FY13 Budget Request Includes Both Investments, Cuts for Senior Programs
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FY13 Budget Request Includes Both Investments, Cuts for Senior Programs

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February 14, 2012

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President Obama has released his budget request for FY2013. The proposal includes investments in some programs for seniors, but cuts in others.

Overall, the proposal is projected to reduce the deficit by about $3 trillion over 10 years through a balanced package of spending cuts and revenue increases. According to the Administration's estimates, deficits would fall from 8.5% of Gross Domestic Product in 2012 to 3.0% in 2022.

Older Americans Act (OAA) funding would generally be frozen, and Medicare spending would be reduced by $302.8 billion over 10 years.

Investments in Elder Justice, Section 202

Given that the debt ceiling deal reached last year imposed discretionary spending caps for the next 10 years, the fact that the OAA is essentially level funded is good news.

In fact, almost all of the increase for the Administration on Aging (AoA) comes from the proposed transfers of the Senior Community Service Employment Program and the State Health Insurance Assistance Program to AoA.

Notable investments for AoA include:

  • Elder Justice Act: Another proposal to provide first-time funding for the EJA, this time with $8 million for an Adult Protective Services demonstration

  • Alzheimer’s Demonstration Grants: Restoration of most of the funding cut last year for this program

Other areas of the budget also include some important increases for older adults:

  • $100 million for new units of Section 202 Housing for the Elderly
  • $10 million more for reverse mortgage and other housing counseling services
  • $10 million more for the Commodity Supplemental Food Program, which funds nutritious food packages for seniors at food banks across the country

Cuts for LIHEAP, Prevention Fund

The budget request also includes some disappointing cuts affecting seniors:

  • OAA Title IV: There is no call to restore the $19 million that was eliminated for Program Innovations.

  • Low-Income Home Energy Assistance Program: LIHEAP is reduced by more than $400 million at a time when economically insecure seniors, people with disabilities, and families with children are struggling with home heating costs.

  • Community Services Block Grant: CSBG, which supports a national network of anti-poverty organizations that administer programs ranging from OAA meals programs to LIHEAP, is once again targeted for a nearly 50% cut.

  • Prevention and Public Health Fund: Funding for PPHF, created by the Affordable Care Act, would be reduced by $4.5 billion over 10 years, although it would be fully funded at $1.25 billion in FY13. NCOA has been advocating for the PPHF as a means to expand evidence-based programs such as the Chronic Disease Self-Management Program (CDSMP) and falls prevention. CDSMP received $10 million from the PPHF this year, and the budget calls for another $10 million for FY13.

Reductions for Medicare and Medicaid

The President’s proposal also includes $358.5 billion in cuts to Medicare ($302.8 billion) and Medicaid ($55.7 billion) over 10 years. 

The reductions are similar to those he proposed in September 2011 for consideration by the congressional “Supercommittee,” which was not able to reach a bipartisan deficit reduction agreement. 

NCOA is particularly concerned about three proposals in the President’s budget that would shift additional costs onto Medicare beneficiaries. However, the cuts would only affect new, not current, beneficiaries, and would not occur until 2017: 

  • Part B Deductible: New beneficiaries would pay a higher annual Medicare Part B up-front deductible for physician and other outpatient services. Currently $162, this fee is indexed for inflation. It would go up by $25 for new enrollees in 2017, 2019, and 2021 (a $75 total increase).

  • Home Health Copay: For the first time, new beneficiaries would pay a $100 copayment per treatment episode for home health services, unless they have been discharged from a hospital or skilled nursing facility.

  • Medigap Surcharge: New beneficiaries who buy certain first dollar Medigap supplemental insurance policies would pay a 15% additional surcharge on those policies, about $30 per month.

NCOA is concerned that these changes could be difficult for millions of seniors who are already struggling to pay for health care costs.

Out-of-pocket costs for Medicare beneficiaries as a share of income has increased from about 12% in 1997 to an estimated 19% in 2011, and they're projected to increase to 26% in 2020, assuming no changes in current law. 

Overall, Medicare households spend three times more as a percent of income on out-of-pocket for health care compared to non-Medicare households.

Moreover, current assistance for low-income Medicare beneficiaries with expensive cost sharing is grossly inadequate: 

  • For persons under age 65, protections against copayments and deductibles will be available for those with incomes below 138% of the poverty line, without an asset test. 

  • For those over 65, however, such protections are only available for those with incomes below 100% of poverty, with a stringent asset test that penalizes those who did the right thing by setting aside a nest egg of savings during their working years.

Another Medicare proposal in the President’s budget that raises concern is subjecting more beneficiaries to higher income-related Part B (for physician and outpatient services) and Part D (prescription drug) monthly premiums.

Currently, about 5% of beneficiaries must pay these higher premiums. Over time, about 25% of beneficiaries would pay these higher premiums. 

The Kaiser Family Foundation released an analysis of such a proposal, which is also currently being proposed by House Republicans to help pay for the package of extenders that includes payroll taxes, unemployment insurance, Medicare physician payment, and one of the Medicare low-income protection programs, known as the QI program.  

Most of the proposed Medicaid reductions would come from applying a single blended federal matching rate to the program, phasing down the Medicaid provider tax threshold, and rebasing the Medicaid Disproportionate Share Hospital (DSH) allotment.

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