It might be appropriate to transfer Medicare costs to general funds for kidney dialysis patients under 65 and for disability beneficiaries under 65. I believe more extensive use of home health services of high quality would be a substantial saving. If a patient felt assured of this type of care they would feel more confident in returning home. A less stringent definition of skilled nursing care is needed for Medicare patients. Being cared for safely and properly at home would also help the patients avoid or postpone institutionalization. I do appreciate this opportunity to enter these remarks. Respectfully submitted, Peter M. Shields Director Union County Division on Aging PREPARED STATEMENT OF THE AMERICAN ASSOCIATION OF RETIRED PERSONS INTRODUCTION I. The American Association of Retired Persons (AARP) appreciates this opportunity to present our views on the Administration's proposals to further cut the Medicare program in FY 1984. Our Association continues to support responsible efforts to reduce the federal budget deficits. We are deeply concerned, however, about the efficacy as large, undisciplined defense increases; and, deep cuts in domestic entitlement and discretionary programs. Like the past two years, the burden of the Administration's proposals fall most heavily on our nation's needy, dependent and vulnerable populations. For older Americans - particularly the poorest among them the Administra tion's FY 84 proposals are as bad if not worse than prior years' budgets. They propose: - a six-month freeze on cost-of-living adjustments for social security, SSI, food stamps and veterans' pensions. is to - a doubling of out-of-pocket costs for hospitalization under Medicare. further significant increases in out-of-pocket costs for physician care under Medicare, Part B. other reductions in food stamps, low income energy assistance, housing assistance and legal aid. All in all, the effect of the Administration's proposals reduce the income of older Americans while significantly increasing their out-of-pocket costs. Our testimony today will focus primarily on the budget cuts in the Medicare and Medicaid programs, the reasons for our concern, and the consequences of the proposed cuts on this nation's elderly. In addition, we will propose alternative recommendations for reducing federal spending in the health care sector. II. ASSESSING THE ADMINISTRATION'S MAJOR PROPOSALS TO The Administration proposes further Medicare cuts in FY 84 of $1.7 billion. Of the $1.7 billion almost 1 billion ($990M) will come directly from beneficiaries in the form of increased copays and deductibles. In addition the proposed physician freeze totals $700 million and will likely also increase beneficiary out-of-pocket costs. The proposed savings comes on top of FY 84 savings of $6.2 billion and another $7.0 billion in FY 85 already on the books (due to reconciliation in 1981 and 1982). in FY 84-88. The budget proposes total new savings of $25.26 billion Most of their proposals either directly or indirectly shift costs now being borne by the federal government to program recipients, though Medicare providers take some cuts too. While the Administration appears to have made its proposals on the basis of program savings alone, our Association believes that additional criteria are equally necessary for evaluating proposals to change the Medicare program. First, any proposal to change Medicare must contribute to restraint in the escalating rise in health care costs. Hospital costs, which make up approximately 75 percent of Medicare expenditures, increased 19 percent in 1981 and over 13 percent in 1982, more than triple the rate of inflation. A recent CBO study on Medicare pointed out that of the projected 13.2% rise in hospital costs, only 2.2% is due to increased aged beneficiaries, while the balance of 10.8% stems from rising hospital costs. Unless such costs can be restrained, Medicare beneficiaries will face continuing efforts to slash the program, particularly in the face of pending insolvency of the HI trust fund. Despite two years of budget cuts in Medicare, the HI trust fund (Part A) is projected to be insolvent sometime in the 1980's. The timing is subject to the extension of continued interfund borrowing among the trust funds. If interfund borrowing is extended as proposed by the National Commission on Social Security Reform, the HI trust fund could be drained by mid-1984 or early 1985. If interfund is not extended indefinitely, the HI trust may be able to make it to 1988 or 1989, though a recent CBO study indicates that the fund could be depleted as early as 1987. A second important criteria for evaluating proposals to change Medicare is the avoidance of cost shifting to Medicare beneficiaries. The economic status of most of America's elderly is precarious at best: Elderly households are overwhelmingly concentrated in the lower-income brackets, particularly compared in 1981, 21% of elderly house -1 to the non-elderly of the non-elderly (see table below). The median income level of elderly-headed households is less than half (45%) that of the non-elderly. Older persons experience one of the highest poverty rates (15.3%) of any adult age group and one of the highest near-poverty rates (25.2%), with older women predominating in these poverty categories. The following table illustrates the economic situation of older persons. |