Healthcare Policy Synopsis: Super Committee holds fate of Medicare and Medicaid in its hands

“The two most important driving forces for the federal budget are the aging of the U.S. population and rapidly rising health-care costs.”
- Federal Reserve Chairman Ben Bernanke

Law makers from both sides of the aisle have come together to create a “Super Committee” comprised of six Democrats and six Republicans, half come from the House of Representatives and half come from the Senate. The members of the Super Committee are tasked with finding at least $1.5 Trillion in budget cuts over 10 years. The members of the Committee are Senators Murray (D-WA, Co-Chair), Kerry (D-MA), Baucus (D-MT), Toomey (R-PA), Portman (R-OH), Kyl (R-AZ); and from the House side, Representatives Hensarling (R-TX, Co-Chair), Upton (R-MI), Camp (R-MI), Van Hollen (D-MD), Clyburn (D-SC), Becerra (D-CA).

The Super Committee must present their recommendations to Congress by November 23 to face an up or down vote before Christmas. The question for Christmas this year is which groups will be visited by St. Nick and which will meet the Grinch. Some very tough decisions need to be made and no area is protected. Adding to the pressure of the situation is the fact that if Congress rejects the recommendations of the Super Committee then automatic cuts of $1.2 Trillion as well as possible tax increases will be enacted across the entire federal budget sparing no one.

Reports are that the Committee is struggling to meet its goal because they are facing deadlocks over how to handle a mix of cuts and taxes to bolster two of the biggest budget areas of our country—Medicare and Medicaid. Republicans want to enact deep cuts to these programs without any increased revenues offset by taxes. Democrats will not agree to any changes to these popular programs without new revenues as part of the comprise package. Democrats view this as a matter of fairness particularly for the most vulnerable populations such as seniors, the poor and the disabled. Republicans view the situations as a matter of principle and are united behind their steadfast refusal to include raising taxes as part of any package to get the nation’s budget and debt problems under control.

The Super Committee is looking at examples from other efforts to address this problem that have been undertaken over the last couple of years. Alan Simpson and Erskine Bowles co-chaired a bi-partisan commission and released their recommendations in 2010 on how to reduce the nation’s budget deficit and accumulating debt crisis by $4 Trillion through 2020. They recommended a series of aggressive cuts and new tax revenues. Restructuring and significant cuts to Medicare and Medicaid funding for long term care services was a major element of their plan, and it is expected it will be as well for the Super Committee. Coupled with the recently enacted 11.1% across the board reduction in reimbursements enacted by CMS for all long term care expenses, seniors are looking at shouldering a significant portion of any reductions.

Families already under enormous economic pressure will find it even more difficult to pay for long term care services for loves ones. Government dollars will pay for less and it will become more difficult to qualify. It has become more important than at any time in our nation’s history to prepare for the costs of long term care and make use of programs such as long term care insurance, life insurance policy conversions to long term care benefit plans, and other financial vehicles to ensure sufficient private pay dollars are available when the time comes.

The view of health policy experts on the Super Committee’s efforts speaks to the major influence healthcare spending has on our nation’s budget and economic future:

Nina Owcharenko, Director of the Center for Health Policy Studies at The Heritage Foundation: "[i]f the goal is producing $1.2 trillion to $1.5 trillion in 10-year savings, the Joint Select Committee on Deficit Reduction must think big and produce recommendations with real substance. Medicare faces a flood of more than 77 million baby boomers joining the program over the next 20 years. The Medicare trustees' annual report continues to warn of the program's unsustainable and unfunded obligations. Meanwhile, Medicaid is draining state budgets, taking more resources away from other important programs such as education and transportation. Nothing could be truer than dealing with the health care savings component. ... They should make measurable progress in restructuring the health care system toward a sustainable, consumer-based model -- not just meet a fiscal target and call it reform."

David Kendall, senior fellow for health and fiscal policy at Third Way, a think tank that creates and advances moderate policy and political ideas: "The rising cost of health care is squeezing the federal budget, making it a common enemy. Over the next 40 years, the cost of Medicare will roughly double in real terms and the number of beneficiaries also will double, while the number of taxpayers will grow by only one-third. For Republicans, spiraling costs have placed them in the increasingly untenable position of proposing steep Medicare cuts in order to avoid tax increases in their budget proposals. Democrats are looking at a budget where health care spending crowds out other progressive priorities such as education, housing and public investments in general. The best way to save money in Medicare and Medicaid is to lower costs throughout the health care system. In the comics, super heroes and their rivals occasionally enter an uneasy alliance against a common enemy. In the face of a looming fiscal crisis, can the two parties use the super committee to follow suit?"

The Super Committee has until Thanksgiving to submit their recommendations to Congress and it must be acted upon within a month’s time. When the Super Committee concept was established, a punitive measure was put in place to make sure partisan bickering and gridlock could not conspire to snuff out this effort. The specter of the $1.2 trillion mandated cuts that will immediately impact every budget area of this country, including defense spending and entitlement programs, was intended to be so harsh that it would force Washington, DC to get out of its own way and allow the Super Committee to accomplish its mission. No one wants to see the looming cuts automatically enacted if the Super Committee fails and/or Congress votes down its recommendations before the end of the year.

As a nation, we have truly arrived at the point where we can no longer kick the can down the road. We have all been enjoying a fantastic dinner party for years but the check is now on the table and everyone has to get out their wallets to help pay. The question for seniors and families faced with long term care expenses—have you prepared for this day (are you even paying attention!?) and do you understand all of your available options to help cover the costs?