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AARP Issue Brief: Medicare


Medicare is a vital source of health coverage for people age 65 and older, people with disabilities, and people with end-stage renal disease. Congress improved Medicare in 2003 by adding a much-needed prescription drug benefit and further strengthened that benefit in 2008 with the passage of additional legislation.

Despite Congressional action, many beneficiaries are still struggling to afford rising out-of-pocket costs, which are often much greater than the costs for people with employer-sponsored coverage. The current financial crisis is likely to only make this affordability problem worse, as retirement accounts shrink and out-of-pocket costs rise.

Like other public and private health payers, Medicare has been experiencing rapid growth in spending, due primarily to increases in the number of people ages 65+, the expanding scope of services needed, and, most significant, the dramatic rise in the cost of health services overall. 

The Medicare program is taking some steps to become a value-based purchaser by revising payment incentives to promote high quality care. However, additional policy changes are needed to move the program further in this direction. 

Legislative and Regulatory Action

Key areas for legislative action are those that would improve the long-term sustainability of the program and those that would safeguard beneficiaries' health and financial security.

AARP believes Congress should take action to bring down the cost of health care and improve the quality of Medicare coverage by:

Requiring the adoption of health information technology

Providing incentives for prevention and healthy behaviors to reduce the need for health care services and to improve quality of life

Promoting care coordination for people with chronic conditions with legislation, such as the Independence at Home Act (S. 3613/ H.R. 7114)

Spurring innovations in payments, including public reporting for greater transparency, to further promote quality and efficiency through value-based purchasing

Congress should also take several legislative actions to improve the health and financial security of Medicare beneficiaries. AARP supports changing the benefit design in Medicare by:

Modernizing Medicare's cost-sharing (deductibles and coinsurance) requirements and protecting against significant premium increases

Further capping beneficiaries' out-of-pocket obligations

Strengthening post-acute care coverage

Eliminating Medicare overpayments to Medicare Advantage plans to achieve balance with the traditional program

Eliminating asset tests in the Part D low-income subsidy and the Part B Medicare Savings Programs, which penalize people who did the right thing by saving for retirement;

Granting the Secretary of Health and Human Services the authority to use the bargaining power of millions of Medicare beneficiaries to negotiate drug prices

Improving the benefit for the future by eliminating or curtailing the donut hole and improving the employer-sponsored subsidy provisions 

Policies that AARP does not support include those that would decrease health and financial security. For example, AARP does not favor premium support (under which Medicare would pay a defined percentage of an average premium amount, and expenses would increase for beneficiaries), nor does AARP support the Medicare "trigger" provision, which is based on an arbitrary formula that values increases in revenues over increases in program efficiency.

On the regulatory front, fraud and abuse is still a significant problem in Medicare. Considerable savings already have been realized from Medicare's fraud and abuse efforts to recover funds from secondary payers by conducting medical reviews, and prosecuting by fraud; however, far more savings could and should be realized.

Another area for improved regulation is Part D drug benefit. Specific ideas include:

Streamlining the process for appeals, shortening time required for decisions, and allowing appeals of tier-four payment rates

Helping low-income beneficiaries, especially in long-term care, by assigning them to the most clinically appropriate plans rather than simple random assignment, letting more people help them select plans, and waiving cost sharing for those in assisted living or home- and community-based services so they do not pay more than those in nursing homes

Allowing a special enrollment period for beneficiaries if the plan changes the formulary mid-year and such change affects the beneficiary's cost-sharing

Ensuring that individuals who switch plans are not required to go through step therapy again 

The Cost of Doing Nothing 

If nothing is done in the 111th Congress to strengthen and improve Medicare, health care costs will continue to go up, undermining the health and well-being of older Americans, many of whom are already skipping important preventative treatment and medication for chronic conditions because they cannot afford the care. Putting off value-based purchasing and more efficient benefit design will undermine the long-term strength of the Medicare program and squander the opportunity to use Medicare reforms to drive important improvements through the broader health care system.

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