Remarks by Cheryl Matheis, AARP Senior Vice President for Policy, Strategy and International Affairs
American Academy of Pediatrics
October 15, 2011
We have a saying at AARP that comes from our founder, Ethel Percy Andrus, who created our organization a little over 50 years ago.
“What we do,” she said, “we do for all.”
So it’s fitting, I think, that I’m here speaking to all of you who have done so much for the health and well-being of children—about how our country’s health care law affects older adults.
We don’t think anyone should have to choose between high quality, affordable health care for youngsters and for seniors. It’s not like the Red Sox and the Yankees—you can be for both.
What we do, we do for all. AARP has just joined forces with Experience Corps, an organization that tutors children in grades K-3 in reading. We supported expansion of SCHIP, so more children would have health care coverage. We welcome the provision in the Affordable Care Act, the health care law I’m going to talk with you about, that enables people to keep adult children on the family health care plan until they turn 26.
So many of our members at AARP face the squeeze that comes from being in the middle.
We represent roughly 37 million members who are 50+.
It’s quite common for our members in their 50’s to be parents of children in school, from pre-kindergarten through college, and to have parents for whom they’re providing care.
So they’re in the middle chronologically, when it comes to the living generations of their family.
And so many of them have been squeezed financially by an economic downturn that has taken a terrible toll on the middle class.
Squeeze on the Middle Class
The Wall Street Journal recently reported that more Americans are reaching their 60’s so loaded down with debt that they can’t afford to retire. Middle class families are borrowing against their homes and 401(k)s, running up credit card balances, taking out loans, borrowing from family members. All that adds up to a jump of almost 300 percent over the last decade in the median debt of middle class families.
We hear from our members about the squeeze on the middle class—the rise in health care costs, the lack of coverage, higher costs for college tuition, the sharp drop in the value of their homes and in the amount of their savings for retirement.
The chief medical officer for AARP Services, Charlotte Yeh, points out that “financial stress can be a chronic health condition, just like diabetes or high blood pressure, or a risk factor for health, just like BMI, smoking, or exercise.”
We hear from our members about the high cost of long-term care. More than six million people 65-plus need daily assistance—about three quarters of them in the community and about one quarter in nursing homes. Medicare pays for very limited nursing home care and does not pay for assisted living.
We had all of this in mind when we fought for and won important protections in the health care law for people 50-64 and those who are 65 and over.
And we’re fighting hard this fall to make sure the so-called super committee in Congress doesn’t shift health care costs onto seniors and cut Social Security.
Let me turn now to the health care law, the Patient Protection and Affordable Care Act.
Some call it the ACA. Others—including, as of late, President Obama—call it Obamacare. You can call it whatever you want. What’s important is not what we call it, but what it calls for.
This law has become a political piñata, but that shouldn’t obscure the constructive provisions in the Act and the work going on, out of the headlines, to carry out those provisions and fulfill its promise.
So in answer to the question posed for this session—Has Anything Really Changed?—Yes, meaningful change has already occurred—and much more change is coming.
As Sgt. Joe Friday would say on Dragnet—and I’m sure some of us are old enough to remember him—we want “just the facts.”
This law helps people 50-plus in a number of ways. It is designed to make private insurance more accessible and fairer.
One of the most important protections for people 50-64 involves age rating. Right now, insurers can charge older people up to 10 times what they charge those who are younger. Under the health care law, starting in 2014, insurers will only be able to charge those who are older three times the amount they charge younger adults.
Another key feature of the law concerns preexisting conditions. In the years before the law passed, we heard heart wrenching stories from many of our members who were rejected for coverage they desperately needed. As of 2014, adults cannot be denied coverage for a preexisting condition. For children, this critical protection is already in place.
Getting coverage will no longer be like playing roulette. Insurers are no longer allowed to drop your coverage if you’ve paid your premiums. Health plans are prohibited from placing limits on what they spend on your care over the course of your lifetime. These provisions are already in effect. Beginning in 2014, health plans cannot place limits on your annual health costs.
Also by 2014, individuals can select a private health plan from a menu of choices offered through an insurance exchange in your state. These insurance exchanges will serve people who are uninsured—or self-employed—or between jobs. They will be transparent markets, with key consumer protections.
Health plans, beginning in 2014, cannot deny coverage to you or charge you more for insurance because of your health, past medical problems, or your gender. They can raise premiums by up to 50 percent for those who smoke.
Another important component of the law is coverage for preventive care. For example, health plans have to cover recommended preventive services, screenings and vaccinations without cost sharing.
The law promotes independent living by providing funding to some states to expand home-and community-based services.
As it approaches its own 50th birthday, Medicare stands as one of the most successful and important programs in our country’s history. At the same time, nearly seven out of 10 Medicare beneficiaries spend at least ten percent of their income on health care expenses—and Medicare households spend three times more on health care, on average, than other households.
The health care law provides major improvements for people 65+ who are in Medicare.
It lowers prescription drug costs. It protects and enhances guaranteed Medicare benefits. And it does something else that’s often overlooked—it strengthens the future fiscal health of Medicare.
Let’s look at these features of the law as if affects Medicare beneficiaries.
First, the cost of prescription drugs.
Over time, the law closes the dreaded doughnut hole under which people in Medicare have had to pay out of their pocket the full price of prescription drugs while they are in a coverage gap.
Medicare beneficiaries no longer have to pay all of the cost of drugs in that coverage gap.
This year, they get a 50 percent discount on brand name prescription drugs while they are in the coverage gap and a 7 percent discount on generic prescription drugs.
Next year there is a 50 percent discount on brand name prescription drugs and the discount for generic prescription drugs rises to 14 percent.
Each succeeding year people will pay less for their drugs in the coverage gap until 2020, when the gap closes and the beneficiary will pay no more than 25 percent copay.
So closing the doughnut hole is one key component of the new law. Another is expanding coverage for wellness and preventive care under Medicare.
Beneficiaries can get yearly wellness visits at no cost to them.
Preventive services provided with no out-of-pocket cost to people in Medicare include certain cancer screenings, cardiovascular screenings, screenings for diabetes, and certain vaccinations and tests.
The new law not only strengthens benefits for people in the program; it also, as I mentioned, strengthens the fiscal future of Medicare. How is that possible?
By achieving almost $400 billion in net savings from Medicare over a ten year period.
About half of that figure will come not from a cut, but from a smaller rate of increase in payments to hospitals, nursing homes, home health workers, and other medical providers.
At the same time, physicians who work in primary care will be rewarded with a 10 percent bonus. There will be payment incentives for hospitals to reduce preventable readmissions.
The law is also designed to lower Medicare costs through incentives for better coordination of delivery, especially for seniors with multiple chronic conditions.
And a new Center for Medicare and Medicaid Innovation will test new payments and delivery models.
About one-third of the Medicare savings in the law come from reducing the subsidies to the private insurance plans known as Medicare Advantage. About one-quarter of those in Medicare are enrolled in a Medicare Advantage plan.
Since 2003, these private plans have been paid about 14 percent more than traditional Medicare to care for each member in the plan. That has proven very costly for Medicare. It has meant higher costs for other Medicare beneficiaries and for taxpayers generally. .
In 2012, the government begins lowering this high rate of subsidy to Medicare Advantage plans.
Insurers have said that will mean cuts in some benefits under these plans, but:
The new law prohibits plans from reducing or eliminating guaranteed benefits; it requires that plans spend at least 85 percent of their revenue on patient care; and it offers bonus payments for Medicare Advantage plans that provide high-quality care.
And here are two other important points in this context: Medicare Advantage plans existed when they were reimbursed at 95 percent of the Medicare rate and, since passage of the health care reform law, enrollment in these plans has risen.
So, to sum up, AARP sees some important benefits from the new health care reform law, some already in place and others coming soon.
Health care policy is challenging and complicated enough in the best of circumstances. We make it more difficult and less amenable to improvement when we fail to recognize positive changes that have occurred.
But at AARP we also see a clear danger from some proposed changes to Medicare that would hurt those who rely on the program now and those who will enter it.
Age of Eligibility for Medicare
I’m referring particularly to proposals circulating now in Washington, DC to raise the eligibility age for Medicare from 65 to 67.
The Kaiser Family Foundation reports that tasking that action would mean an average increase of more than $2000 a year in out-of-pocket costs for 65 and 66 year-olds. Instead of loosening the middle class squeeze, we’d be tightening it.
In addition, despite what you may hear from some pundits, raising the age for Medicare would also hurt those who are 67 and above. Increasing the age for entry into the program would push up Part B and Part D premiums for everyone in Medicare because the overall population in the program would be older, less healthy, and costlier.
We believe the President and Congress should reduce the deficit over time—but the way to do that is by cutting waste and closing tax loopholes, not by cutting Social Security and shutting people out of Medicare.
Thank you very much for listening. I look forward to your questions.