In what has become an annual Washington exercise, Democrats and Republicans are waging a war of words over the president’s proposed budget and how it would affect programs for seniors. President Donald Trump tweeted that he “will not be touching your Social Security or Medicare” in the budget, while Democrats have charged it does exactly that.
The budget does propose reductions in future projected Medicare spending, but experts say they are similar to last year’s budget proposal, which included bipartisan ideas also supported by former President Barack Obama. The watchdog group Committee for a Responsible Federal Budget said the Medicare proposals “represent reductions in costs not cuts to benefits.”
On Social Security, the budget calls for changes to disability benefits that would translate to cuts for some beneficiaries. On Medicaid, there are more significant (but not well-defined) cuts. We’ll go through what the budget calls for in each of these programs.
We’ll also note that we’re talking about a budget that won’t actually be enacted. Any president’s budget proposal is largely a symbolic statement of priorities, not a piece of legislation on which Congress would vote. And this budget is possibly “deader on arrival than most,” Joseph Antos, a health care expert at the right-leaning American Enterprise Institute, told us.
Medicare Battle Lines
If readers are feeling a little déjà vu, it’s because we wrote nearly a year ago about similar Democratic spin on the 2020 budget proposal’s potential impact on Medicare.
This year, Trump goes too far in claiming “we’re not touching Medicare” in the 2021 budget. There are several proposals to reduce the growth in spending over the next 10 years by about $600 billion, as the Committee for a Responsible Federal Budget estimates. But Democrats, again, have spun those proposals as a “slashing” and “cuts” that “could ultimately hurt beneficiaries’ access to needed care.”
Former Vice President Joe Biden said in a Feb. 10 interview, the day the White House released the budget, that the proposal “eviscerates Medicare.” House Speaker Nancy Pelosi said the next day in a press conference: “So if you’re sitting at home at your kitchen table and you’re a senior or if there’s a senior in your family on Medicare, you’re getting cut. And if there is long-term care in your family’s budget, you are getting cut.”
A “cut” or “savings” — the word choice depends on one’s political party — of $600 billion over 10 years would be a 6% decrease from projected spending, CRFB said.
As we saw with the Affordable Care Act, when Democrats proposed cuts in the growth of future Medicare spending, they were criticized by Republicans for hurting the program, and seniors. Now, the rhetoric is reversed.
“Despite what you hear from the other side, Medicare will grow at 6% under this budget,” Acting Office of Management and Budget Director Russ Vought told reporters on Feb. 10. That’s 1 percentage point slower growth, on average, than what is projected under current law, according to CRFB.
“The debate about reducing the rate of growth in spending vs spending cuts is somewhat semantic, and it has been trotted out by both parties in past years,” Tricia Neuman, senior vice president and director of the Program on Medicare Policy at the nonpartisan Kaiser Family Foundation, told us in an email.
Some reduction in the growth of the program and/or an increase in funding is necessary. The trust fund for hospital insurance (Medicare Part A) is set to be insolvent in 2026, meaning the trust fund would be exhausted and payroll taxes wouldn’t be enough to cover all projected spending.
“A big boost in the economy could potentially extend the life of the trust fund a bit,” Neuman said. “But even with a tailwind, policymakers will need to reduce Medicare spending, increase revenues or both to keep the trust fund solvent for an extended period of time. That said, there are a number of policies that could be considered to extend the life of the trust fund beyond those proposed in the Administration’s budget.”
What does the administration propose? Several of the same policies it backed last year, including:
- Making one payment to post-acute care providers, instead of different payments based on the site of care ($105 billion in savings over 10 years);
- Equalizing “site-of-service payments,” meaning paying the same amount whether services are performed at hospital facilities or doctors’ offices ($175 billion);
- Changing graduate medical education payments to a federal grant program with spending caps ($50 billion);
- Cutting payments to providers for bad debt, meaning unpaid copays/deductibles from beneficiaries ($35 billion).
Trump’s post-acute care payment change mirror’s Obama’s fiscal 2017 budget proposal for nearly $100 billion in savings over 10 years from a similar proposal. Obama also had proposals for reducing bad debts and equalizing payments.
“Several of the major budget proposals, such as site-neutral payments to equalize Medicare’s payments to different kinds of facilities … are similar to recommendations from the Medicare Payment Advisory Commission to address overpayments to certain providers,” Paul N. Van de Water, a senior fellow at the left-leaning Center on Budget and Policy Priorities, wrote in a Feb. 13 analysis.
Trump’s budget “would mainly affect hospitals and post-acute providers,” KFF’s Neuman told us, noting that she would describe the proposals “as more non-partisan than bi-partisan since they are still somewhat controversial and have yet to move through the legislative process.”
Democrats have argued that changing payments to health care providers could affect beneficiaries’ access to care. Henry Connelly, a spokesman for Pelosi, told us when we asked about the speaker’s comments on the budget that “these Medicare cuts in the Trump Budget mean seniors will find it harder to access quality care when they need it.”
Van de Water told us in a phone interview that it’s “possible” access to care could be affected but “not likely at least in the near term.” He explained that the Medicare Payment Advisory Commission, an independent agency that advises Congress, “takes a thorough look every year at the adequacy of payments with an eye to making sure they’re not reduced to a point where they impair access on the part of beneficiaries.” If it appeared access was going to be significantly restricted, that agency, known as MedPac would say so.
CRFB said in a footnote to its analysis of the Medicare proposals that lower payments to providers “could impact quality and access in some select cases.” But it said “there is little evidence of any significant effect,” particularly for proposals that “largely focus on reducing excessive payments and spending more efficiently.”
The providers who would be affected “wouldn’t be very happy” with reduced payments, AEI’s Antos noted in a phone interview. (Indeed, the Federation of American Hospitals said the budget “will make the job of America’s caregivers much more difficult.”)
In terms of an impact on beneficiaries’ access, Antos said “there’s always that possibility,” but given seniors are a big customer base for health care providers, there’s “really more risk on the side of providers to say, no we’re not going to take Medicare patients.”
Medicare beneficiaries could also benefit from some proposals. KFF’s Neuman said it was “conceivable” that provider payment changes to hospitals would reduce Medicare spending growth “which could potentially slow the growth in Medicare deductibles.”
CRFB said “the policies would actually reduce costs for individuals by lowering premiums and out-of-pocket costs.”
One notable difference between the 2020 and 2021 budget proposals is the lack of detail in Trump’s latest drug spending policies. The new budget includes $135 billion in “comprehensive drug pricing reform,” without explaining what that might be. Antos at AEI told us that drug pricing is the most likely topic Congress would address from these budget proposals, so the administration is leaving “some wiggle room.” Both parties want to do something on drug pricing, but it’s unclear what legislation might be feasible. “Both want to claim victory for themselves,” he said.
Like last year’s budget, this one proposes moving two programs in Medicare — payments to hospitals for uncompensated care and for graduate medical education — to other parts of the budget. That’s not included in CRFB’s calculation of $600 billion in Medicare spending reductions. (Note: CBPP calculates $501 billion in Medicare reductions in the budget over 10 years. The difference between the two organizations’ figures is that CRFB included $100 billion in “likely” savings from the budgets’ unspecified “drug pricing reform.”)
In his CBPP post on the budget’s Medicare proposals, Van de Water did take issue with other Trump administration proposals that he said “would weaken Medicare’s finances and harm beneficiaries,” pointing to an October executive order to boost private Medicare Advantage plans. That “could raise costs for some or all beneficiaries by increasing payment rates to providers,” Van de Water wrote. Two proposals in that executive order — “removing limits on private contracts between patients and providers, and making it easier for seniors to opt out of Medicare,” he wrote — are also in the budget, he said, but without any spending reduction figures.
The savings from SSDI — benefits for those unable to work due to a medical condition that lasts more than a year or causes death — and SSI — for low-income disabled adults and children — would come partly from reducing retroactive benefits beneficiaries can receive from 12 months to six. That means a worker who becomes disabled would be eligible for half the amount of retroactive benefits once he or she applies, CBPP explains.
Other proposals include reducing benefits if more than one family member gets SSI benefits and testing methods to increase work participation among disability recipients. CRFB said these proposals would amount to $35 billion over 10 years in “tangible policy savings” and $45 billion in work promotion savings “which are unlikely to materialize at such a large scale.”
Neuman at KFF said proposals to restrict SSDI eligibility would affect Medicare as well. She points to a provision in the budget to “[r]educe improper payments caused by barriers for beneficiaries to report income and assets.” That provision calls for developing new reporting and review systems, as well as “future related legislative changes” that “could include requiring suspension of benefits when beneficiaries neglect wage and resource reporting requirements, and instituting mandatory training for beneficiaries on reporting requirements prior to receipt of their first benefit checks.”
“People may not think of that as a Medicare provision, but it is, in that SSDI is a pathway to Medicare,” Neuman told us. “If fewer people qualify for Social Security Disability Insurance payments, then fewer people with disabilities may qualify for Medicare.”
Medicare beneficiaries include 52.6 million seniors and 8.6 million individuals with disabilities, according to the latest figures from the Centers for Medicare & Medicaid Services.
Politicians often include Medicaid when they criticize the Trump budget’s proposals for Medicare, and the president’s proposals have included more significant reductions to the health program for low-income individuals. This year, though, the budget is less specific on what exactly those will be.
Trump, too, included Medicaid when telling governors on Feb. 10: “We’re not touching Medicare. We want to keep Medicare. We’re not touching Social Security. We’re making our country stronger again. We’re not decreasing Medicaid.”
That’s false. The budget includes “significant Medicaid savings by requiring work and community engagement activities, reintroducing asset limits, and otherwise tightening eligibility requirements for able-bodied adults – resulting in about $130 billion of savings,” CRFB said.
Beyond that, the budget includes $844 billion in savings over 10 years for what it calls the president’s “health reform vision,” with little information on what that would be. CRFB noted that in past years, the president’s proposal has included changing Affordable Care Act spending to block grants to states and putting a cap on the growth of Medicaid spending. “While this proposal is likely to differ,” CRFB said, “the bulk of the savings would most certainly come from Medicaid and ACA subsidies.”
This year’s budget does make a reference to ending the enhanced federal matching funds to states that expanded Medicaid eligibility under the ACA. Medicaid, which is jointly funded by the states and the federal government, primarily has covered the disabled, children, pregnant women and families with low incomes, but the ACA enabled states to expand eligibility to all adults earning up to 138% of the federal poverty level. The federal government has paid nearly all of the costs of covering this expansion population: The federal match was 100% initially and has phased down to 90%. (The traditional federal match rate varies but can be as low as 50%.)
The budget refers to this adult expansion population when it says that under the health reform vision: “Medicaid spending will grow at a more sustainable rate by ending the financial bias that currently favors able-bodied working-age adults over the truly vulnerable.”
Ending the higher federal match to cover the expansion population “would almost certainly lead states to end coverage for most of the more than 12 million people who have gained coverage through the expansion,” CBPP’s Aviva Aron-Dine, vice president for health policy, wrote.
We don’t know exactly how states would respond. Politicians have linked the overall Medicaid cuts to seniors’ health care, since the program pays for long-term care for those with low incomes and assets.
There is one specific provision in the budget that would affect eligibility for such Medicaid coverage. It calls for taking away state authority to set higher home equity limits than the federal minimum when determining eligibility, Van de Water told us. This would “quite likely have a substantial effect on people getting long-term care” coverage. Seniors, particularly in states with high home values, would either not qualify if their homes were worth more than the limit, or they would have to sell their homes.
Neuman, too, noted that the budget “would achieve more than $30 billion in savings by limiting eligibility for Medicaid-covered nursing home care.”
As we said, a president’s budget is more a statement of policies and priorities than a budget Congress would debate. In fact, Republican Sen. Mike Enzi, chairman of the Senate Budget Committee, said in a floor speech on Feb. 10 that he wouldn’t hold a hearing on Trump’s budget, for the same reason he didn’t hold one on Obama’s final budget — “because it turns into a diatribe against the president.”
“Over the next few days, you will hear lots of complaints about the president’s budget. Seldom will anybody mention anything good, and it has been that way for every president.” Enzi said.
“Congress doesn’t pay any attention to the president’s budget exercise. That is all it is — an exercise,” he continued. “Congress holds the purse strings, according to the Constitution, and Congress is very protective of that constitutional authority.”