FAQ: How Are Medicare Benefits Impacted By The New Debt Deal?

FAQ: How Are Medicare Benefits Impacted By The New Debt Deal?

The debt deal that Congress struck with President Obama is prompting questions about how the legislation affects Medicare benefits. Although beneficiaries escaped the cutting knife temporarily, a new bipartisan joint committee of 12 lawmakers from the House and Senate is working on a plan to reduce the federal budget at least $1.2 trillion over the next decade. If the committee fails to reach an agreement, or if Congress fails to pass the proposals they offer, a series of automatic across-the-board spending cuts would kick in by 2013, which would cut Medicare. Here’s how Medicare would be impacted:

Q:  I read that my Medicare premiums would not be affected. Is this correct?

A:  Yes, temporarily at least, seniors and the disabled escaped direct Medicare cuts, but the agreement could eventually hit beneficiaries. The first spending cuts under the debt deal are $917 billion in discretionary spending. What seniors and the disabled need to watch now is the plan from the new joint committee. That group has the leeway to recommend major changes that would hit Medicare beneficiaries in the wallet. The committee has until Thanksgiving to report its recommendations, and then Congress must vote by December 23, 2011.

Q:  What type of changes are being studied?

A:  There have been a number of Medicare reform proposals over the past 12 months that the committee will have to choose from. Those include:
• Raising the eligibility age for Medicare from 65 to 67.

• Making seniors pay a bigger portion of the Medicare premium.
• Overhauling Medicare by going to a system of premium support, which would give beneficiaries a fixed amount of money to buy private insurance to provide Medicare benefits rather than having the government directly pay for covered services.  Seniors would have to pay any difference in what the government premium subsidy covers and the full cost of the premium.
• Restructure Medigap so that plans would be banned from providing first dollar coverage, and require seniors to pay new deductibles and cost sharing amounts out-of-pocket.
• Expand means testing to provide a less generous package of benefits to higher income seniors or charge them higher premiums than they pay now.  Expand means-testing to more middle-income seniors.

Q:  If the committee or Congress fails to achieve the $1.2 trillion in spending cuts, what then?

A:  If across-the-board cuts were triggered it would affect payments to healthcare providers who treat Medicare patients. Near the top of the list will be doctors, hospitals, nursing homes, home healthcare and other providers. Providers say that the cuts will affect seniors’ access to services. Hospitals may have to close units or may not accept new Medicare patients. Doctors already are facing a 29.5 percent pay cut beginning January 1 of next year unless Congress acts to change it. TSCL has received email from a growing number of seniors who say they are having problems finding doctors who accept new Medicare patients.

Q:  Why is Medicare part of the debt reduction plan?  Don’t payroll taxes and premiums cover the costs?

A:  Payroll taxes and premiums only pay part of the costs. About 15 percent of the federal budget is spent on Medicare, and spending is projected to grow as a share of both the federal budget and the overall economy due to rising healthcare costs and a population that is living longer.

Q:  What is TSCL’s position?

A:  TSCL feels the growth of healthcare costs in America is a real problem, one that threatens the retirement security of tens of millions of seniors. Medicare costs far outpace the growth in Social Security benefits over a retirement, leaving seniors in their late 70s and 80s at risk of depleting their retirement savings. According to the Social Security Administration, some 50 percent of people age 65 and older have a total income of just $24,857.

While our nation needs to address measures to slow the rate at which healthcare costs are rising, simply shifting a greater portion of the costs to beneficiaries will do nothing to address the real problem. Instead, it leaves the oldest and sickest at risk of not being able to afford the healthcare they need, and more may try to go without it.

Q:  What can I do?

A:  Become a spokesman: Tell us about your situation, and the healthcare costs that you cope with. Let us know if you are willing to become a spokesman and to share your story with media. Doing so puts a human face on the challenges seniors and the disabled cope with on a daily basis, and helps illustrate how Medicare and Social Security changes may impact tens of millions of others like you. To tell us your story and to become a spokesman, click here: To watch a video produced by the nonpartisan Kaiser Family Foundation about how other seniors are making ends meet, click here. http://www.kff.org/medicare/Making-Ends-Meet.cfm

Sources:  “Comparison of Medicare Provisions in Deficit-Reduction Proposals,” Kaiser Family Foundation, April 2011.  “Debt Deal May Hit Medicare,” Janet Adamy, The Wall Street Journal, August 2, 2011.   “Making Ends Meet,” Kaiser Family Foundation, June 28, 2011.