Testimony to Senate Special Committee on Aging

We believe that Social Security benefits were always intended to be there in both good times and bad. It also is important to note that the next generation has paid into Social Security for decades and deserves to get the retirement benefits they have already earned. With shrinking pensions, dwindling savings, diminished assets and longer life expectancies, future generations will depend on Social Security even more.

Senator, it goes without saying, your urgent attention to strengthening Social Security for the long term is necessary and greatly appreciated.

Medicare

Let me turn next to the Medicare program and some recent proposals being considered by Congress. Medicare was created in 1965 and plays a vital role in ensuring the health and retirement security of older Americans and people with disabilities in current and future generations. Medicare covers persons age 65 and older, regardless of their income or medical history, and now covers 47 million Americans, helping individuals pay for needed health care services. 

Nearly half of all people on Medicare (47%) live on incomes below $21,660 for an individual and $29,140 for couples. About 29 percent of all people on Medicare have a cognitive/mental impairment and about the same percent report being in fair or poor health. According to the most recent data available, Medicare beneficiaries spent a median of $3,103 a year of their own money on health care in 2006. Ten percent of beneficiaries – more than 4 million people – spent more than $8,300 a year. The oldest and poorest beneficiaries spent about one-quarter of their incomes on health care.

Independent Payment Advisory Board

As you know, AARP supported the Affordable Care Act last year because it will improve and strengthen Medicare and provide Americans who currently lack health insurance access to affordable, comprehensive health insurance. 

President Obama recently suggested that the Independent Payment Advisory Board (IPAB), established under the new law, be expanded. AARP agrees with many of the Independent Payment Advisory Board’s original goals — extending Medicare solvency, slowing cost-growth and improving quality without reducing benefits or increasing cost-sharing for people in Medicare. However, we remain concerned about the spending targets the IPAB must meet in its second ten years and the unintended impact these savings targets might have on beneficiaries’ access to or quality of care. We would have strong concerns with expanding the role of this unelected, unaccountable board. We will carefully monitor how these proposals move forward to ensure that Medicare is protected and strengthened for the millions of people who depend upon it.

Other proposals are being considered in Congress that would greatly expand the cost-sharing on beneficiaries, significantly increasing their out-of-pockets costs for Medicare. We do not believe the answer is to simply shift costs onto Medicare beneficiaries and increase the health and economic insecurity of millions of Americans. Increasing the out-of-pocket costs for people on Medicare would especially penalize the sick.

House-Passed Fiscal Year 2012 Budget Resolution

Before it left for recess, the House passed the Fiscal Year 2012 House Concurrent Budget Resolution (H. Con. Res. 34), which, among other things, would eliminate the current Medicare program for those turning 65 in the year 2022 and after, and replace it with a defined contribution, “premium support” program, with the government’s contribution growing each year by the rate of inflation. 

AARP finds the direction of this House-passed budget disturbing and in some cases misguided. First, we are concerned that a premium support system would dramatically increase costs for Medicare beneficiaries while removing Medicare’s promise of secure health coverage – a guarantee that future seniors have contributed to through a lifetime of hard work.

Under this proposal, premium payments to private plans would be sharply reduced, capped at levels well below medical inflation. Therefore, Medicare beneficiaries would bear a larger and larger share of the high cost of medical inflation, as increased costs will be shifted to them – making it harder and harder for them to pay for other household expenses. According to an calculations based on the Congressional Budget Office analysis, the House-passed budget would more than double beneficiary costs in 2022, from about $5,500 to $12,500 – an increase of roughly $7,000 per year in beneficiary premiums and co-insurance.

The legislation would also increase the age of Medicare eligibility from 65 to 67 by 2033. Those who enter Medicare before 2022 would continue under the current Medicare program, with the option to switch to the new program. AARP opposes raising the age of eligibility for the Medicare program because, according to research, it would:

• Increase the cost burden for 65 – 66 year olds who no longer have access to Medicare.
• Increase premiums and cost sharing for Medicare enrollees.
• Raise costs for states, employers and for people under 67 purchasing coverage on the individual market.
• Produce relatively little in savings to the federal government.
  

Finally, the House-passed budget repeals key improvements in the Affordable Care Act, but the two I would like to speak to today are the closure of the “coverage gap”, or the doughnut hole, in Medicare Part D and eliminating the Community Living Assistance Services and Supports (CLASS) program.

AARP fought to close the doughnut hole because it provides millions of seniors with access to lower out-of-pocket costs for their prescription drugs. Repealing the doughnut hole provision would immediately increase the prescription drug costs for nearly 4 million Medicare beneficiaries.

The CLASS program is a national voluntary insurance program to help individuals pay for some of the costs of services and supports to help them live in their homes and communities. It has the potential to: provide savings to Medicaid; support family caregivers in their care giving roles; and help to give eligible consumers choice and control and a flexible benefit to help them meet their needs. 

Senator, abandoning relief from the doughnut hole and taking away an option to help people live in their homes by repealing the CLASS Program does not bode well for older adults. The added burden of higher health costs will put more seniors at risk, especially those who are most vulnerable.

Medicaid

As for Medicaid, under the House-passed budget resolution, all federal Medicaid payments to states would be converted to a block grant beginning in 2013, with constrained annual growth.

Rhode Island is operating in a special environment when it comes to Medicaid because of the Global Waiver that put more money to work here, creating some flexibility in how the state allocates federal funds and – we hope – helping us rebalance the health and long-term services and supports system more toward community-based care.

We are watching this closely because oversight is absolutely critical and because it remains to be seen what happens down the road when we are apt to see a reduction in the original federal contribution.

What we know is that the notion of replacing Medicaid as it is presently constituted with a block grant system is a move in the wrong direction. Medicaid funding should not be limited to a block grant, which could lead to millions losing needed health and long-term services and supports coverage, especially in bad economic times.

The House-passed budget resolution could lead to cuts for millions of older adults and people with disabilities who get long-term care, including services to help them live in their own homes, through Medicaid.

There are limited financing options currently available to pay for long-term services and supports and individuals typically exhaust their own assets before turning to Medicaid. Block granting Medicaid would put both current and future seniors in need of these services at risk. For those who are already in nursing homes or receiving home and community-based services, Medicaid cut-backs could lead to reduced access and inadequate care. For individuals who do not yet need long-term services and supports or can still pay for these services themselves, if the time comes and they have exhausted their savings, they may likely be turned away or offered insufficient care that neither meets their needs nor maintains their dignity.

Supplemental Nutrition Assistance Program (Snap)

Also under the proposal, SNAP – the Supplemental Nutrition Assistance Program — is ended as an entitlement to individuals and is converted into a block grant to the states. SNAP eligibility would be made contingent on work or job training, and there would be lifetime limits on SNAP.

Today, 2.5 million older Americans receive SNAP. Block granting SNAP will diminish its ability to provide assistance in economic downturns. Typically, states have reduced benefits or created waiting lists for other block grant programs during tough economic times.

Nearly a third of SNAP recipients today are older or people with disabilities. Unless clear exemptions from work requirement were provided for the elderly and people with disabilities, the policy assumptions made in this budget would bar older adults and Americans with disabilities from receiving SNAP benefits.

Across-The-Board Cuts

While AARP appreciates that the budget resolution recognizes the importance of Social Security to older Americans, we remain concerned that across-the-board cuts to Medicare, Medicaid and other critical federal programs could also have a detrimental impact to the lives of many seniors who depend on these programs for their health and retirement security. We urge you to consider the impact of these proposed cuts on real people, here in Rhode Island and across the country, and to look at less draconian ways to achieve savings.

Across-the-board cuts would include reductions in Medicare, Medicaid and all other health care spending. The House-passed budget resolution proposes enacting this hard spending cap as a law and it could not be waived – regardless of need or economic circumstances – even by a super-majority of votes in Congress.

The budget contemplates enacting this spending cap as part of the debt ceiling debate that will begin when you return to Congress next week. This is a frightening scenario to everyone.

Older Americans Act

The Older Americans Act (OAA) provides essential programs, information and services to meet the needs of a growing older population. Programs supported through the OAA include home-delivered and congregate nutrition services, in-home supportive services, transportation, caregiver support, community service employment, the long-term care ombudsman program, services to prevent the abuse, neglect, and exploitation of older persons, and other supportive services. These programs provide vital support for those older adults who are at significant risk of losing their ability to remain in their own homes and communities, or who need support and protection in long-term care facilities.

Pending formal legislative language, our interest is to ensure that the Act maintains critical service and information roles, and promotes greater responsiveness to the needs of mature and older Americans. In this period of economic downturn, AARP is most concerned that programs, authorities and partnerships that have already proven effective in meeting the needs of vulnerable older Americans be maintained and strengthened. We believe that the most important legislative objective to better serve older persons is to promote and improve efficiency in the delivery of core services. Better coordination of existing OAA programs with other federal programs holds great promise and merits the support of the Administration and Congress.

Conclusion

AARP’s 135,000 members in Rhode Island hope that the Special Committee on Aging is listening. We hope that you will not turn away from the great needs of a generation that has made America great and millions of others who have paid into a system based on the promise of greater health and financial security in retirement.

We know that creative solutions are necessary. All we ask is that you carefully measure the human consequences of your decisions. And that you remember the greatest wealth of this nation is the way we show the world the respect we have for our citizens.