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President Clinton Releases New State-By-State Report Demonstrating Urgent Need for Medicare Reform

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The Briefing Room

Office of the Press Secretary

For Immediate Release February 29, 2000

February 29, 2000

President Clinton today will release a new report, called Americaís Seniors and Medicare: Challenges for Today and Tomorrow, providing a state-by-state snapshot of the unprecedented demographic and health care challenges confronting Medicare. It documents the success of the current program and provides new information about its impact on women, Americans over the age of 85, and rural beneficiaries. With this report in hand, the President will urge Congress to move ahead this year to modernize and strengthen Medicare and include in its reforms a long overdue voluntary prescription drug benefit. Among the findings of todayís report:

MEDICARE HAS BEEN AN IMPORTANT ANTI-POVERTY PROGRAM FOR MILLIONS OF AMERICANS. Poverty among the elderly has been reduced by nearly two-thirds since Medicare was created. Medicare has contributed to this dramatic improvement by helping seniors pay for the potentially devastating cost of care when they can least afford it.

MEDICARE PROVIDES CRITICAL HEALTH CARE TO 38 MILLION AMERICANS. Over thirty-three million seniors and almost 5 million people with disabilities rely on Medicare. About 11 percent, or 4 million, of Medicare beneficiaries are over the age of 85, and 24 percent, or 9.1 million of them live in rural areas.

  • Women beneficiaries outnumber men in all states. Over 57 percent of these Americans -- about 22 million -- are women. This distribution of women to men is consistent across all states, ranging from 51 to 59 percent.
  • 10 percent of beneficiaries in 40 states are age 85 or older. These 4 million beneficiaries over 85 have spent almost a quarter of their lives on Medicare. States in the upper Midwest, including North and South Dakota, Minnesota, Nebraska, Kansas, and Iowa, have the highest proportion of seniors over the age of 85.
  • In 15 states, more than half of Medicare beneficiaries live in rural areas. In fact, in Mississippi, Montana, North and South Dakota, Vermont and Wyoming, over two-thirds of beneficiaries live in rural areas. The 9 million beneficiaries nationwide living in rural America typically have few to no options for managed care or prescription drug coverage.

MEDICARE PROGRAM ENROLLMENT WILL SURGE, INCREASING THE PRESSURE TO REFORM. About 62 million Americans will be age 65 or older in 2025, compared to 35 million today.

The Medicare Program Continues to Face Demographic Challenges

  • In 2025, there will be 30 states with an elderly population that is at least 20 percent of the total population -- compared to no states today. In Florida, where 18 percent of state residents are elderly today, about 5.5 million people -- over 25 percent of residents -- will be elderly in 2025 as the baby boom generation retires. Nationwide, this demographic increase is over 75 percent from 2000 to 2025, and is over 100 percent in 15 states.
  • Many older Americans are uninsured or have undependable health insurance. There are 6 million people nationwide age 55 to 65 who have no or undependable health insurance. In eight states, these individuals are more than one third of the population age 55 to 65. They are the fastest growing group of uninsured -- and are at great risk of becoming sick. As the baby boom generation turns 55, there will be an even greater access problem.

Medicare Beneficiaries Need a Prescription Drug Benefit

  • Retiree health coverage is declining. Sixteen states have 20 percent or fewer firms offering health insurance to retirees. Nationally, 22 percent of firms offer health insurance to retirees older than age 65. No state has more than 30 percent of firms offering coverage. This will be lower in the future, as 25 percent fewer firms offered retiree health coverage in 1998 than 1994, so that very few seniors will get prescription drug coverage through former employers.
  • Individual Medigap insurance with prescription drug coverage costs twice as much in high-cost states. The average premium for a 65-year old for Medigap Plan H that includes drug coverage among other benefits is about $135 but exceeds $150 per month in 9 states. The part of the premium that is attributable to drugs alone can be $90 per month or $1,080 per year -- for coverage that is limited to $1,250 per year with a $250 deductible. Moreover, in most states, insurers "age rate" or increase premiums as people get older, making insurance more expensive when seniors can least afford to pay for it.
  • Most seniors are middle income and would not benefit from a low-income prescription drug benefit. About 15.6 million or half (49 percent) of all elderly have incomes between $15,000 and $50,000. Only in the District of Columbia, Louisiana, Mississippi, New Mexico, Rhode Island, South Carolina, and Texas are there more low income than middle class seniors. Nationwide, over half of beneficiaries without drug coverage have incomes above 150 percent of poverty ($12,750 for a single, $15,000 for a couple). Thus, a prescription drug benefit targeted to low-income beneficiaries will not help most seniors.

Health Care Providers Depend on Medicare

  • Health care providers depend on over $200 billion a year in Medicare spending, accounting for one-fifth of all funding. This does not even count beneficiary payments which comprise nearly half of their total health spending. Medicare spending exceeds 20 percent of all health spending in 12 states. Nationwide, over 5,100 hospitals, 800,000 physicians and nearly 15,000 nursing homes care for Medicare beneficiaries.

THE NEED IS CLEAR FOR THE PRESIDENTíS PLAN TO STRENGTHEN AND MODERNIZE MEDICARE. The Presidentís FY 2001 budget dedicates $432 billion over 10 years -- the equivalent of over half of the non-Social Security surplus -- to Medicare. This plan makes Medicare more fiscally sound, competitive and efficient, and modernizes the programís benefits by including a long-overdue prescription drug benefit.

  • Making Medicare more competitive and efficient. Since taking office, President Clinton has worked to reduce Medicare growth and fraud and extend the life of the Medicare Trust Fund from 1999 to 2015. He has proposed to build on these efforts and save $71 billion over 10 years by: 1) expanding anti-fraud policies; 2) making Medicare more competitive, efficient and high quality; and 3) constraining out-year program growth.
  • Dedicating $299 billion over 10 years to Trust Fund solvency. It is impossible to pay for a doubling in Medicare enrollment through provider savings or premium increases alone. To address the future financing shortfall, the budget dedicates $299 billion of the non-Social Security surplus to Medicare, helping extend the Trust Fund through 2025, and reducing publicly held debt by preventing funds from being used for tax cuts or new spending.
  • Modernizing Medicareís benefits. Unlike virtually all private health plans, Medicare does not cover prescription drugs, and over three in five beneficiaries lack dependable prescription drug coverage. The Presidentís plan:
    • Establishes a new voluntary Medicare prescription drug benefit that is affordable to all beneficiaries and the program. The drug benefit, which costs $160 billion over 10 years, would be accessible and voluntary, affordable for beneficiaries, and competitively and efficiently administered. It would also provide high-quality, necessary medications.
    • Creates a Medicare reserve fund to add protections for catastrophic drug costs. To build on the Presidentís prescription drug benefit, the budget also includes a reserve fund of $35 billion for 2006-2010, to design protections for beneficiaries with extremely high drug spending. The Administration plans to work with Congress to design this enhanced prescription drug benefit. Absent consensus, the reserve will be used for debt reduction.
    • Improves preventive benefits in Medicare. This proposal would: eliminate the existing deductible and copayments for preventive services, such as colorectal cancer screening, bone mass measurements, and mammographies.

  • Creates health insurance options for people ages 55 to 65. The plan would allow people age 62 through 65 and displaced workers age 55 to 65 to buy into Medicare. It would require employers who drop previously promised retiree coverage to give early retirees with limited alternatives access to COBRA coverage until they are 65 and can qualify for Medicare. To make this policy more affordable, the President proposes a tax credit, equal to 25 percent of the premium, for participants in the Medicare buy-in and a similar credit for COBRA.

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