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Rebuilding the Middle Class: A Blueprint for the Future

AARP CEO A. Barry Rand offers a plan for financial security

An example of this narrow approach is raising the Medicare eligibility age.

The end result of this policy is to lower federal health costs for the program, by shifting costs from the federal government to employers, states and families on Medicare — including those in the middle class.  This only drives seniors to more costly and less-efficient providers, which, in turn, raises total health spending in the economy.

This is pure folly … and very dangerous.

A better approach would be to lower the growth in health care spending system-wide.  If we focus on lowering the growth rate of costs throughout the health care system, we will also lower the cost of Medicare and Medicaid.

An analysis by the President’s Council of Economic Advisors shows that lowering the growth rate of health care costs by 1.5 percentage points per year will increase the real income of middle-class families by $2,600 in 2020; $10,000 in 2030; and $24,300 by 2040. That’s real relief for real people.

All of this comes back to the impact on people. We can’t just cut Medicare or raise the eligibility age to reduce the deficit.  We have to make it work more efficiently — and we have to lower the growth in costs to keep it sustainable for generations to come.

The Affordable Care Act puts us on that path. The ACA achieved $716 billion dollars in Medicare savings. That’s more than was achieved by the “fiscal cliff” deal.  And those savings were achieved without cutting one dime of guaranteed benefits.

By taking steps to remove waste, fraud and inefficiency in Medicare, we have been able to reinvest some of those savings into lowering costs for beneficiaries and for Medicare by filling in gaps in the program — for example, closing the “doughnut hole” in Part D drug coverage and providing preventive care.

And it’s working.  More than 5.2 million people with Medicare have saved $3.9 billion dollars.  Last year, people in the doughnut hole have saved an average of $770 on prescription drugs.

At the same time, the ACA made Medicare more secure, extending its financial life by 7 years. It also helped reduce the rising cost of Medicare — and it did so without taking a dime from a person’s guaranteed benefits.

More needs to be done.  Moving forward, if we pursue additional reforms in Medicare and Medicaid, such as

  • Payment innovations to promote value, not volume;
  • Measures to lower drug costs;
  • Providing consumers with better information on cost and quality;
  • An emphasis on improving the health care delivery system, like integrated care programs;
  • And, continuing efforts to make the programs more efficient and to reduce waste

we will bring significant savings to these programs, spur innovative cost reductions in private insurance — and most importantly, help people get healthier and stay healthier.

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