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					    The Privatization
      of Medicare
2008 Conference of the National Council on
  Aging & the American Society on Aging
              March 27, 2008

                 Alison Bonebrake
             Legislative Representative
              bonebrakea@ncpssm.org

         National Committee to Preserve
           Social Security and Medicare
         1-800-966-1935 / www.ncpssm.org
National Committee to Preserve Social Security and Medicare   1
                 THE MMA…PLANTING
                   THE ROOTS OF
                   PRIVATIZATION




National Committee to Preserve Social Security and Medicare   2
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.




   National Committee to Preserve Social Security and Medicare   3
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.

    National Committee to Preserve Social Security and Medicare   4
          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, co-
    pays, deductibles, coverage gap, & formulary)

   National Committee to Preserve Social Security and Medicare   5
  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

   National Committee to Preserve Social Security and Medicare   6
         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.

   National Committee to Preserve Social Security and Medicare   7
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
   National Committee to Preserve Social Security and Medicare   8
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.

   National Committee to Preserve Social Security and Medicare   9
        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.


    National Committee to Preserve Social Security and Medicare   10
  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.

   National Committee to Preserve Social Security and Medicare   11
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.


    National Committee to Preserve Social Security and Medicare   12
           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



   National Committee to Preserve Social Security and Medicare   13
                        MEDICARE
                      LEGISLATION IN
                     110TH CONGRESS




National Committee to Preserve Social Security and Medicare   14
           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;

     National Committee to Preserve Social Security and Medicare   15
         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


   National Committee to Preserve Social Security and Medicare   16
   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 bare-
  bones bill (S.2499) which blocked physician
  payment cuts until 6/30/08.
• Negotiations continue for more comprehensive
  legislation.

   National Committee to Preserve Social Security and Medicare   17
                      BUSH BUDGET
                     PROPOSALS FOR
                       MEDICARE




National Committee to Preserve Social Security and Medicare   18
      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 means-
  testing:
  – 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.

  National Committee to Preserve Social Security and Medicare   19
         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

   National Committee to Preserve Social Security and Medicare   20
                          BUDGET
                        RESOLUTIONS




National Committee to Preserve Social Security and Medicare   21
     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.


    National Committee to Preserve Social Security and Medicare   22
   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.


   National Committee to Preserve Social Security and Medicare   23
                   TRUSTEES REPORT




National Committee to Preserve Social Security and Medicare   24
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.


      National Committee to Preserve Social Security and Medicare   25
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.)



      National Committee to Preserve Social Security and Medicare   26
 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.

    National Committee to Preserve Social Security and Medicare   27
 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.)




    National Committee to Preserve Social Security and Medicare   28
                        ENTITLEMENT
                        COMMISSIONS




National Committee to Preserve Social Security and Medicare   29
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.


     National Committee to Preserve Social Security and Medicare   30
    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.

    National Committee to Preserve Social Security and Medicare   31
              THANK YOU!




National Committee to Preserve Social Security and Medicare   32

				
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