The Debt Ceiling & Medicare – What Could Happen?

Introduction To many, the Debt Ceiling fiasco over the summer was nothing more than political theater between President Barack Obama and House Majority Leader John Boehner (R.) What many of us don’t realize is that a lot of us would have been directly impacted if an agreement had not taken place when it did. The potential victims of the Debt Ceiling crisis could have been those on Medicare. We at ThirdAge have put together a description of some of the major points about the averted crisis and how it could have affected those of us on Medicare.

What is the Debt Ceiling? The bill that was passed by Congress and signed into law by the President last summer will raise the nation’s debt ceiling by $400 billion. It will also reduce federal spending over the next 10 years. And between now and Thanksgiving 2011, Congress will form a new 12 member committee of both Republicans and Democrats. Their task will be to generate an additional $1.2 to $1.5 trillion in additional spending cuts. This process is called sequestration. If this committee fails to come up with the cuts on their own, then there will be automatic cuts across all programs with the exception of a few like Social Security and Medicaid.

What is the task of the Super Committee? Since the passing of the bill, Congress appointed 12 members to the committee in charge of the spending cuts. This committee was dubbed the “Super Committee”. They are given until November 23, 2011 to make their recommendations on what to cut. Once that is complete, the proposals will be given the fast track to be voted on in both houses of Congress by December 23, 2011. There will also be no amendments allowed to the bill. *Top row, L to R are: Sen. Patty Murray, D-WA; Rep. Chris Van Hollen, D-MD; Rep. Fred Upton, R-MI; Rep. Jeb Hensarling, R-TX; Middle Row from, L to R are: Sen. John Kerry, D-MA; Rep. Xavier Becerra, D-CA; Sen. Pat Toomey, R-PA; Rep. David Camp, R-MI; Bottom row, L to R are: Sen. Max Baucus, D-MT; Rep. Jim Clyburn, D-SC; Sen. Rob Portman, R-OH; and Sen. Jon Kyl, R-AZ. *

What Are the Potential Changes That Could Affect Medicare? Raising the Eligibility Age The age to be eligible for Medicare would be increased from 65 to 67.

Combining Part A and B Deductibles There are talking about combining Part A and B deductibles into a single annual payment. Deductible amounts being discussed range around $550. They would impose 20% cost-sharing for all Medicare services (including Part A services which currently require either no cost-sharing or a set co-pay). The total annual out-of-pocket expenses would be capped between $5,250 and $7,500.

Increase Part B Premiums As of right now, higher income beneficiaries pay a larger share of their Part B and Part D premiums. One proposal discusses of increasing Part B premiums from 25% to 35% of program costs.

Eliminating First-Dollar Medigap Coverage This proposal would prohibit Medigap plans that cover the first $500 of cost-sharing and would also limit coverage to 50% of the next $5,000. (This may include policies already held by individuals.)

Persons Eligible For Both Medicare and Medicaid Eliminated This proposal means that a beneficiary who is eligible for both Medicare and Medicaid would no longer receive Medicare. This would give full responsibility to Medicaid for providing health coverage as well as putting the beneficiary on a Medicaid managed care plan.

Other Proposals Being Discussed Ideas such as turning Medicare into a voucher program and limiting overall federal spending that would cause Medicare to suffer deep cuts in its programs may be on the table.

What If The “Super Committee” Doesn’t Work? If the “Super Committee” is unable to come up with a minimum of $1.2 trillion in cuts or if Congress does not pass their suggested cuts, then sequestration will take place. This would means cuts would be implemented across the board. There are exempt programs like Social Security and Medicaid. Medicare would only be limited to a 2% cut. That cut would come from payments to providers only. This may sound acceptable, but it doesn’t say which programs could suffer cuts if the sequestration were to happen.

What’s Next? The final proposals by the “Super Committee” will be due November 23, 2011. Congress will have to vote for or against the proposals with no amendments by December 23, 2011. Stick with ThirdAge as we will stay on top of this situation.