Medicare And the Fiscal Cliff: To Cut Or Not

Democrats reluctant to trim benefits as part of 'cliff' deal.

Dec. 4, 2012 -- Editor's Note: This is the latest in an ongoing series about the building blocks that lawmakers could put on the table as they search for a deal to avert the fiscal cliff.

In the spending vs. revenue tug-of-war in Washington, Republicans and Democrats view cutting the costly Medicare program as a clear path to savings. But the two sides disagree on where and how deeply to cut.

Those details are the subject of intense debate, especially when it comes to the question of whether to raise the eligibility age for Medicare beneficiaries -- a proposal that Republicans support, but Democrats largely resist.

"I don't think you can look at entitlement reform without adjusting the age for retirement," Sen. Lindsey Graham, R-S.C., told ABC's George Stephanopoulos in a recent interview. "Let it float up another year or so over the next 30 years, adjust Medicare from 65 to 67 over the next 30 years."

Speaking to Stephanopoulos last week, Sen. Dick Durbin, D-Ill., signaled his openness to seeking cuts from the Medicare program, but not for raising the current eligibility age, which is 65.

"My concern about raising that Medicare retirement age is there will be gaps in coverage or coverage that's way too expensive for seniors to purchase," Durbin said.

Notably, House Speaker John Boehner, R-Ohio, and President Obama have talked about hiking the eligibility age for Medicare. Both the White House's deficit-reduction proposal and the Republican counter-offer, submitted on Monday, call for cuts to Medicare although the GOP plan would take a bigger bite out of the program.

Boehner called the Obama administration's proposal a "La-La-Land offer," and White House communications director Dan Pfeiffer was similarly dismissive of the GOP plan.

"Their plan includes nothing new and provides no details on which deductions they would eliminate, which loopholes they will close or which Medicare savings they would achieve," Pfeiffer said in a statement.

While some Democratic lawmakers including Durbin and Sen. Kent Conrad, D-N.D., have said that Medicare cuts "have to be part of the solution" they face opposition from more liberal elements of the party as well as powerful interest groups like the AARP.

"We urge Congress and the president not race to put harmful changes to Social Security and Medicare into any end-of-year package," AARP Executive Vice President Nancy LeaMond said in a statement earlier this month.

What's more, raising the eligibility age remains unpopular with most Americans.

Sixty-seven percent of adults in an ABC News-Washington Post poll released last week said they opposed raising the Medicare eligibility age from 65 to 67.

"Opposition to increasing the Medicare eligibility age crosses partisan and ideological lines; it's 68 percent or more among Democrats and Republicans and liberals and conservatives alike," according to Damla Ergun, an analyst at the polling firm Langer Research Associates. "Instead views relate to age; opposition peaks at 78 percent among adults age 50-64. It's also higher among women and people with less than $100,000 incomes, compared with men and the better-off."

Health care experts also caution that an upward shift in the eligibility age might actually come with unintended consequences. For example, 65 and 66-year-olds are generally the healthiest seniors, and kicking them out of the program will create a higher-cost risk pool for all the other enrollees.

"It's clear that it would reduce federal spending and it can do so in a very immediate sense, depending on how it's phased in," Tricia Neuman, director of the Medicare Policy Project at the Kaiser Family Foundation said in an interview with NPR. "However, while federal spending will go down, costs to others will go up. In fact, total spending will rise."

And, according to a January 2012 Congressional Budget Office report: "Many of the people who would otherwise have enrolled in Medicare would face higher premiums for health insurance, higher out-of-pocket costs for health care, or both."

The same report, however, noted that raising the eligibility age from 65 to 67 would cut the program's cost by $148 billion from 2012 to 2021.

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During the 2011 debt ceiling negotiations, President Obama also expressed support for means-testing Medicare, which would save money but lead to higher payments by wealthier Americans. Essentially, those with the "means," pay more.

"I've said that means-testing on Medicare -- meaning people like myself -- you can envision a situation where, for somebody in my position, me having to pay a little bit more on premiums or co-pays or things like that would be appropriate," Obama said at a July 2011 news conference.

Last week, however, White House spokesman Jay Carney declined to say whether the administration had put means-testing on the table again in this round of negotiations although Republican House leaders included it as part of their proposal on Monday.

"I'm not going to get into the specifics and negotiate line items on what those reforms might look like as part of an overall package," Carney said at a Nov. 26 White House briefing.

Many Capitol Hill Democrats have been reluctant to back proposals that would result in benefit reductions, and some top Democrats like House Minority Leader Nancy Pelosi, D-Calif., argue that entitlement programs should not be part of the fiscal cliff negotiations at all.

"Those issues -- Social Security, Medicare, Medicaid -- they should be in their own realm," she said at a Nov. 17 news conference.

But if both sides are serious about squeezing a proposed $400 billion from Medicare as part of a comprehensive deficit-reduction deal, Pelosi and other wary Democrats will have to find room to compromise.

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