ate to transfer Medicare costs to general funds for kidney der 65 and for disability beneficiaries under 65.

sive use of home health services of high quality would be 3. If a patient felt assured of this type of care they would in returning home. A less stringent definition of skilled Bled for Medicare patients. Being cared for safely and properly help the patients avoid or postpone institutionalization.

s opportunity to enter these remarks.

Respectfully submitted,

Peter M. Shields

Director

Union County Division on Aging

D STATEMENT OF THE AMERICAN ASSOCIATION OF RETIRED PERSONS

ODUCTION

American Association of Retired Persons (AARP)

tes this opportunity to present our views on the
ration's proposals to further cut the Medicare program
34. Our Association continues to support responsible
to reduce the federal budget deficits. We are
oncerned, however, about the efficacy as

the fairness of the Administration's proposals to
ne deficit, bring down interest rates, and promote
Conomic growth. Indeed, despite the "bipartisan"
paper, the basic contents of the Administration! s
budget is little different from previous years:
massive revenue losses;

large, undisciplined defense increases; and,

deep cuts in domestic entitlement and discretionary

programs.

past two years, the burden of the Administration's

; fall most heavily on our nation's needy, dependent rable populations. For older Americans

rly the poorest among them

-

the Administra

-a doubling of outunder Medicare.

- further significan

for physician care

- other reductions i

assistance, housin

All in all, the effec reduce the income ( cantly increasing t

r testimony today w Medicare and Medica

e consequences of th 2. In addition, we reducing federal spend

ASSESSING THE ADMINIS
DUT MEDICARE IN FY 84

The Administration pr Of

4 of $1.7 billion.

will come directly

ased copays and dedu cian freeze totals $

ase beneficiary out

a six-month freeze on cost-of-living adjustments

for social security, SSI, food stamps and veterans' pensions.

p of FY 84 savings o

85 already on the b 1982). The budget pr TT 84-88.

g of out-of-pocket costs for hospitalization

icare.

ignificant increases in out-of-pocket costs

cian care under Medicare, Part B.

uctions in food stamps, low income energy

e, housing assistance and legal aid.

the effect of the Administration's proposals

income of older Americans while

creasing their out-of-pocket costs.

y today will focus primarily on the budget cuts and Medicaid programs, the reasons for our concern, ces of the proposed cuts on this nation's

ition, we will propose alternative recommendations

eral spending in the health care sector.

HE ADMINISTRATION'S MAJOR PROPOSALS TO
E IN FY 84

tration proposes further Medicare cuts in llion. Of the $1.7 billion almost 1 billion e directly from beneficiaries in the form of and deductibles. In addition the proposed

è totals $700 million and will likely also

ciary out-of-pocket costs. The proposed savings comes savings of $6.2 billion and another $7.0 billion

y on the books (due to reconciliation in 1981

budget proposes total new savings of $25.26 billion

st of their proposals either directly or indirectly osts now being borne by the federal government to recipients, though Medicare providers take some

D.

ile the Administration appears to have made its
ls on the basis of program savings alone, our
tion believes that additional criteria are equally
ry for evaluating proposals to change the Medicare

rst, any proposal to change Medicare must contribute
raint in the escalating rise in health care costs.
1 costs, which make up approximately 75 percent of
e expenditures, increased 19 percent in 1981 and over
ent in 1982, more than triple the rate of inflation.
t CBO study on Medicare pointed out that
projected 13.2% rise in hospital costs, only 2.2%
to increased aged beneficiaries, while the balance
% stems from rising hospital costs. Unless such
an be restrained, Medicare beneficiaries will face
ing efforts to slash the program, particularly in
e of pending insolvency of the HI trust fund.
spite two years of budget cuts in Medicare, the HI
und (Part A) is projected to be insolvent sometime
1980's. The timing is subject to the extension of
ed interfund borrowing among the trust funds. If
nd borrowing is extended as proposed by the National
ion on Social Security Reform, the HI trust fund
e drained by mid-1984 or early 1985. If interfund
extended indefinitely, the HI trust may be able to

989, though a recent CBO study indicates be depleted as early as 1987.

cant criteria for evaluating proposals

is the avoidance of cost shifting to

ies. The economic status of most of is precarious at best:

seholds are overwhelmingly concentrated er-income brackets, particularly compared -elderly

in 1981, 21% of elderly house

incomes below $5,000 compared with 8% of

y households and over 50% of elderly houseincomes below $10,000 compared with 19% -elderly (see table below).

n income level of elderly-headed households han half (45%) that of the non-elderly.

sons experience one of the highest poverty 5.3%) of any adult age group and one of the near-poverty rates (25.2%), with older women ating in these poverty categories.

_ng table illustrates the economic situation