The National Commission on Fiscal Responsibility and Reform held its final meeting and voted on its proposals for resolving the nation’s fiscal problems. The Commission’s Chairmen Erskine Bowles and former Senator Alan Simpson were unable to garner 14 of the 18 members necessary to support the proposals necessary to issue formal recommendations. The final vote in support of the report was 11 to 7. However, the Commission released The Moment of Truth: Report of the National Commission on Fiscal Responsibility and Reform on December 1 which has already generated substantial discussion in Congress and the White House. While there is no official recommendation from the Commission, we can expect to see various Commission proposals surfacing over the next few weeks and months and throughout the 112th Congress as Congress and the White House struggle to address the federal deficit.
Many of the Commission proposals would have a devastating impact on people with disabilities or programs designed to support them. The following are a few highlights.
- The plan would increase the normal retirement age to 69.5 and the early retirement age to 64 over time. This is effectively a cut in benefits and could create pressure on the disability program for those who cannot work longer. The plan proposes a “hardship exemption”, with little detail.
- The plan proposes a change in the benefit formula that gradually reduces the benefits the workers will receive in retirement, except those in the very lowest income bracket.
- The plan would reduce the annual cost of living adjustment (COLA) amounts, effectively reducing benefits over time – by about 6 percent for a person receiving benefits for 20 years. A benefits “bump up” is included for people receiving benefits for 20 years, but it does not make up for the amounts lost to the reduced COLAs.
- The plan includes a minimum benefit equal to 125 percent of the poverty line for 30-year workers, which would benefit some low-income workers.
- The plan would very gradually (over 35 years) bring 90 percent of earnings into the FICA tax range (as it was in 1983). Only about 84 percent of earnings fall under the range now. Closing that gap immediately could nearly eliminate Social Security’s entire projected shortfall.
- The proposal calls for reform or repeal of the Community Living Assistance Services and Supports (CLASS) Act, which is the newly enacted voluntary, premium-based long term services insurance program to assist individuals to meet their needs without becoming impoverished for Medicaid eligibility. The CLASS program is required by law to be solvent over a 75-year period and is currently under development by the Secretary of Health and Human Services.
Medicare, Medicaid and other health care programs
The Commission recommends many changes to Medicare, Medicaid and other health care programs to reduce costs. They include accelerating or expanding many of the cost savings included in the Affordable Care Act. While the DPC will analyze each of the proposals for their impact on people with disabilities, below are examples of the changes most likely to impact our constituents:
- Increase cost-sharing for Medicare beneficiaries by creating a single annual deductible of $550 for both hospital care and medical care and a uniform 20% coinsurance on health spending above the deductibles. By 2015 this is estimated to save $10 billion in Medicare spending.
- Prohibit Medigap plans from covering the first $500 in health care spending and limit coverage to 50% for the next $5,000 in Medicare cost-sharing. The Commission’s plan would save an additional $4 billion by 2015.
- Reform the physician payment system and fully pay for all of the costs. Congress has been stopping large cuts to physicians and other health care providers that were implemented to save money in the Medicare program. If the cuts were allowed to take affect it would mean a 23% cut in payments to providers beginning in 2012. It is very expensive to fix the problem as the commission estimates that freezing payments from 2012 to 2020 would cost $267 billion.
- Place dual eligibles (people who receive both Medicare and Medicaid) in Medicaid managed care. This would save $1 billion by 2015.
- Reduce funding for Medicaid administrative costs. This would save $260 million by 2015.
- Place a global cap on all health care spending, which could include Medicaid block grants
- Reduce the tax benefit for employer-provided health insurance.