Statement for the Record Submitted to the Senate Finance Committee

Today’s older Americans have contributed a great deal to our society throughout their lives.  They have helped to build our nation through employment, paying their taxes, raising families, and contributing to their communities as leaders, mentors, military service men and women, and volunteers.  Millions of them are still very active members of their communities today — whether they are paid or unpaid – contributing countless hours to charitable efforts or helping to care for their friends and loved ones in their own homes. 

Older Americans truly understand that budgets matter and that we all need to live within our means.  But they also understand that budgets impact real people – federal programs can make meaningful differences in peoples’ lives and help ensure that older and disabled Americans can live independently and with dignity as they age.  We urge that any proposals under consideration distinguish between:  programs whose benefits serve an important need from those programs that do not; programs that have been contributed to and earned over the course of a lifetime and those that are not; and programs that are wasteful and inefficient and steps to either eliminate them or make them more efficient. 

For example, AARP generally opposes proposals that result in arbitrary, across-the-board, spending cuts that fail to distinguish between different types of spending and would take a meat ax approach to governing.  AARP believes that solutions to our nation’s long-term financial challenges should be thoughtful and balanced, not arbitrary and across the board.  Importantly, efforts to rein in the debt and deficit should not harm critical Social Security, Medicare and Medicaid benefits which are essential to the retirement and health security of current and future retirees.

Social Security

AARP strongly believes that Social Security, a self-financed program important to both current and future generations of Americans who pay into the system, should not be cut in any effort designed to achieve arbitrary overall federal spending targets. 

Social Security benefits are financed through payroll contributions from employees and their employers, each and every year, throughout an individual’s working life.  The program is separate from the rest of the federal budget and has not contributed to our large deficits.  According to the Social Security Trustees, the program has sufficient assets to pay 100 percent of promised benefits for over a quarter century, and even with no changes, can continue to pay approximately 75 percent of promised benefits thereafter.  While Social Security faces this long-term shortfall,  targeting it now for arbitrary, across-the-board cuts is unfair and unnecessary, and will most assuredly mean significant reductions in benefits for not only current beneficiaries, but for their children and grandchildren as well.

Social Security is currently the principal source of income for nearly two-thirds of older American households receiving benefits, and roughly one third of those households depend on Social Security benefits for nearly all (90 percent or more) of their income.  Despite its critical importance, Social Security’s earned benefits are modest, averaging only about $1,200 per month for all retired workers in March 2011.  Nonetheless, Social Security keeps countless millions of older Americans out of poverty and allows tens of millions of Americans to live their retirement years independently, without fear of outliving their retirement income. 

Social Security also provides critical income protection for workers who become disabled, and for the families of workers who become deceased. Moreover, while personal savings should always play an important role in retirement planning, with the growing prevalence of 401(k) and other individual account plans and the decline in defined benefit pension plans, the guaranteed benefit of Social Security will become increasingly important to future generations as workers live longer and bear more of the market risk associated with investing for their own retirement income. 

Given the already modest benefits current Social Security beneficiaries receive, the program’s continued critical importance to future generations’ income and retirement security, and the system’s dedicated financing, AARP firmly believes that Social Security should not be targeted for cuts as part of a budget exercise to satisfy arbitrary spending thresholds.  More importantly, in the face of declining pensions, shrinking savings, and longer life expectancies, Social Security deserves to have its own national conversation that focuses on preserving and strengthening the retirement security of Americans and their families for generations to come.

Medicare

As the Committee – and other Members of Congress – continues to grapple with proposals to address this country’s long-term deficit, AARP urges you to reject proposals that simply shift health care costs onto Medicare beneficiaries and do not address the underlying problem of rising health care costs throughout the system.

It is a fact that all health care costs, including Medicare costs, have been increasing at levels above inflation each year.  This trend is not sustainable.  However, Medicare is just one part of our nation’s health care system, which includes a vast array of other payers including public, individual, and employer-based health insurance.  Focusing only on Medicare (and Medicaid) and enacting arbitrary limits and/or across-the-board cuts to the program will not rein-in overall health care cost growth.  These arbitrary cuts to Medicare simply shift costs on to other payers of health care services, particularly beneficiaries and their families, and undermine current and future beneficiaries’ access to quality care.

AARP believes that if we are serious about addressing rising health costs, we cannot only look to Medicare (and Medicaid) for solutions.  There are steps we can take to improve the Medicare program -- including increasing preventive services, lowering the costs of prescription drugs, and encouraging delivery system reforms that improve care coordination for beneficiaries -- that should help to reduce the growth in health costs for the overall program.  And there are steps we can take to further reduce waste in the program.

However, to truly tackle the issue of rising health care costs, we urge you to focus on changes that will incent high value care and reduce waste, fraud, and inefficiency that occurs throughout the entire health care system.  While Medicare (and Medicaid) can play an important role in improving the delivery of health care, targeting federal programs alone is short-sighted and will not reduce overall health costs.  

Over 47 million older Americans and Americans with disabilities depend on Medicare today.  And as you know, significant savings related to the Medicare program have already been enacted as part of the Affordable Care Act (ACA).  AARP’s support for this law was based in part on many of the delivery system reforms—such as Accountable Care Organizations (ACOs), patient-centered medical homes, value-based purchasing, quality-based payments, and patient safety initiatives – included in the law. We have been working closely with providers, physicians, and health plans to help ensure that these delivery system reforms are implemented in such a manner that current and future beneficiaries benefit from both a higher quality and more efficient Medicare program. 

However, we believe implementation of these significant delivery system reforms will take time, planning, and commitment from Congress, the Administration, and providers to help achieve a new way of delivering care: one that focuses on improving primary and coordinated care for beneficiaries, and payment incentives that reward quality and improved outcomes rather than volume.  AARP believes setting annual, arbitrary cost targets for Medicare will undercut this needed progress, and we strongly urge Congress not to enact such counterproductive measures. 

The new law already includes an Independent Payment Advisory Board (IPAB) which, although it contains some important consumer protections, could potentially trigger cuts that may impact seniors' access to care.  During the health care debate, AARP raised concerns about the arbitrary IPAB targets, and the role of an unelected and unaccountable board.  We have also continued to point out the shortcoming of any strategy that singles out Medicare instead of targeting waste, inefficiency and delivery system reform throughout the health care system. 

While IPAB is charged with looking at access and provider payment policies in the broader context of health system trends, we remain extremely concerned expanding IPAB could have a negative impact on Medicare beneficiaries’ access to care.  We do, however, strongly urge Congress to maintain the consumer protections supported by AARP – including prohibitions on cutting benefits, raising seniors’ already high out of pocket costs, and rationing care -- enacted as part of IPAB. 

Medicaid

A recent AARP study finds that 9 out of 10 Americans 50 plus want to stay in their current residence for as long as possible – and many need the support of Medicaid, the primary payer for long-term care, to retain this independence.  Arbitrary limits on Medicaid could deny many Americans that right to choose how and where they receive the long-term care they need.  Medicaid helps pay for a large percentage of nursing home care as well as home- and community-based services.  Because of the extremely high cost of long-term services and supports (for example, the average annual cost of a nursing home stay is over $70,000), many older Americans, even middle class Americans, have had to virtually deplete all of their resources to finance their care.  Medicaid is a last resort for these families, providing a lifeline to continue to receive the services and care they need. 

AARP is concerned that putting unfair limits on Medicaid could reduce access and quality care, such as cutting staffing in nursing homes, which could put the health and safety of our seniors and people with disabilities at risk.  It would also reduce access to much needed and preferred home and community-based services.  Arbitrary limits could also mean cuts to support for family caregivers (both paid and unpaid) who provide needed services and supports for seniors and adults and children with disabilities to help keep them living in their homes and communities for as long as they can.  Cuts could also include services, such as respite care, that allow unpaid caregivers a short reprieve from their caregiving duties, and likely saves the Medicaid program millions each year across the states.

As you examine how to address the growing costs of health care programs, we urge you to reject arbitrary limits, and focus instead on ways to make the delivery of health care to all Americans more efficient and cost-effective.

Conclusion

On behalf of our millions of members and all older Americans, we appreciate the opportunity to share our views on this important debate.  We urge Congress to not simply look at the numbers in the budget, but the real people that would be impacted by these budget driven changes and enforcement mechanisms.  Literally, millions of people are counting on you.  We look forward to working with Members of this Committee, as well as Members from both Houses of Congress and both sides of the aisle, to craft legislation that will address our nation’s long-term debt without sacrificing the current or future health and retirement security of our nation’s seniors.