Transcript National Committee to Preserve Social Security and Medicare

The Privatization
of Medicare
2008 Conference of the National Council on
Aging & the American Society on Aging
March 27, 2008
Alison Bonebrake
Legislative Representative
[email protected]
National Committee to Preserve
Social Security and Medicare
1-800-966-1935 / www.ncpssm.org
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THE MMA…PLANTING
THE ROOTS OF
PRIVATIZATION
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MEDICARE MODERNIZATION ACT
• On December 8, 2003 President Bush signed
into law, “Medicare Prescription Drug,
Improvement, and Modernization Act of 2003”
(P.L.108-173).
• The MMA contained key provisions designed
to undermine and privatize Medicare.
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PROHIBITED MEDICARE FROM OFFERING
PRESCRIPTION DRUG PLAN
• MMA allowed only private companies to offer
drug benefit.
• MMA expressly prohibited Medicare from
directly insuring seniors and providing a
government-administered prescription drug
plan.
• MMA contained “noninterference” provision
prohibiting the Secretary of HHS from directly
negotiating drug prices with drug
manufacturers.
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PROBLEMS WITH
PRIVATIZED DRUG BENEFIT
 Privatization of prescription drug benefit
resulted in an administratively inefficient,
unnecessarily expensive, and overly complex
program which fails to meet the needs of
many seniors.
 1,824 stand-alone PDPs offered in 2008 (17
national plans)
 1,932 MA-PDs offered in 2008
 Benefit structure varies by plan (premiums, copays, deductibles, coverage gap, & formulary)
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OFFERED EXCESSIVE SUBSIDIES
TO INSURANCE PRIVATE PLANS
• Private plans first allowed to participate in
Medicare because some believed they could
provide better services at a lower cost; they
were paid 5% less
• Over time subsidies grew & MMA increased
subsidies even further
• Today, private plans are an average of 13%
than it would cost to cover that same
beneficiary under traditional Medicare
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PROBLEMS WITH
SUBSIDIES TO PRIVATE PLANS
• Medicare pays $1,000 more per year to cover
a beneficiary in a private plan.
• All Medicare beneficiaries, whether they
enroll in a private plan or not, subsidize
payments to private plans by paying higher
Part B premiums.
• Subsidies expedite insolvency of HI trust fund
by 2 years.
• Equalizing payments would save $50 billion
over the next 5 years and $157 billion over
the next 10 years.
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MEANS-TESTED PART B PREMIUMS
• Beginning in 2007, those with higher
incomes pay larger a monthly Part B
premium.
• In 2008, individuals making more than
$82,000 & couples making more than
$164,000 pay higher premiums
• Monthly means-tested Part B premiums
range from $122.20 to $238.40
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PROBLEMS WITH MEANS-TESTING
• Undermines social insurance nature of
Medicare.
• Erodes public support for Medicare by those
with higher incomes.
• Creates administrative complexities and
confusion among beneficiaries.
• Could apply to more seniors over time.
• Could lead to means-testing of all social
insurance programs.
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CREATED PRIVATIZATION
DEMONSTRATION PROJECT
• MMA created “comparative cost adjustment
demonstration project” beginning in 2010
• Demo requires Medicare to compete with subsidized
plans in up to 6 metropolitan areas
• The federal government will provide a fixed dollar
amount per beneficiary, based on the average cost of
government and private plans in region
• If beneficiaries enroll in a less expensive plan, they
can pocket a portion of the savings.
• If beneficiaries enroll in a more expensive plan, they
will pay out-of-pocket for any costs beyond their
allocation.
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PROBLEMS WITH PRIVATIZATION
DEMONSTRATION PROJECT
• Demo induces more beneficiaries to enroll in
private plans.
– Beneficiaries in traditional Medicare will have to
pay higher premiums since it insures the sicker
and higher cost beneficiaries.
– Healthier beneficiaries will have a strong incentive
to enroll in private Medicare Advantage plans.
• Demo produces sharp increases in Medicare
premiums & beneficiaries will lose premium
consistency.
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CREATED MEDICARE FUNDING CAP
• MMA created a trigger designed to limit the federal
contribution to Medicare
• Action is triggered when the Medicare Trustees
project in two consecutive annual reports that
general revenues will finance at least 45% of
Medicare's outlays over a 7-year window.
• The Trustees’ warning triggers Presidential action
and expedited Congressional review
• Warning was first triggered with release of 2007
Trustees report & again in the 2008 report.
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PROBLEMS WITH
MEDICARE FUNDING CAP
• Arbitrary measure of Medicare’s health
• Ignores Medicare’s financing structure;
designed to rely on general revenues to
finance about 75 percent of Parts B & D
• Limits the consideration of all solutions
(increased revenues) to address problems
facing Medicare
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MEDICARE
LEGISLATION IN
110TH CONGRESS
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CHAMP ACT (HR 3162)
• In July 2007, Chairman Dingell & Chairman
Rangel introduced the Children’s Health and
Medicare Protection Act (CHAMP Act)
• The CHAMP Act contains the following
Medicare provisions:
– Halts physician payment cuts for the next two
years;
– Eliminates excessive subsidies to Medicare
Advantage plans;
– Repeals the 2010 demonstration project
designed to privatize Medicare;
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CHAMP ACT (HR 3162)
• CHAMP Act provisions, cont:
– Repeals the arbitrary limit on general revenue
funding of Medicare;
– Improves benefits for low-income seniors;
– Provides mental health parity in Medicare;
– Offers new preventive benefits to Medicare
beneficiaries; and
– Prohibits seniors from being locked into their
Part D drug plan
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STATUS OF THE CHAMP ACT
• The House passed the CHAMP Act on August 1,
2007.
• The Senate was making progress on CHAMP Act
provisions last year until the White House veto
threat over MA subsidies.
• Facing veto, Congress could only pass barebones bill (S.2499) which blocked physician
payment cuts until 6/30/08.
• Negotiations continue for more comprehensive
legislation.
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BUSH BUDGET
PROPOSALS FOR
MEDICARE
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BUSH FY 2009 BUDGET
PROPOSALS FOR MEDICARE
• Proposes severe cuts to Medicare:
– $178 billion over the next 5 years,
– $556 billion over the next 10 years,
– more than $10 trillion over the next 75 years.
• Proposes expansion of Medicare meanstesting:
– Removes the annual inflation adjustments to
means-tested income thresholds, and
– Proposes to means-test Part D premiums.
• Continues to dole out excessive and wasteful
subsidies to Medicare Advantage plans.
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BUSH PROPOSALS ON
MEDICARE FUNDING CAP
• Budget proposal:
– Proposes automatic payment reductions of
0.4% per year to health care providers
when the cap is breached.
• Legislative proposal:
– Medicare Funding Warning Response Act
of 2008 (S. 2662 / H.R. 5480)
– Proposes an expansion of means-testing in
Medicare
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BUDGET
RESOLUTIONS
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HOUSE BUDGET RESOLUTION:
MEDICARE PROVISIONS
• Rejects Administration’s Medicare cuts.
• Contains reserve fund for Medicare improvements,
such as:
– increasing the physician reimbursement rate, while holding
beneficiaries harmless;
– providing greater access to preventive benefits;
– enhancing assistance for low-income beneficiaries; and
– promoting efficiencies in the Part D program.
• Includes a reconciliation instruction for the Committee
on Ways and Means to produce a bill that would
reduce mandatory spending (except Social Security)
by $750 million over 6 years.
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SENATE BUDGET RESOLUTION:
MEDICARE PROVISIONS
• Rejects Administration’s Medicare cuts.
• Contains reserve fund for Medicare
improvements, similar to House resolution.
• Provides $1.325 billion in Medicare savings in
2013, allowing for legislation to delay the
Medicare trigger.
• During floor debate, Sen. Ensign offered an
amendment to means-test Part D premiums.
It failed by a vote of 42-56.
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TRUSTEES REPORT
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SOCIAL SECURITY TRUSTEES’ REPORT
• Social Security’s actuarial balance improved
since last year. The OASDI trust fund now has a
projected 75-year actuarial deficit equal to 1.7
percent of payroll compared with last year’s estimate
of 1.95 percent.
• The Social Security trust fund will be solvent for
another 33 years. Both the 2007 and 2008 reports
project that the OASDI trust fund will be exhausted in
2041. At that time, payroll taxes are estimated to be
sufficient to cover 78% percent of HI costs.
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SOCIAL SECURITY TRUSTEES’ REPORT
• The long-term financial shortfall for Social
Security represents a small percent of the
total U.S. economy. The trustees estimate
that the OASDI trust fund has a shortfall over
the next 75 years of $4.3 trillion ($0.4 trillion
less than last year) against a total GDP of
$797 trillion. (Social Security’s shortfall
represents only 0.6 percent of GDP.)
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MEDICARE TRUSTEES’ REPORT
• Medicare’s actuarial balance remained
about the same. The HI trust fund now has
a projected 75-year actuarial deficit equal to
3.54 percent of payroll compared with last
year’s estimate of 3.55 percent.
• The Medicare HI trust fund will be solvent
for another 11 years. Both the 2007 and
2008 reports project that the HI trust fund will
be exhausted in 2019. At that time, payroll
taxes are estimated to be sufficient to cover
78% percent of HI costs.
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MEDICARE TRUSTEES’ REPORT
• The long-term financial shortfall for
Medicare represents a small percent of the
total U.S. economy. The trustees estimate
that the HI trust fund has a shortfall over the
next 75 years of $12.4 trillion, against a total
GDP of $797 trillion. (Medicare’s shortfall
represents only 1.6 percent of GDP.)
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ENTITLEMENT
COMMISSIONS
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ENTITLEMENT COMMISSION LEGISLATION
• Identical legislation has been introduced in House &
Senate (S. 2063 & H.R. 3655) by Sens. Conrad &
Gregg and Reps. Cooper & Wolf.
• Establishes a task force to review and make
legislative recommendations regarding the long-term
fiscal balance of the federal government, including
Social Security and Medicare.
• The Task Force would be comprised of 16 members,
evenly divided by the parties.
• The Task Force report would have to be approved by
12 of the 16 members by December 8, 2008.
• The legislation would be considered in a time-limited
process with no amendments allowed.
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PROBLEMS WITH ENTITLEMENT
COMMISSION LEGISLAITON
• The Task Force puts Social Security privatization
back on the table
• The Task Force leaves the American people out of
the discussion
• The Task Force would usurp jurisdiction over Social
Security, Medicare, Medicaid and federal taxes
• The Task Force would cut Social Security, Medicare
and Medicaid for budgetary purposes
• Social Security and Medicare are distinct programs
and need to be addressed separately.
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THANK YOU!
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