Republican Leaders Offer Bigger Cuts to Senior Programs
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Republican Leaders Offer Bigger Cuts to Senior Programs

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December 4, 2012

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Last week, the Obama Administration put an offer on the table to reduce the deficit and avoid across-the-board federal funding cuts under a sequester. The plan was very similar to the President’s 2103 budget proposal.

Yesterday, House Republican leaders dismissed the proposal as “not serious” and counter-offered with:

  • Increasing Medicare and Medicaid cuts from $340 billion to $600 billion over 10 years.
  • Adding $300 billion in new cuts to non-defense discretionary programs, such as the Older Americans Act (OAA).
  • Cutting the Social Security Cost of Living Adjustment (COLA).
  • Reducing revenue savings (from $1.6 trillion to $800 billion), largely by refusing to let tax cuts for the wealthiest Americans (with incomes over $250,000) expire. 

NCOA opposes these cuts to senior programs as unacceptable, as they will harm millions of older Americans, particularly the most vulnerable. 

In a letter to President Obama outlining the offer, House Republican leaders stated: “This is by no means an adequate long-term solution, as resolving our long-term fiscal crisis will require fundamental entitlement reform.” 

This statement strongly implies that this is only the first step toward even more cuts to these critical programs. When used by politicians and the press, "entitlement reform" essentially means cuts to Medicaid, Medicaid, and Social Security.

Where Things Stand

These negotiations come as several critical deadlines lie ahead. If Congress takes no action by year’s end:

  • A sequester will imposes cuts of $54.7 billion annually over 10 years to nearly every discretionary program, including the OAA.
  • The 2001 and 2003 tax cuts will expire.
  • Medicare physician payments will be cut by 27%.
  • The unemployment insurance extension and payroll tax cuts will expire.

What could happen when it comes to spending cuts? Below are some ideas being considered, with a special focus on programs serving older adults.

Medicare

While there appears to be little appetite in either party to include Social Security reforms in the current budget debate—although cutting COLAs is still on the table—the program in greatest jeopardy appears to be Medicare.

The vast majority of the Republican leadership’s $600 billion reduction proposal would fall on Medicare. This cut would be on top of the $716 billion reduction enacted in 2010. 

This is a drastic turnabout from those who harshly criticized the 2010 Medicare reductions during the election. 

According to the National Journal: "In just a few short weeks, the dominant Republican line on Medicare has shifted from attacking the Democrats for making cuts to the program to demanding a new round of cuts to reduce the federal deficit."

According to the Kaiser Family Foundation, current Medicare ideas on the table include:

  • Raising the eligibility age from 65 to 67.
  • Further raising premiums for wealthier beneficiaries.
  • Prohibiting or discouraging first-dollar Medigap coverage.
  • Restructuring cost-sharing by creating one deductible for Parts A and B, imposing home health copayments, and putting a new limit on out-of-pocket spending.
  • Requiring all individuals who are dually eligible for both Medicare and Medicaid to enroll in state managed care plans, with no opportunity to opt-out.

NCOA is concerned that increased cost sharing would hurt older adults who have low and modest incomes. We believe reforms should tackle the systemic causes of health cost inflation and build on innovations and delivery system reforms that work—not shift costs to beneficiaries.

Half of Medicare beneficiaries have incomes of less than $22,000 per year, and Medicare households currently spend three times more of their income on out-of-pocket on health care than non-Medicare households (about 15% to 5%).

Medicaid

One Medicaid proposal being considered is to cap spending on a per-person basis. That means states with higher than usual Medicaid spending per enrollee would not receive matching federal funds above its cap. Caps would not keep pace with health inflation, so there would be deeper cuts over time.

NCOA is concerned that these cuts would fall most heavily on seniors and people with disabilities, who are the most expensive to serve, and make up nearly two-thirds of the program’s spending. Caps also could create serious funding disparities among states.

Non-Defense Discretionary Programs

These include senior programs like the OAA, Section 202 Senior Housing, and Senior Corps, as well as broader health, education, and energy assistance programs.

If Congress fails to act before the end of the year, these programs will face 8.2% cuts in 2013 under the sequester. This would be on top of the over $1 trillion already cut this past year under Budget Control Act caps.

President Obama has proposed that these previous savings be counted toward the $4 trillion target. NCOA agrees.

While the Republican plan would avoid the sequester this year, it would cut these programs by $300 billion and have no effect on across-the-board sequestration cuts in future years.

Under the sequester, the U.S. Administration on Aging would lose $121 million, varying by state.

Potential Paths Forward

Congress and the President may agree on a framework this month to reduce the deficit, with specific targets included and details to be worked out in committees later in the year.

But some believe this won’t happen until February or March, with the tax cuts expiring and sequester hitting in January, with a retroactive fix.

Others think they might avoid this with a bridge, or down payment, this month to give them more time to negotiate the framework in February or March.

Whatever happens, programs serving seniors will be critical parts of the package and could see substantial cuts.

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