The Debt Ceiling Deal
Issues to be considered by supercommittee:
Healthcare and retirees—Medicare and Medicaid
It is expected that both Medicare and Medicaid will be addressed by the supercommittee. Healthcare costs are continuing to climb; at the same time, more and more Americans are reaching retirement age and becoming eligible for Medicare. Many proposals are being made to reduce the use of Medicare and thereby reduce its costs. Here are some of these proposals:
Raising the eligibility age for Medicare from 65 to 67, as some suggest doing, is a bad idea. Older people have the greatest difficulty in getting insurance because they are priced out of the market. Most people over 50 who are unemployed would have to find a job that includes health insurance; however the current job market proves even more difficult because of age discrimination, and an older worker may not be considered “employable.” If older workers cannot get health insurance, they will be forced to wait an additional two years before they can qualify for Medicare. This means they are likely to go without any healthcare.
Vouchers for Medicare. Another proposal is to replace the current Medicare program with a capped annual voucher. This proposal, which was included in the House Republican budget, would end Medicare as we know it. Under the proposal, beneficiaries would receive a small amount to use toward the cost of their own healthcare coverage, which they would have to purchase from a private insurance company. This voucher would not be enough to keep up with the pace of increasing healthcare costs. According to the Congressional Budget Office, the Medicare vouchers would be about $9,750 annually by 2030, while annual medical costs for a person on Medicare in 2030 would be about $30,400. This means the out-of-pocket costs for that person would be about $20,750. In short, beneficiaries would pay more to get less healthcare.
Note: The AFT has been in the lead in working to oppose Medicare vouchers and raising the eligibility age to 67.
Create a single deductible for Medicare Parts A & B. Other proposals under consideration would restructure the Medicare benefit to make it “simpler.” These proposals would replace the current cost-sharing system with a combined Part A (hospital coverage) and Part B (doctor or outpatient coverage) deductible and create a universal co-insurance for all service accessed under Medicare, regardless of whether a person is an inpatient or an outpatient; this single (combined) deductible would be about $600. Although it might look like a savings, it isn’t. The current Medicare Part B deductible is about $160, and the Part A deductible is about $1,100 with co-insurance for a hospital stay up to 60 days. So, if a person is not hospitalized, the individual does not pay the hospital deductible, just the $160 deductible for the year.
This single deductible could be coupled with an annual out-of-pocket limit, although that amount would be higher than what an average consumer spends out of pocket each year. So while “simpler” might sound good, it actually would raise out-of-pocket costs for most Medicare consumers. Under some proposals, the beneficiary could spend about $500 before the insurance would begin to cover costs.
Reduce use (or restrict first-dollar coverage under Medigap). Another proposal is called “reduce use.” It would create deductibles for Medigap plans (supplemental insurance coverage that Medicare recipients buy to fill in gaps in Medicare coverage), eliminating first-dollar coverage. In short, beneficiaries of these plans would have to pay more for healthcare. Those who support this type of proposal believe that additional cost-sharing on the part of beneficiaries would drive down their use of services, choosing to pay only for “necessary care.” Such a proposal would create a new coverage gap. People might skimp on preventive and necessary care; studies show that individuals without insurance coverage may be more likely to delay needed care. This also applies to Part D coverage for prescription drugs and the “donut hole.” If people are unable to afford care, they will go without it. This proposal wrongly assumes that consumers have the medical expertise to determine when it is necessary to see their healthcare provider.
Medigap plans cover most of a beneficiary’s co-payments. The reduce-use option, which is based on the idea that beneficiaries overuse healthcare, would restrict the first $500 of an enrollee’s cost-sharing liabilities and limit coverage to 50 percent of the next $5,000 in Medicare cost-sharing, requiring seniors to pay for this out of pocket. Download the AFT/ARA Medicare and Medicaid Primer for more information.
Medicaid is a program jointly funded by the states and federal government that reimburses hospitals and physicians for providing healthcare to eligible people who cannot finance their own medical expenses. It is an efficient and flexible program that works as a safety net when economic crises or natural disasters strike. Children, pregnant women, people with disabilities and low-income seniors are among the people Medicaid helps.
Medicaid is important to older Americans because it pays for 62 percent of all long-term care (nursing home and home healthcare, for example) in the United States.
Any proposal related to Medicaid is likely to include deep cuts; Medicaid is the most vulnerable of the three programs discussed here. The House Republican plan would cut Medicaid by one-third by 2021 and convert it to a block grant so that the program’s expenditures could be determined in advance. Today, anyone who qualifies for benefits is entitled to them. But if the supercommittee decides that Medicaid costs need to be finite, it will have to change the program from an entitlement (providing assistance to all who qualify) to a block grant, which would mean that once the funding limit is reached, the state could cut off financial aid to those in need, including the provision of healthcare to children in poverty or long-term care for low-income seniors.