The House Fiscal Year 2019 Budget and Its Effect on Seniors

The House Budget Resolution for Fiscal Year (FY) 2019 would make cuts to the Medicare, Medicaid and Social Security programs and repeal and replace the Affordable Care Act (ACA), actions which would be harmful to millions of Americans.

The House Budget Resolution for FY 2019, introduced by House Budget Committee Chairman Steve Womack (R-AR), was approved by the House of Representatives Budget Committee on June 21, 2018. This budget proposes drastic cuts in federal spending for programs of importance to most low- and middle-income Americans while protecting nearly $2 trillion in tax cuts, which mainly benefit the very wealthy and large profitable corporations and dramatically increase our deficits and debt. This paper summarizes some of the key proposals in the House Republican FY 2019 budget resolution that would affect seniors and people with disabilities who rely on Medicare, Medicaid and Social Security.

Medicare

The budget resolution proposes $537 billion in cuts to Medicare which would be achieved by ending traditional Medicare and increasing health care costs for beneficiaries. Chairman Womack’s plan assumes savings for the federal government by privatizing Medicare and shifting costs to Medicare beneficiaries.

Privatizing Medicare with Vouchers/Premium Support Payments

Under premium support, when people become eligible for Medicare they would not enroll in the current traditional Medicare program which provides guaranteed benefits. Rather they would receive a voucher, also referred to as a premium support payment, to be used to purchase private health insurance or traditional Medicare through a Medicare Exchange. The amount of the voucher would be determined each year when private health insurance plans and traditional Medicare participate in a competitive bidding process. Seniors choosing a plan costing more than the average amount determined through competitive bidding would be required to pay the difference between the voucher and the plan’s premium. In some geographic areas, traditional Medicare could be more expensive. This would make it harder for seniors, particularly lower-income beneficiaries, to choose their own doctors if their only affordable options are private plans that have limited provider networks. Wealthier Medicare beneficiaries would be required to pay a greater share of their premiums than lower-income seniors.

Private plans participating in the Medicare Exchange would be required to offer insurance to all Medicare beneficiaries. However, it is likely that plans could tailor their benefits to attract the youngest and healthiest seniors and still be at least actuarially equivalent to the benefit package provided by fee-for-service Medicare. This would leave traditional Medicare with older and sicker beneficiaries. Their higher health costs would lead to higher premiums that people would be unable or unwilling to pay, resulting in a death spiral for traditional Medicare. This would adversely impact people age 55 and older, including people currently enrolled in traditional Medicare.

Raising the Medicare Eligibility Age

The budget resolution would gradually increase the age of eligibility for Medicare to correspond with Social Security’s retirement age which is increasing from 65 to 67. However, unlike Social Security, people would not be able to receive Medicare at a younger age, and it is important to point out that not all people are living longer. Raising the Medicare eligibility age is a benefit cut. Although this proposal would save money for the federal government, it would increase system-wide health spending by increasing costs for everyone else, including:

65- and 66-year olds who would have to buy private insurance, which can be age rated;
Younger people buying health insurance coverage in an older risk pool;
Medicare beneficiaries left in an older and less-healthy risk pool;
Employers providing health insurance to workers and retirees; and
State Medicaid programs.
Increasing Beneficiaries’ Out-of-Pocket Costs

The House budget resolution assumes savings from redesigning the Medicare benefit by combining the Part A and Part B deductibles and making changes to supplemental insurance (Medigap) policies, changes that would likely increase costs for people with Medigap policies. Instead, Medicare should be improved for beneficiaries by simplifying its cost-sharing and adding a catastrophic cap.

The House budget resolution would exclude drug manufacturer discounts from the calculation of the threshold to enter the catastrophic coverage phase (where Medicare picks up a higher proportion of drug costs than it does in the donut hole). This would save Medicare nearly $60 billion and increase seniors’ out-of-pocket costs.

Repealing and Replacing the Affordable Care Act

The House budget resolution assumes repeal of the Affordable Care Act (ACA) and adopts the reforms included in the House-passed “American Health Care Act” (AHCA) that would reduce the federal deficit by $204.1 billion between fiscal year 2018 and fiscal year 2027.

According to the Congressional Budget Office (CBO), over the next decade 23 million people would lose health insurance under the AHCA compared to current law. These losses would occur due to the proposal’s repeal of the Medicaid expansion, restructuring of the Medicaid program into per capita caps, changes to the Affordable Care Act’s (ACA) individual market reforms, and repeal of the individual mandate (which was done in the tax cut bill). Seniors and near retirees would make up the largest demographic group to lose health care coverage under the AHCA.

Medicaid

By assuming enactment of the ACA repeal, the House budget resolution would destroy the current Medicaid program and slash benefits for low-income individuals. These changes would be detrimental to seniors and others who rely on Medicaid.

Changing the Structure of Medicaid from an Entitlement to Per Capita Caps or a Block Grant

Medicaid provides funding for health care to help the most vulnerable Americans, including low-income seniors, people with disabilities, children and some families. The House budget resolution would end the current joint federal/state financing partnership and replace it with per capita caps (or a block grant, at state option) giving states less money than they would receive under current law.

Based on the House-passed AHCA, the House budget resolution would cap the growth in federal per-enrollee payments for most children and nondisabled adults enrolled in Medicaid at the medical care component of the consumer price index (CPI-M). For most enrollees who are disabled or age 65 or older, the capped amount would be the CPI-M plus one percentage point. Historically, the CPI-M has grown more slowly than the rate at which Medicaid expenditures have grown. Alternatively, the House budget resolution would allow states an option to convert the federal Medicaid payment to a block grant. This would change Medicaid, making it more like the Children’s Health Insurance Program (CHIP) block grants to the states.

While block grants or per capita caps would give state governments greater flexibility to manage and design their Medicaid programs, such discretion in no way compensates for the significant reductions that beneficiaries, including nursing home residents and their families, could face.

The House budget resolution would further cut Medicaid by applying work requirements to Medicaid recipients under 65 who are not disabled or pregnant.

Repealing the Medicaid Expansion under the Affordable Care Act (ACA)

Beginning in 2014, states have had the option to receive federal funding to expand Medicaid coverage to uninsured adults with incomes of up to 138 percent of the federal poverty level ($16,753 for an individual in 2018). Thirty-two states have expanded their Medicaid programs.

The House budget resolution would repeal the Medicaid expansion in the ACA. This proposal would hurt states and low-income individuals by:

Eliminating billions of federal dollars to states to provide their residents with health care and financial protection. Under the ACA, the federal government paid 100 percent of the cost for newly eligible low-income adults in Medicaid for the first three years (2014-2016), phasing down to 90 percent by 2020.
Preventing low-income adults from receiving access to health care services. Repealing the Medicaid expansion would result in 14-17 million people losing coverage. In total, the House budget resolution would cut $1.5 trillion from Medicaid and “other programs.”
Social Security

The House budget resolution proposes reforming the Social Security Disability Insurance (SSDI) program and includes a plan to eliminate concurrent receipt of Unemployment Insurance and SSDI. This proposal would affect SSDI beneficiaries who work but get laid off – and as a result – qualify for Unemployment Insurance. These are benefits that Americans have earned through their contributions while working and it is unfair to deny them their earned benefits in an effort to balance the budget.

Social Security and Unemployment Insurance are vital insurance systems established for different purposes. Receiving UI and SSDI concurrently has been authorized under current law for many years and has been considered appropriate and lawful. Individuals qualify for SSDI because they have significant disabilities that prevent them from performing substantial work activity (earnings of $1,180 per month in 2018). At the same time, the Social Security Act encourages SSDI beneficiaries to attempt to work. Those who try and are unsuccessful in doing so through no fault of their own may qualify for UI. A recent report by the Government Accountability Office shows that less than one percent of individuals served by SSDI and UI receive benefits concurrently and that the UI benefits paid are modest. We are deeply concerned about this proposal, as it would deprive disabled workers part of the benefit that accrues to them because they made an effort to return to work. We are, therefore, opposed to the enactment of UI/DI bills such as the one included in the FY 2019 budget resolution.

NATIONAL COMMITTEE POSITION

The National Committee opposes provisions included in the House budget resolution that would reduce health care coverage through Medicare, Medicaid and the Affordable Care Act, as well as a proposal that would be detrimental to the Social Security program, particularly the following:

Ending traditional Medicare by converting it from a defined benefit to a defined contribution program;
Raising the Medicare eligibility age;
Increasing costs for Medicare beneficiaries by restructuring the program and Medigap in ways intended to reduce federal spending, and by increasing out-of-pocket costs for seniors under Part D;
Repealing the Affordable Care Act, which has extended the solvency of the Medicare Part A Hospital Insurance trust fund;
Transforming the Medicaid program from a federal/state partnership into either per capita caps or a block grant program, which would result in arbitrary cuts to vulnerable seniors and other individuals;
Repealing the Medicaid expansion, which would hurt states financially and negatively affect low-income adults who need access to health care services; and
Eliminating concurrent receipt of Social Security Disability Insurance benefits and Unemployment Insurance benefits.