Reform - Call to Candidates

September 11, 2008

call to Presidential Candidates: Preserve Medicare

Caring for our elders, disabled people and families are American values. For decades the public Medicare program has honored these values, bringing health and economic security to millions of older and disabled people and their families. The presidential candidates should make the preservation of Medicare, as a vital social insurance program, a top domestic priority. Here's why.

Why is Medicare Important?

People forget what life was like before Medicare. Private industry failed to insure older and disabled people. When Medicare was enacted in 1965 half of Americans aged 65 or older had no health insurance. For 43 years, Medicare has provided quality health insurance and access to health care for older people and, since 1972, for people with disabilities. Over time Medicare has:

Kept older people out of poverty;
Relieved the next generation of the worry and reality of having to pay their parents' medical bills at the expense of their own needs;
Helped to increase life expectancy. In 1950, the average life expectancy at age 65 was another 13.9 years. By 2004, that number had increased to 18.7 years.

What are the Consequences of Medicare Privatization?

Medicare was designed to be an understandable, stable, and uniform social health insurance program. However, recent developments have resulted in an increased reliance on hundreds of subsidized private plans, annual plan and benefit changes, and income-based benefits and cost-sharing. These developments confuse beneficiaries and, left unchecked, will lead to the erosion of Medicare's community of interest and the destruction of Medicare as a dependable, valued public program.

For years Medicare has been a balanced public-private partnership. Experiments with delivering benefits through private managed care plans to save money began in the early 1980s, but medical coverage has proven more expensive under private plans than under traditional Medicare. (The Congressional Budget Office, the Government Accountability Office, the Medicare Payment Advisory Commission, the Commonwealth Fund and numerous other studies have come to this same conclusion).

The Medicare Modernization Act of 2003 provided substantial subsidies to private "Medicare Advantage" plans. These subsidies have led to an extraordinary proliferation of private plans. The subsidies to private plans amount to over $10 billion annually. Nonetheless, many plans fail to actually provide the level of coverage to beneficiaries in need that is provided by traditional Medicare. Further, plans limit access to providers available to beneficiaries in traditional Medicare, most plans are not available nationwide, and most change benefit packages and provider networks every year.

The current administration and many pundits would cut reimbursements to health care providers and reduce coverage to beneficiaries on the grounds that we "can no longer afford Medicare." Instead of reducing beneficiary coverage and fair payments to doctors, however, the government should be cutting wasteful payments to private Medicare Advantage plans. The Congressional Budget Office estimates that equalizing the payment policies for Medicare Advantage plans with those for traditional Medicare would save Medicare at least $150 billion over the next nine years. The average payment to private plans is 13% more than payments to traditional Medicare, thus it is clear that such payments do not save the Medicare program money. In fact, they threaten Medicare's very existence.

What are the Consequences of the "45% Trigger"– and What Can Be Done About It?

A little known provision of the Medicare Modernization Act of 2003 states that if two consecutive Medicare Trustees' Reports estimate that more than 45% of Medicare's budget within a 7-year window will come from general revenues, the President must propose legislation to lower the proportion to less than 45%. The 2006 and 2007 Medicare Trustees' Reports projected that general revenues would exceed the 45% Trigger, with 2008 being the first year to "trigger" the requirement that the President submit legislation to Congress to cut Medicare expenditures. The"45% Trigger" should be eliminated because:

It is entirely arbitrary and is not a true reflection of the stability of the Medicare program. It was included in the law, along with the subsidies to private Medicare plans, in order to encourage the end of Medicare as a public, social insurance program.
No such financing limit exists for any other governmental activity. Spending from general revenues for Medicare is no different from similar federal spending for education, housing, defense, or veterans' programs, all of which are 100% financed with general revenues. Medicare funding should not be subject to special detrimental treatment.
It forces Medicare to rely primarily on payroll taxes and premiums rather than on income taxes that produce general revenues - placing a burden on all beneficiaries and taxpayers, and, disproportionately, on lower-income individuals.

Conclusion

The next president should end Medicare subsidies to private industry. These public "earmarks" for the private insurance industry come at the expense of Medicare beneficiaries, Medicare's future, and all taxpayers. The Presidential candidates should recognize these Medicare truths and should commit to cutting private Medicare subsidies, rather than the peoples' benefits and valued Medicare program. In addition, the next president should move to repeal the Medicare 45% Trigger provision. The presidential candidates should recognize that the 45% Trigger is inequitable, against the public's interest and should commit to eliminating it rather than cutting benefits for people with Medicare and payments to those who provide them with health care.