,
which only tax wages and fall
disproportionately upon those with lower
incomes. Neither of these policy
considerations is reflected in the funding
limit. Further, the 45 percent cap limits
the consideration of all solutions—including
the use of increased revenues—to address
problems facing both the Medicare program and
the U.S. health care system. We encourage
Congress to repeal this arbitrary funding limit
and prevent these Medicare cuts from taking
effect.
Medicare savings should be achieved by
equalizing payments to private Medicare
Advantage plans.
While the
President proposes billions of dollars in cuts
to traditional Medicare, he continues to dole
out excessive and wasteful subsidies to private
insurance Medicare Advantage plans.
Today, the government pays an average of 13
percent more to cover a beneficiary enrolled in
a private Medicare Advantage plan than it would
cost to cover that same beneficiary under
traditional Medicare. In simple dollar
terms, Medicare pays about $1,000 more a year
to cover a beneficiary in a private plan than
it would cost to provide care to that same
beneficiary under traditional
Medicare.
All Medicare beneficiaries,
whether they enroll in a private plan or not,
subsidize payments to private companies by
paying higher Part B premiums. Today,
these premiums are almost $50 per year higher
per couple than they would be absent the
subsidies to private plans. This number
will continue to grow exponentially in future
years. These increases are in addition to
the record-setting increases in Part B premiums
beneficiaries have already experienced – and
which are expected to continue – as a result
of overall increases in the cost of health
care.
In addition to adding costs
for individual beneficiaries, subsidies to
Medicare Advantage plans result in higher costs
to the federal government. Medicare’s
actuaries estimate that eliminating these
subsidies would add two years of solvency to
Medicare's hospital insurance trust fund.
According to the Congressional Budget Office
(CBO), paying private plans at the same rate as
traditional Medicare would save $50 billion
over the next five years and $157 billion over
the next ten years.
For all of
these reasons, we support the Medicare Payment
Advisory Commission’s (MedPAC) recommendation
that payment policy should be built on a
foundation of financial neutrality between
payments in the traditional fee-for-service
program and payments to private plans. We
should be using taxpayer dollars to promote
quality in Medicare instead of bestowing
unwarranted subsidies on inefficient private
plans that serve a fraction of Medicare
beneficiaries.
The budget
resolution should provide resources for
necessary Medicare
improvements.
As a member of the
Budget Committee, we encourage you to
strengthen Medicare by providing resources that
could be used to improve the Medicare Savings
Program (MSP) for Parts A and B and the
Low-Income Subsidy (LIS) for Part D.
These programs directly help beneficiaries with
limited incomes and assets afford their
Medicare out-of-pocket costs. We also
encourage you to provide resources that could
be used to enhance access to preventive care
and mental health services. We believe
these enhancements would reduce financial
barriers to receiving care and could be
financed by curtailing excessive subsidies to
the insurance industry.
As the
Budget Committee begins to markup the Fiscal
Year 2009 Budget Resolution, we believe there
is a real opportunity to improve and strengthen
Medicare. We strongly urge you to reject
the misguided Medicare priorities proposed by
the President. His proposals for
means-testing premiums and for massive Medicare
cuts could not be more out-of-touch with
beneficiaries. Furthermore, beneficiaries
oppose his attempts to undermine traditional
Medicare by rewarding private insurance
companies with unwarranted taxpayer and
beneficiary-funded subsidies. We look
forward to working with you and other members
of the Committee to improve the program for all
beneficiaries and to ensure that traditional
Medicare is preserved for generations to
come.
Sincerely,
AFL-CIO
AFSCME
Alliance
for Retired Americans
Center for Medicare
Advocacy
Families USA
Medicare Rights
Center
National Committee to Preserve Social
Security and Medicare
OWL – The Voice of
Midlife and Older Women
Cc:
Members of the House Budget Committee
Related Documents
- LCAO Joint Statement for Mark-up of House Budget
LCAO Joint Statement for Mark-up of House Budget