Drug Savings Act Would Strengthen Medicare Without Harming Beneficiaries

Reposted from AFL-CIO NOW

Sen. Jay Rockefeller (D-W-Va.) introduced the Medicare Drug Savings Act of 2013 that would produce savings without passing on costs to seniors.

The act offers a solution that strengthens Medicare’s fiscal footing while shielding beneficiaries from harmful cost-shifting, unlike most other Medicare proposals we hear about. The Congressional Budget Office (CBO) estimates that restoration of Medicaid-level drug rebates for low-income Medicare beneficiaries would save the federal government $141 billion over 10 years. Here are some critical facts about the bill from the AFL-CIO and other allies:

  • America’s workers strongly support allowing Medicare to secure lower prices drugs. According to a recent national poll, 85% favored “requiring drug companies to give the federal government a better deal on medications for low-income people on Medicare.”
  • Implementing Medicare drug rebates is not new law. Upon passage of the Medicare Modernization Act (MMA), millions of older adults and people with disabilities gained access to prescription drug coverage through private plans approved by the federal government, known as Medicare Part D. At the same time, the MMA severely limited the tools available to the federal government to control spending on pharmaceutical drugs in Medicare. In particular, the MMA eliminated rebates offered by pharmaceutical manufacturers for drugs provided to beneficiaries dually eligible for Medicare and Medicaid. Applying Medicaid-level rebates to Medicare drugs simply restores a practice that existed for dually eligible beneficiaries prior to the passage of the MMA.
  • Restoring drug rebates to the Medicare program is a proven cost saver. Already the Medicaid program benefits from lower drug prices due to federally determined rebates on brand name and generic medications. A 2011 comparison of 100 brand-name drugs under Medicaid and Medicare Part D found that Medicaid rebates required by law reduced expenditures by 45% for the drugs under review. Whereas, Medicare rebates secured by private drug plans reduced expenditures by only 19%.
  • Pharmaceutical spending on research and development is not at risk. Studies show that research and development investments in particular types of drugs are not directly linked to specific revenue sources, such as Medicaid. These findings, coupled with an examination of industry spending trends, suggest that reinstating Medicare drug rebates will not limit research and development. We reject the argument that pharmaceutical manufacturers will be unable to fulfill their commitment to innovation if the Medicare program is allowed to secure more reasonable drug prices.
  • Applying Medicare drug rebates will not shift costs to Medicare beneficiaries or employers. Some stakeholders claim that applying Medicaid-level drug rebates for low-income Medicare beneficiaries will increase costs for other Part D beneficiaries, but research supports otherwise. The same research suggests that costs for purchasers outside of Medicare—namely employers— will be largely unaffected if the Medicare rebates are restored.

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President Obama: ‘Medicare, Medicaid and Social Security…They Strengthen Us’

Reposted from the AFL-CIO NOW Blog

During President Obama’s second inaugural address yesterday, he affirmed we’re stronger when we work together:

But we have always understood that when times change, so must we; that fidelity to our founding principles requires new responses to new challenges; that preserving our individual freedoms ultimately requires collective action. For the American people can no more meet the demands of today’s world by acting alone….No single person can train all the math and science teachers we’ll need to equip our children for the future, or build the roads and networks and research labs that will bring new jobs and businesses to our shores. Now, more than ever, we must do these things together, as one nation and one people.

He also lifted up working peoples’ shared belief in a robust social insurance system.

We do not believe that in this country freedom is reserved for the lucky, or happiness for the few. We recognize that no matter how responsibly we live our lives, any one of us at any time may face a job loss, or a sudden illness, or a home swept away in a terrible storm. The commitments we make to each other through Medicare and Medicaid and Social Security, these things do not sap our initiative, they strengthen us. They do not make us a nation of takers; they free us to take the risks that make this country great.

Our journey as a nation is not complete until we achieve equality and economic opportunity for all.

For our journey is not complete until our wives, our mothers, and daughters can earn a living equal to their efforts. Our journey is not complete until our gay brothers and sisters are treated like anyone else under the law—for if we are truly created equal, then surely the love we commit to one another must be equal as well. Our journey is not complete until no citizen is forced to wait for hours to exercise the right to vote. Our journey is not complete until we find a better way to welcome the striving, hopeful immigrants who still see America as a land of opportunity; until bright young students and engineers are enlisted in our workforce rather than expelled from our country. Our journey is not complete until all our children, from the streets of Detroit to the hills of Appalachia to the quiet lanes of Newtown, know that they are cared for, and cherished, and always safe from harm.

Read the entire inauguration speech transcript here.

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Want to Cut the Deficit? Start by Closing the ‘Mitt Romney Loophole’

Reposted from the AFL-CIO NOW Blog

While congressional Republicans are heavily focused on cutting Social Security, Medicaid and Medicare benefits and other harmful budget cuts that threaten the 98%, a better approach is to eliminate loopholes that allow the wealthiest 2% of Americans and Wall Street to pay much less than their fair share of taxes.  Focusing on loopholes keeps money in the hands of working families, which helps the economy grow without increasing hardship and economic insecurity for working people.

Many current loopholes just aren’t fair. Take, for example, what Think Progress calls the “Mitt Romney Loophole.” People like Mitt Romney who manage investment funds get paid in two ways. Part of their income is a management fee that is taxed as ordinary income, currently at a top rate of 39.6%. But fund managers also get a cut of the profits of the investments, which is taxed as a capital gain, with a top tax rate of only 20%. The typical investment manager takes a management fee of 2% and gets a 20% cut of the profits, meaning they avoid paying the normal tax rate on the vast majority of their income, something working families are not able to do. As Think Progress explains:

This loophole is one of the main reasons that Mitt Romney paid a tax rate of just 13.9 percent on income of more than $20 MILLION. Meanwhile, millions of middle-class workers pay a much higher rate on their much, much lower salaries.

Closing this loophole would not only make our tax code fairer and more progressive, it would help raise revenue to protect vital programs and leave room in the budget for investments to grow the middle class. Closing just this one loophole that often benefits the ultra-wealthy would raise $21 billion over 10 years.

Photo by Gage Skidmore on Flickr

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6 Reasons Why Means-Testing Social Security and Medicare Is a Real Dud

Reposted from the AFL-CIO NOW Blog

Means-testing Social Security and Medicare is an idea thrown around a lot to “find savings” because, on the surface, it doesn’t sound too painful. Wealthy people typically are able to save more and invest in retirement than lower- and middle-income earners, so they don’t need Social Security and Medicare as much, right? Wrong.

Means-testing Social Security and Medicare is a cynical way to weaken and destroy benefits for middle-income working people.

Lynn Stuart Parramore at Alternet writes:

In Washington-speak, “means-testing” is a scheme to deny or reduce Medicare and Social Security benefits for people who are “too wealthy” in the name of saving money. It’s a counterproductive, harmful idea, but one that well-intentioned liberals often get snookered into embracing.

Parramore spoke with several economists to discuss six reasons why means testing is a real dud:

1. Means-Testing Undermines Progressive Values

Parramore writes:

At their heart, programs like Medicare and Social Security are about fairness, equality and shared citizenship, values that progressive Americans hold dear.

Medicare and Social Security are not welfare programs. They are benefits that people pay for as they work. They are also smart social insurance programs that spread risk across society in order to protect everyone at rates no private insurance scheme, with its much smaller risk pool, could touch.

She spoke with economist Joseph Stiglitz, who added, “We don’t means-test public education because we believe that we want people to have the same opportunities and we lose out on that with means-testing.”

2. Means-Testing Won’t Stop at the Wealthy

This is where we get into the nitty-gritty that means-testing Social Security will actually cut benefits for middle-income earners…even people who make around $60,000 a year and less. Those are not the people we usually think of as being wealthy. In order to produce any significant savings, people typically considered middle class will be affected.

Political economist Thomas Ferguson told Parramore:

The truth is that means-testing is a device to destroy political support for what are still the most popular of all government programs—programs that have survived decades of attacks by the right.

3. Means-Testing Doesn’t Make Economic Sense

It’s simply untrue that means testing produces great savings, writes Parramore.

In fact, it will likely raise costs for middle- and lower-income seniors who rely on Medicare and Social Security to live decently in retirement….Means-testing will cause many high-income beneficiaries to view the programs as unfair, and they will opt out, purchasing their own insurance and retirement policies on the private market. Programs like Medicare and Social Security depend on spreading risk across a large pool of people. For example, the departure of higher-income beneficiaries from Medicare, who tend to be younger and healthier, would increase overall costs and diminish public support.

4. Means-Testing Plays into Conservative Deficit Hysteria

Even entertaining the idea of benefit cuts through means-testing suggests that Social Security is in crisis. It’s not.

Conservatives promote deficit hysteria because they have a fundamental hatred of government and wish to destroy the New Deal programs that have benefited the middle class and the poor. If they were really concerned about deficits and spending, they would not support costly and unnecessary wars, monopolistic conditions and extremely low taxes for the wealthy and large corporations….Social Security does not contribute to the deficit. It is a well-managed program in fine fiscal condition, and there is no justification for tampering with it now. The Trustees Report shows that the program will be able to meet all of its obligations at least until 2033. If there is a tweak needed down the road, that can be handled very simply by raising the cap, which stands now at just over $100,000.

5. Creeping Means-Testing Is Already Happening

Wealthier people already pay more for Medicare.

Medicare was started in 1965 to provide health insurance to people 65 and older regardless of their medical history or income. Since then, 75% of the program’s Supplementary Medical Insurance (SMI), the part that goes to pay doctors, has been financed by general revenues, the largest chunk of which comes from personal income taxes. The personal income tax is progressive, which means that upper-income people pay a larger share of their income in taxes for SMI.

Since 2007, specific means-testing features have been added. For example, beneficiaries with incomes over $85,000 have been required to pay higher SMI premiums. Beginning in 2013, the 2.9 percent hospital insurance tax will continue to apply to the first $200,000 of income for individuals or $250,000 for couples filing jointly, but it will rise to 3.9 percent on income in excess of those amounts.

6. The Coming Old Age Crisis

A secure retirement is quickly becoming a thing of the past with vanishing pensions, a shaky job market, declining wages and constant attacks on Social Security and Medicare. We need more robust Social Security and Medicare benefits, not less.

The United States is a rich country, and a dignified retirement for our elderly should be one of our proudest achievements. And yet Social Security and Medicare are under near-constant attack. Pensions are vanishing, and despite 401(k)s and other voluntary retirement plans, workers still can’t save nearly enough to retire securely. [Economist Teresa] Ghilarducci warns that the economic structure of retirement in America is falling apart. She exposes the Wall Street financiers who want to privatize Social Security, the risk of 401(k) plans, do-it-yourself retirement schemes and companies like Enron that have left employees high and dry.

Read Parramore’s article on Alternet: 6 Reasons Joseph Stiglitz and Other Top Economists Think Means-Testing Medicare & Social Security Is a Destructive Idea.

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Soul Khan Gets Real: You Have to Vote

Reposted from the AFL-CIO Blog

Some say young voters are apathetic this election year and not likely to go to the polls.

Popular YouTube personality Soul Khan tackles this challenge head on—with messages that resonate about what’s at stake for young voters if they don’t get out and vote to re-elect President Obama.

With an entertaining rap, Khan gets in the face of young people with messages like:

Don’t want your taxes raised while millionaires like Romney get tax cuts?

Get out and vote for Obama.

Don’t want to lose your birth control choices as a woman?

Get out and vote for Obama.

Want environmental protections that keep our water clean and air breathable?

Get out and vote for Obama.

Check out the video and pass it along to anyone you know, young or otherwise, who doesn’t yet know what’s at stake in this election.

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The Facts Behind Romney and Ryan’s Medicare Lies

It took approximately five minutes after the announcement of Paul Ryan as the Republican running mate for the spin to begin. Anxious to pre-empt a conversation about Ryan’s plan to end the guarantee of Medicare, the Mitt Romney campaign is on the air with some (strikingly dishonest) Medicare ads of their own. They have plenty of money to advance this message, so it’s worth unpacking what’s really going on.

First and foremost, the Ryan plan, in any form, would mark the end of Medicare as we know it—as a guarantee of health coverage for senior citizens. Instead, it would give older people a voucher to go buy their own private insurance. The Ryan budget would also increase the eligibility age, delaying the time when retirees could get Medicare. That’s the proposal the U.S. House voted on and passed in March and it’s the model Ryan has continued to promote even as he’s suggested possible tweaks.

So let’s move on to the claims the Romney campaign is making. The Affordable Care Act is paid for partly through billions in future savings—about $700 billion over 10 years in reduced payments to health insurance companies and providers. A lot of that money stays in the Medicare system, by paying for free preventative care for seniors and closing the prescription drug “doughnut hole.” The attack leveled by Romney, Ryan and their allies—an attack that’s Jonathan Cohn rightly called “astoundingly cynical”—is that this constitutes a massive cut to Medicare.

But here’s the catch: in the Ryan budget that passed, these future savings are included, even as the rest of the ACA is repealed. So the same reductions that the Romney campaign is complaining about were voted on and approved by Ryan and virtually every House Republican.

In the ACA, the cost savings that come out of Medicare go back into the health care system. In the Ryan budget, they’ll be needed to pay for the massive tax cuts proposed in that plan. Cohn notes that not only does this money get pulled out of providing health care entirely, but the attack the Romney campaign is making is a “brazen misrepresentation of reality.” Or, to say it in fewer and shorter words, “a lie.”

The Ryan plan doesn’t replace the guarantee with the vouchers for 10 years, so that major change doesn’t immediately affect today’s retirees. But the repeal of the ACA’s provisions on prescription drugs and preventative care absolutely will. If those provisions are gone, seniors who are on Medicare now will be paying hundreds of dollars more out of pocket. Ryan’s cuts to Medicaid, which many seniors depend on for nursing home care, would also have a big impact—his proposed cuts to Medicaid and the repeal of the ACA Medicaid expansion are a big and under-covered change in his budget. Some 6 million of today’s retirees depend on Medicaid and could lose out under Ryan’s plan. This is what was in the Ryan budget the House passed, and he hasn’t backed off of this at all.

What’s more, if Ryan’s plan kicks in ten years from now, today’s Medicare beneficiaries will get an unpleasant wake-up call as the voucher plan starts to erode the program:

In 2022, when the limited-subsidy program would be introduced, seniors who qualified for traditional Medicare would be allowed to switch to the new program. If healthier or younger beneficiaries make the change to lower their out-of-pocket costs, those still participating in Medicare would be part of an insurance pool that is less healthy and more expensive. To cover those higher per-person costs, Medicare might well be forced to either raise premiums or limit reimbursements to health care providers—which could prompt many to stop taking Medicare patients.

Romney has suggested he may back off of the Medicare savings that Ryan included in his original budget. But in that case, the Ryan budget math gets even more implausible. And by the standards Romney has laid out for how he wants his budget to work, Medicare would have to be slashed either way. That these cuts to programs for vulnerable people would be required in order to pass his huge tax cuts for the rich adds insult to injury. As Derek Thompson notes, Romney’s proposals “have clear and inevitable conclusions: Tax cuts for the richest and spending cuts for the poorest.”

It’s hard to overstate how hypocritical and dishonest the new Romney-Ryan attacks over Medicare are, coming from two people who have pledged changes so radical that they’d leave it unrecognizable.

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Happy Birthday, Social Security!

It was on this day 77 years ago that Franklin Roosevelt signed the Social Security Act into law.

At the time, the U.S. had just suffered a devastating depression, and around half of Americans over 65 were in poverty. The passage of the Social Security Act marked a turning point for elderly Americans—a guarantee of a basic income.

The effort to create Social Security and pass it into law was led in 1935 by one of the 20th century’s underrated heroes: Roosevelt’s Secretary of Labor, Frances Perkins, the first woman to serve in the Cabinet.

Today, as defined-benefit pensions are increasingly rare, Social Security is critical. It’s estimated that it keeps 20 million people out of poverty. It makes up 59% of older men’s income and 77% of older women’s income. As we’ve noted before, nearly 2/5 of all the income earned by seniors comes from Social Security; for a majority of seniors, Social Security represents 50% or more of their income. For a quarter of elderly couples and half of elderly single people, Social Security makes up 90% or more of their income—literally all that stands between them and severe poverty. This is especially true after our last recession, which hit retirement savings, 401ks and home values hard.

So what does the future hold for Social Security? You’ll hear a lot of false talk that the system is in crisis, as an excuse to make unnecessary and painful cuts. Privatizing the system is a longtime project of some of the Republican Party’s top leaders, including new vice presidential pick Rep. Paul Ryan. Ryan co-sponsored a bill in 2005 to take money out of Social Security and put it into private accounts on the stock market. President Bush’s failed push for Social Security privatization was based on a gentler version of Ryan’s plan, and he still supports privatization today.

At 77, Social Security has been working a long time—but we need to keep fighting to keep the guarantee in place, for today’s retirees and future ones.

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What Does Paul Ryan Believe?

We’ve written a lot about Rep. Paul Ryan in this space, well before this weekend’s announcement that Mitt Romney would select him as the vice presidential nominee. The reason we spend so much time on Ryan is that his worldview and his proposals are the official agenda of the Republican Party—confirmed by the House Republicans passing his budget earlier this year. Ryan has spent his life in politics and is the model of the big ideological shift in Republican economic policy over that time. Romney’s pick only cements how important a player Ryan is in the debate over what kind of country we’ll have.

A quick look through the things Ryan has proposed show where his priorities lie. There are big benefits for the richest, and nothing but pain for middle-class and working-class people. In Ryan’s America, you’re on your own.

The centerpiece of the Ryan agenda is his plan to end—yes, end—Medicare. Ryan calls it a plan to “save” Medicare. Back in the real world, you can ice a pile of dirt and stick candles in it, but you can’t do that and say you’ve “saved birthday cake.”

Here’s the simple explanation: right now, Medicare is a guarantee—a program that offers coverage to every senior citizen, regardless of their economic background. It’s popular, it’s effective, and it keeps seniors out of poverty. Ryan claims his plan “protects” Medicare, but what it actually does is replace the guarantee with a voucher that seniors will use to buy their own insurance in the private market. Older people require more care and face higher health risks, so they’re more expensive to insure, especially in the individual market—the reason Medicare works is that it’s social insurance, which everyone pays into, and where a huge pool of beneficiaries helps distribute costs. Additionally, the value of the vouchers declines relative to health care costs over time, so that more and more will be paid out of retirees’ pockets.

Anyone who has ever had to deal with the private insurance market, raise your hand if you would like to rely on it—using a voucher of ever-decreasing value—when you’re no longer employed and most in need of health care? Yup, I thought so.

Last night on “60 Minutes,” Romney and Ryan sat together for an interview, and Romney said two things about Medicare that, taken together, are a pretty clear tell: he said that on the one hand, their plan would just mean “more choices,” and on the other hand, he insisted that people over 55 wouldn’t be affected. Which leads us to an important question: if all their Medicare plan represents is “more choices” and it saves Medicare, why wait? If it’s really going to be a good thing, why not give current retires and those near retirement the benefit of the change? Why reassure older people that Medicare won’t change if the plan really “protects” Medicare? The answer, of course, is that the plan means less care and more costs for beneficiaries, and they don’t want to take the political risk of imposing more cost and less care right away.

Speaking of eroding guarantees, Ryan is also one of the architects of Social Security privatization. His plan was the model for the proposal that President Bush tried, and failed, to push through in 2005. It would have diverted funds out of Social Security and into the stock market.

Anyone who lived through 2008, and saw what the market crash did to your 401k or your home value, raise your hand if you thought to yourself, “Gee, if only my Social Security had been invested in the market, too.” Anyone?

Let’s move on to taxes. Another major part of Ryan’s budget is a plan to completely eliminate taxes on investments, meaning that only work would be subject to income tax. That’s a huge boon to the very richest—CEOs, wealthy heirs, and financial industry executives especially. Let’s take Mitt Romney as an example: under a Ryan-style tax plan, Romney would pay a tax rate of less than 1 percent. The Joint Economic Committee of Congress estimates that the richest 1 percent would get a $238,000 tax cut under Ryan’s plan, while the top 0.1 percent would get a tax cut of more than $1.1 million. That’s where the savings from Ryan’s changes to Medicare would go—higher costs for seniors on fixed incomes, lower taxes for multi-millionaires.

Going beyond Medicare and taxes, Ryan’s budget is pretty hard on all the other stuff the federal government does, too. And by “all the other stuff” I mean things like schools, roads, Pell Grants for college, food inspection, and food stamps, to name a few. Those are programs that employ people, put money in working-class people’s pockets, and help keep America growing over the long term.

It’s no wonder that the Ryan budget has been described as “the largest redistribution of income from the bottom to the top in modern U.S. history,” one that would cause “an even wider gap between the very well-off and everyone else.”

Raise your hand if you think that solves any of the problems America faces. Anyone?

Photo of Rep. Paul Ryan by Gage Skidmore on Flickr

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End of Extended Jobless Benefits Hits More Than 500,000

Reposted from the AFL-CIO NOW Blog

This month marks the end of the federal extended unemployment insurance benefits program for 35 states with the nation’s highest jobless rates. More than half a million long-term jobless workers have lost their unemployment lifeline.

Chad Stone of the Center on Budget and Policy Priorities (CBPP) says:

As we’ve explained previously, EB [extended benefits] will no longer be available in any state, not because most states’ economies haveimproved to anywhere near pre-recession conditions, but because they have not significantly deteriorated in the past three years.

The end of the program that provided up to 20 additional weeks of jobless benefits—in addition to the states’ usual 26 weeks—and the additional weeks available under the federal Emergency Unemployment Compensation (EUC), was part of legislation passed in February to keep the EUC alive through 2012.

That bill reduced the number of weeks of available to jobless workers and also changed the formulas that would trigger extra federal jobless benefits, in effect, cutting benefits even further by setting higher thresholds for unemployment pain. Click here for a closer look from the National Employment Law Project (NELP).

The cuts, a recent report in USA Today notes:

are nudging some Americans into poverty, straining social services just as states and localities face their own budget woes and further crimping weak economic growth as those who lose benefits spend less.

The average unemployed American has been out of work 40 weeks, according to the Labor Department, and there are still about three jobless people for every job opening.

If Congress doesn’t act when it returns after August recess, the situation for long-term jobless workers will grow even more dire because the entire federal EUC expires at the end of the year, leaving workers only state benefits upon which to rely.

Legislation to keep the EUC operating is expected. But with the Republican lawmakers’ track record of blocking, filibustering and other delaying tactics in previous attempts to extend the federal unemployment insurance benefits, the outlook is uncertain.

NELP’s George Wentworth told USA Today:

There’s going to be lots of people without any income still unable to find a job. You’re going to see these people not be able to feed their families and not able to pay their mortgages. It will have a devastating impact on a lot of local economies.

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Happy Birthday, Medicare!

It was 47 years Ago today that President Lyndon Johnson signed into law the two bills that created Medicare and Medicaid, guaranteeing health care coverage to retirees and people in poverty.

The new laws led to a dramatic decline in poverty rates among senior citizens and a broadening of health care coverage for the most vulnerable people across the country. It’s a major accomplishment that’s worth celebrating—and protecting.

The Strengthen Social Security campaign has a great set of reports coming out that detail how these laws affect each state. That’s not just a set of statistics—that’s parents and grandparents, friends and neighbors who have basic health care coverage.

Unfortunately, the debate over Medicare isn’t settled. After all, Rep. Paul Ryan, the Wisconsin Republican who chairs the budget committee, has targeted the guarantee of Medicare for demolition. The proposal Ryan wrote—the proposal which passed the U.S. House this year and which Mitt Romney has endorsed—would replace Medicare with a voucher system that would radically shift costs towards retirees and drastically cut Medicaid. Ryan has pulled the Republican Party hard to the right with his zeal for privatization—and Medicare and Medicaid, two critical safety nets, are the next target of his crusade to “radically curtail the government’s role in protecting citizens from life’s misfortunes.”

And one key piece of moving us towards health care access that’s truly universal is the Medicaid expansion in the Affordable Care Act. It would save lives by giving coverage to millions who currently fall through the cracks. That’s now under threat from governors like Florida’s Rick Scott, Texas’ Rick Perry and Wisconsin’s Scott Walker, who put a much higher value on scoring ideological points than they do on expanding health care coverage.

So it’s a very happy 47th birthday for Medicare and Medicaid—but we’re going to have to fight hard to make sure they get to see 48.

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