Page images
PDF
EPUB

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
CUT MEDICARE IN FY 84

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). The budget proposes total new savings of $25.26 billion in FY 84-88.

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

[ocr errors]

in the lower-income brackets, particularly compared to the non-elderly in 1981, 21% of elderly households had incomes below $5,000 compared with 8% of non-elderly households and over 50% of elderly households had incomes below $10,000 compared with 19%

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.

TOTAL 1981 MONEY INCOME OF HOUSEHOLDS BY AGE OF HOUSEHOLDER

[blocks in formation]

Source:

Census Bureau, "Money Income and Poverty Status of Families and Persons in the United States: 1981" (Series P-60, No. 134)

Proposals that simply shift program costs to beneficiaries

are based on the erroneous notion that the elderly can and should
bear an even greater burden.
But,
Medicare currently pays only
40% of the elderly's health care bill. The Part A deductible
automatically rises from $304 to $350 in FY 84, over a 15%
increase. (The Part A deductible rose from $204 in 1981
to $260 in 1982, over a 27% increase, due to the 1982 Budget
Reconciliation Act.) The Part B premium rises automatically
in FY 84 to $13.60 from $12.20, almost a 10% increase, and
Part B deductible, which was $60 in FY 81, is now $75, a
25% increase. Beneficiary liability for Medicare Part B
physician services alone is approximately 69% of total
physicians' charges due when deductibles, coinsurance and
unassigned claims are included. Moreover, the unwillingness
of a large number of physicians to accept assignment (i.e.,

accept Medicare reimbursement as payment in full) portends continuing increases in beneficiaries' out-of-pocket health

care expenditures.

The third criteria for evaluating a proposal to change Medicare is whether the proposal contributes toward the development of a more rational, high quality health care delivery system. The elderly and disabled need and use health care services. The imminient bankruptcy of the HI Trust Fund frightens not only this vulnerable population but all Americans deeply concerned about health care for themselves, their children, as well as their parents.

The plain fact of the matter is that the American health care system is priced beyond the reach of those who need it most. Under current law projections, the deficit in the HI Trust Fund will be over $400 billion by the middle of the next decade. Congress and the American people

and poor.

are facing the collapse of the nation's commitment to accessible, affordable health care for the aged, disabled Change is unavoidable. The question is whether we have the political will and wisdom to make changes that accommodate the needs of all our people or whether we will relegate the right to health care to the commerce of the marketplace.

Unfortunately, the Administration's proposals simply shift costs away from the federal government to others,

« PreviousContinue »