MYTH: The New Health Law is Bad for Seniors!

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1 ` FACT SHEET MYTH BUSTER GOVERNMENT AFFAIRS JANUARY 2012 MYTH BUSTERS: New Health Law & Other Myths INTRODUCTION Even before the passage of the Affordable Care Act, rumors have been circulating that falsely claim seniors will be hurt by health reform. On the contrary, the new health law includes improvements to Medicare a government-run program that is the largest, most successful health care program in history. As the 2012 campaign season heats up, detractors are running ads against supporters of the new health law and spreading mistruths. Below are the myths and lies that opponents are using to scare seniors and retirees, and the facts that are true. MYTH: The New Health Law is Bad for Seniors! FACT: The new health law provides seniors under Medicare a free yearly medical check up and free preventive screenings for diseases such as diabetes, heart disease and cancer. Items such as mammograms, bone-mass measurements tests and colonoscopies are covered with no copays. The law also gradually closes the doughnut hole a gap in Part D prescription drug coverage where seniors are responsible for 100% of drug costs. While in the doughnut hole, seniors will receive a 50% discount on brand name prescription drugs and subsidies toward generic drugs. MYTH: Cuts to Medicare Advantage Plans will Hurt Seniors! FACT: The new health law eliminates the wasteful overpayments to private Medicare Advantage (MA) plans. The overpayments not only costs the government an additional $1000 per person each year than under traditional Medicare, but also raises Part B premiums for seniors and the disabled, including those not on MA plans, by $90 per couple a year. The new health law restructures government payments to Medicare Advantage plans to keep it more in line with that of traditional Medicare. The law also provides a bonus payment to MA plans that provide high quality care. Finally, the new law forbids MA plans from charging higher co-payments than traditional Medicare. MYTH: The New Health Care Law will Bankrupt Medicare! FACT: According to the Medicare actuaries the new health law extends the life of Medicare by 7 years. Rather than becoming insolvent in 2017, the life of the Hospital Insurance Trust Fund will be extended until At that point, Medicare will still be able to pay 90 percent of the expenses.

2 MYTH: The New Health Law has increased Medicare premiums! FACT: The new health law has not increased Medicare premiums and, in fact, in some cases it has reduced premiums. In 2010, when the new law was enacted the Medicare Part B premium was $ It was $96.40 again in 2011 for 73 percent of beneficiaries. Only new beneficiaries and those with higher income paid more. In 2012, the Part B premiums went up only slightly to $99.90 for individuals with incomes of $85,000 and below and couples with incomes of $170,000 and below. Further, the Part B deductible actually decreased by $22; it was reduced from $162 in 2011 to $140 in Myth: Obama Administration s Medicare Rebate Proposal will Increase Medicare Premiums! The American Action Network, a conservative advocacy group, sent out mailers in many congressional districts criticizing this proposal and claiming it would increase Medicare premiums by 40 percent. (August 2011) FACT: Prior to passage of the Medicare Part D prescription drug plan, dual-eligibles low-income seniors covered by Medicare and Medicaid received their prescription drug benefits through the Medicaid program, which received rebates from pharmaceutical companies. When the Republican controlled Congress and White House enacted the Medicare Part D drug plan in 2003, the drug benefits of dualeligibles were transferred under the Medicare program. This change provided the drug companies a huge windfall, because, under the new law, drug companies were not required to pay rebates to the Medicare program. President Obama and Democrats who support the Medicare Drug Savings Act simply want to revert back to the law prior to 2003 when pharmaceutical companies were required to pay rebates for all lowincome beneficiaries. According to the Congressional Budget Office, these rebates would provide the government $112 billion from 2012 to RESOURCES: Politifact: SNOPES: Factcheck:

3 What s at Stake for Social Security, Medicare & Medicaid in 2012 At the end of 2011, the Super Committee announced it was not able to make a bipartisan agreement on how to reduce the federal deficit by $1.2 trillion before the committee s deadline. Without this agreement, the Budget Control Act mandates a process known as sequestration. Under the sequestration, automatic, across the board cuts go into effect in January, These cuts will be split evenly between defense and non-defense mandatory and discretionary spending. Both Social Security and Medicaid are protected from these automatic cuts, while Medicare fees to providers can be cut by up to two percent. Currently, both chambers are seeking ways to avoid sequestration. Reportedly, this effort includes consideration of many prior deficit reduction proposals, including proposals that would harm Social Security, Medicare and Medicaid. Potential Threats to Social Security The Chained CPI: Prior deficit reduction negotiations have proposed changing the formula used to calculate the annual COLA to the so-called chained CPI, which would cut the benefits of those receiving Social Security today. After ten years average retiree benefits would be cut by about $600 a year, and after 20 years they would be cut by about $1,000 a year. This technical change assumes that seniors will substitute one good for a cheaper version to make ends meet. While that may work for certain goods, a senior cannot just substitute triple bypass surgery with a double because it s cheaper. Plain and simple, the chained CPI is a COLA cut! Raising the Retirement Age: Raising the normal retirement age beyond age 67 is a 13% benefit cut on top of the 13% cut already made when the retirement age was increased from 65 to 67, according to the Social Security Administration. While the life expectancy of upper income earners has increased, the life expectancy of middle and low wage earners has not increased significantly to justify another increase in the retirement age. Pushing retirement even farther out of reach would be devastating for millions of older Americans. Means-Testing Social Security: Workers contribute to Social Security and earn the right to benefits upon retirement. This popular support is the very shield that makes politicians think

4 twice before making cuts to the program. Means-testing Social Security benefits would break the connection between contributions and earnings and would compromise public support for the program, leaving it highly vulnerable to benefit cuts in the name of deficit reduction. Potential Threats to Medicare Voucherize Medicare: Earlier this year, the GOP proposed replacing traditional Medicare with vouchers or stipends for private insurance. The amount would not be enough to keep up with medical inflation. The Congressional Budget Office already found that plan would increase overall health care costs by $34 trillion over 75 years and increase out-of-pocket costs by $6,000 per senior per year. Similarly, the Wyden-Ryan proposal would replace guaranteed health care benefits with vouchers. This approach will lead private-for-profit insurance companies to cherry pick the healthiest seniors, leaving Medicare with sicker and more costly seniors, ultimately driving up its costs and crippling the program. Raise Medicare s Eligibility Age: Proposals to raise the age of eligibility from 65 to 67 is a step in the wrong direction. This population faces the most difficulty in obtaining insurance due to chronic health conditions and jobs with health insurance are difficult to find for this group to due to age discrimination. Instituting a Single Deductible for both Medicare Part A and B: This proposal would replace the two separate deductibles for Medicare for Part A (hospital coverage) and Part B (doctor and outpatient coverage) with a single deductible ($550- $600) for both. The Medicare Part B deductible for 2012 is $140 and the Part A deductible is $1,156 for a hospital stay of up to 60 days. While a single deductible appears to reduce costs, in fact, it raises costs for seniors not using hospital services. Restrict First Dollar Coverage under Medigap: Currently, Medigap covers most of a beneficiary s co-payments. This option, which is based on the idea that beneficiaries overutilize benefits, would restrict the first $500 of an enrollee s cost-sharing liabilities and limit coverage to 50% of the next $5,000 in Medicare cost-sharing, requiring seniors to pay for this out-of-pocket. Home Health Co-pay: The Medicare Payment Advisory Board (MedPAC) recommends charging a 5% copayment for home health visits (currently, there is no co-pay for home health care). This change would amount to $150 copayment for each 60-day home care treatment period, or episode. Potential Threats to Medicaid

5 Social Security & Medicare Current Facts & Figures Fact Sheet January 2012 Medicaid is the government safety net program that provides health care benefits to 60 million individuals, including pregnant women, children, people with disabilities and lowincome seniors. The program, which is funded by both the state and federal revenues, also pays for 62% of all long term care spending (i.e., nursing home, home health care) in the United States. Of all the entitlement programs, Medicaid is the most vulnerable and most likely to see cuts. The Many Faces of Social Security About 158 million workers contribute to Social Security through payroll taxes. More than 55 million people receive monthly Social Security benefits, including: o 38 million receive retirement benefits o 4.2 million surviving spouses and parents o 10.5 million disabled workers and their dependants o 4.3 million children younger than 18 receive Social Security benefits as dependents of deceased, disabled or retired workers. Average 2011 Monthly Social Security Benefit A retired worker: $1,174 A retired couple: $1,907 Disabled worker: $1,067 Disabled worker with spouse and child: $1,813 Widow or widower: $1,133 Young widow or widower with two children: $2,409 Maximum Monthly Social Security Benefit: $2,366 (for worker retiring at Full Retirement Age). Social Security Cost of Living Adjustment (COLA) for 2012: 3.6% 2012 Social Security & Medicare Contribution Amounts Social Security: 6.2% for workers, which is matched by employers at a rate of 6.2%, unless Congress extends the 2011 rate of 4.2% for workers. This contribution is paid on earnings up to $110,100. Medicare: 1.45% for both workers and employers on all wages Social Security Eligibility: Did you know? Social Security is an extremely efficient program, with administrative costs of only 0.9% of total expenditures!

6 Full Retirement Age: 66 Early Retirement Age: 62. Taking early retirement can reduce Social Security benefits up to 30 percent. Social Security: When & How to Apply for Benefits You should apply for Social Security benefits three months before the date you want your benefits to start. You can apply in one of the following ways: o Visit your local Social Security office. Call to find the office nearest your location. o Call Social Security at If you are deaf or hard of hearing, you can call Social Security at TTY o Go Online: The Many Faces of Medicare About 158 million workers contribute to Medicare through payroll taxes. More than 47 million people receive Medicare benefits, including: o 39.6 million individuals 65 and over o 7.9 million disabled individuals Medicare Part A (Hospital Coverage) Deductible: $1,156 (first 60 days of Medicare-covered inpatient hospital care) Copayment: 10% 2012 Medicare Part B (Physician Coverage) Individual s Income Couple s Income Your 2012 Part B Monthly Premium $85,000 or less $170,000 or less $99.90 $85,001-$107,000 $170,001-$214,000 $ $107,001-$160,000 $214,001-$320,000 $ $160,001-$214,000 $320,001-$428,000 $ Above $214,000 Above $428,000 $ For all Beneficiaries: Part B deductible is $140 and the Part B copayment is 20% Medicare Part D (Prescription Drug Coverage) Monthly Premium: On average, $30 (amounts vary by plan). Deductible: $320. Doughnut Hole: $2,930 - $6, The new health law mandates that beneficiaries in the doughnut hole receive a 50% discount on drug prices from manufacturers for brand name drugs and 14% subsidy from drug plans for generics. Cap on Out-of-pocket Costs: $4,700 (this includes what beneficiaries pay -- deductible and copayments -- plus drug discounts) In addition to a monthly premium, high-income individuals will pay an income-related monthly adjustment amount as noted below:

7 Individual s Income Couple s Income Income-related monthly adjustment amount $85,000 or below $170,000 or below $0.00 $85,001 - $107,000 $170,001 - $214,000 $11.60 $107,001 - $160,000 $214,001 - $320,000 $29.90 $160,001 - $214,000 $320,001 - $428,000 $48.10 Above $214,000 Above $428,000 $66.40 Medicare: When & How to Apply for Benefits Generally, Medicare is available for people age 65 or older, younger people with disabilities and people with End Stage Renal Disease. If you are already receiving Social Security retirement benefits, you will be automatically enrolled in Medicare Parts A and B. If you want to apply for Medicare, call the Social Security Administration ( ) or visit their website:

8 Ends Medicare as we know it! The Ryan Republican Budget (House Concurrent Resolution 34) U.S. House of Representatives June 2011 Privatizes Medicare and turns care over to insurance companies. Currently, Medicare pays for all medically necessary health care without limits. Under the Ryan budget, current workers under 55 must choose a private insurance plan when they go on Medicare. Traditional Medicare will end. Drastically increases out-of-pocket payments. The Ryan budget would not be indexed for medical inflation. According to the Congressional Budget Office, by 2030 the Medicare vouchers would be about $9,750 a year while annual medical costs would be about $30,460, leaving seniors with an average $20,700 to pay out-of-pocket. Eliminates many Medicare benefits, repeals health reform. The Ryan budget repeals the Affordable Care Act; thus, all the benefits for seniors in the law will be terminated, including provisions that require no co-payments for preventive services, free annual visits and closing the doughnut hole. Promotes rationing by private insurance companies. With rising health care costs and limited funding, insurers will have every incentive and motive to deny care. Guts Medicaid by Slashing $1.4 Trillion from the Program Endangers long term care services for seniors and the disabled. Medicaid pays about 62% of all long term care spending in the U.S. Seniors make up 57% of the individuals receiving nursing home coverage and home care under Medicaid. By cutting one-third of Medicaid s funding, it will be difficult for states to continue to adequately fund these benefits. Jeopardizes eligibility under Medicaid. By block granting Medicaid, which means states will receive a limited amount of money, states will be hard pressed to provide needed benefits; thus, states will most likely change eligibility or increase cost sharing for individuals. Jeopardizes low-income assistance for seniors. Currently, Medicaid pays the monthly Medicare Part B premiums for low-income Medicare beneficiaries. Under a block grant proposal there is no guarantee this coverage will continue.

9 Roadmap to Eliminate Social Security The Ryan Republican Budget Forces Rapid Cuts Social Security through fast-track procedure. The Ryan Republican plan would expose Social Security to a fast-track process, posing devastating cuts to the program and its 53 million beneficiaries. The Budget Act of 1974 forbids Social Security from being cut through fast-tracking, an up-or-down vote process that leaves no room for debate, amendments or input from the American public. The Ryan Republican budget attempts to go around this safeguard by creating a new fast-track expedited process that would trigger statutory reforms just for Social Security in any year that the program is not in 75-year balance. Social Security serves and protects millions of Americans so any changes to Social Security should be given thorough review and full debate. Robs the Middle Class of Retirement Security by cutting benefits & raising the retirement age. The Ryan Republican Budget endorses cutting future Social Security benefits for every worker earning more than $27,000 a year and increasing the retirement age, two ideas of the Bowles Simpson plan. These cuts are aimed at middle class workers, who are already struggling to save for retirement. Consider that the average 30-year-old man today makes $3,000 less (inflation adjusted) than his father made in The Ryan Republican budget and its cuts to Social Security would make retirement security even more difficult to reach for today s middle class workers. Left unchecked, the Ryan Republican budget immediately threatens the ability of the government to keeps its promise to Social Security beneficiaries. It is unconscionable for elected leaders to describe Social Security as being immediately threatened by outof-control-costs when really the Social Security Trust Fund has $2.6 trillion surplus. Elected leaders must not scare our country into thinking that Social Security must be cut in the name of fiscal responsibility when Social Security does not contribute a dime to the deficit. Current retirees and future generations deserve better than for their promise to broken and for this basic level of economic security to be intentionally devastated in a game of dirty politics. Does Not Seriously Address Deficit The $4.3 trillion in program cuts are offset by $4.2 trillion in tax cuts for the rich, leaving just $155 billion in deficit reduction. House Concurrent Resolution 34 passed the House on April 15 by a vote of 235 to 193; it was brought up in the Senate on May 25, but failed by a vote of 40 to 57.

10 The Chained CPI: Cutting your Social Security COLA Fact Sheet July 2011 Social Security s cost-of-living adjustments (COLA) to monthly benefits are designed to help retirees keep up with the rising living standards and costs. COLAs currently are tied to the Consumer Price Index for Urban Wage Earners (CPI-W), which surveys price changes in the average set of goods purchased by urban wage earners and clerical workers. There has been no COLA in the past two years. The CPI-W formula does not protect seniors purchasing power because it fails to account for the fact that seniors spend two to three times as much of their budget on medical care than younger households. Yet, many in Congress are seriously considering cutting your Social Security benefits by now tying the COLA to the Chained CPI (C-CPI-U), a smaller measure of inflation. While many will describe this change as simply technical, it is a change that would result in big, lifetime losses in benefits for the average Social Security beneficiary. Why is the Chained CPI bad for seniors? According to the Social Security Actuary, moving to a chained CPI would mean an immediate benefit cut. In fact, according to Social Security Works, an average earner retiring in 2011 at age 65 would lose over $6,000 over 15 years if the chained CPI were adopted. The chained CPI assumes that a lower COLA is acceptable because consumers can substitute cheaper products when prices go up. The problem is that health care costs, which consume a large amount of seniors income, cannot simply be substituted with a cheaper version. A senior cannot just substitute triple bypass surgery with a double because it s cheaper. Nor can knee surgery be substituted with crutches. The chained CPI ignores this reality and instead tries to balance the budget on the backs of our nation s seniors. Is there a better alternative? Yes! The COLA should be tied to the Experimental Consumer Price Index for the Elderly (CPI-E), a measure of inflation that more accurately reflects the spending of seniors, giving greater weight to medical care and housing costs. The Bureau of Labor Statistics developed this index and it is available for use today.

11 What Should I Tell My Friends about the Chained CPI? The chained CPI is a back door way of trying to balance the budget on the backs of America s seniors! It s an immediate Social Security benefit cut! It s not just a simple technical change without any impact it s a real cut to the benefits you have earned every year into the future. It hits today s Social Security beneficiaries! Politicians like to say their cuts to Social Security will not affect those getting benefits today. Wrong! Switching to the chained CPI would hit all current beneficiaries now! We need a higher COLA not a lower one! The current COLA is not enough it does not accurately account for large health care cost increase faced by seniors and people with disabilities. Where can I find out more? United States House of Representatives, Committee on Ways & Means: National Academy of Social Insurance: Social Security Works: National Women s Law Center: o Economic Policy Institute: o