Analysis: Budget battles' increasing impact on seniors

Washington Watch

President Barack Obama took a political gamble at the beginning of April by proposing to curb the growth of Medicare and Social Security. In upsetting his liberal political base, Obama hopes his concessions will draw rank and file Senate Republicans into a budget deal that, so far, has proven elusive.

Obama released his proposed $3.778 trillion budget recently, for the fiscal year beginning in October – the first salvo in a long process full of political gamesmanship, partisan rhetoric and hopefully, ultimately, an agreement on a broad deficit reduction deal later this year.

With sharp automatic spending cuts threatening to slow the economic recovery and another showdown over the federal debt limit on the near horizon, the president’s budget blueprint makes cutting a deal on the budget with Republicans the administration’s top fiscal priority.

Since the budget plan is the Democrat’s opening move, it was no surprise that the House Republicans’ counter move was to declare the budget document as “dead on arrival.” No one was surprised either by the strong pushback from senior groups and liberal activists against the proposals to curb entitlements by cutting future benefits or spending on Medicare and Social Security. Obama’s budget promises to make meaningful reductions in Medicare benefits, including higher premiums for couples making more than $170,000 a year.

The administration’s political calculation is this: by putting Social Security on the table and signaling a willingness to make Medicare beneficiaries pay more, Obama is gambling that he can reach a much broader deficit deal with Republicans over time. Of the entitlement cuts, Obama said, “I don’t believe that all these ideas are optimal, but I’m willing to accept them as part of a compromise.”

The budget proposal includes slowing the growth of spending on programs such as Social Security by $130 billion over 10 years by using a different inflation measure for calculating annual cost of living increases, called “chained CPI” – what people hope is a more accurate consumer price index -- and making $370 billion in changes to Medicare through cuts to providers and raising certain fees and premiums.

The Obama idea is trimming cost-of-living increases by roughly three-tenths of a percentage point a year and saving the government about $130 billion over the next decade. White House officials said the change would not affect programs for the poor, such as Supplemental Security Income, or SSI, and would be adjusted to reduce the impact on retirees 77 or older.

Changing the CPI immediately drew the criticism of AARP and infuriated many Democrats, who have long demanded that Social Security be protected from any debt-reduction deal. They argue it is unfair to seniors, even though the budget plan includes some other protections for the very elderly and the very poor.

“I am willing to make tough choices that may not be popular within my own party, because there can be no sacred cows for either party,” Obama said in introducing his budget. But Obama stressed that his efforts to slow entitlement growth was conditioned on lawmakers agreeing to higher taxes, such as new limits on tax breaks claimed by wealthier Americans – something Republican leaders have recently said they won’t accept.

Obama would take more from upper-income Medicare beneficiaries, in part, because he is trying to shield the Medicaid program for the poor. Today, fewer than 5 percent of the elderly have enough income to trigger higher Medicare premiums. Obama would increase that up to 25 percent, a step toward means-testing of Medicare. He would also penalize seniors who buy generous private medigap policies that cover everything from the first dollar.

Democrats have long resisted this notion, contending it is a step toward turning the Medicare program into a safety-net program for lower-income people. Under Obama’s plan, Medicare beneficiaries would also take a hit, through higher premiums and requirements to substitute generic drugs for more expensive brand names.

Two years of budget battles between the president and a divided Congress have already extracted about $2.4 trillion in deficit reduction, including spending cuts and tax increases over the next decade. The ongoing impasse over the unpopular across-the-board spending cuts, known as the sequester, is set to trim an additional $1.2 trillion more over the next decade.

The result, Republicans argue, is the only substantial place left to go for more savings are entitlement programs that have been largely left untouched in prior budget battles. Democrats contend that there is still more revenue to be had in closing tax loopholes and making moderate adjustments to social programs.

The unspoken giant in the room is that many economists forecast that the country’s fiscal problems are about to explode within 10 years, largely driven by the baby boom generation drawing Social Security and Medicare in record numbers as well as by climbing interest rates. Roughly 46 million Americans received Social Security retirement benefits in 2012, a figure forecast to grow 40 percent by 2023 with a similar increase for Medicare.

Congressional lawmakers and the White House have been locked in irregular budget talks since 2011. Since then, the White House and Congress have already agreed to roughly $2.5 trillion in deficit reduction over 10 years through a combination of spending cuts and tax increases. House Republicans and Senate Democrats have already passed budget resolutions, so the White House document becomes largely a political document geared to influencing the broader deficit reduction discussions.

CMS nomination: Filling the hardest job in government

When the cherry blossoms come out in the nation’s capital in April, strange things sometimes happen. As the long partisan struggle between the Democratic White House and the Republican House continues, the nomination of Marilyn Tavenner to be the new head of Medicare and Medicaid looks like it might prompt that rare event – a bipartisan agreement.

Known as one of the hardest jobs in the administration to fill and win approval for, Tavenner is expected to get Senate approval to run the Centers for Medicare & Medicaid Services. If confirmed she would be the first leader at CMS to get through the Senate since 2004, when Republican Mark McClellan got Senate approval. He stepped down in 2006, and interim appointees have filled the job since then.

Tavenner was named to run CMS after it became clear that her predecessor, Don Berwick, would never get confirmed amid intense debate over health care reform. She has been running the agency in an acting capacity for more than a year and her nomination seems to have risen above the usual partisan rhetoric about health care. But it doesn’t mean that her nomination is going to get easy confirmation. If her nomination hearing is any indication, however, she does seem to be on track to get confirmed, despite continued opposition by some lawmakers to implementation of the Obama health care law and strong questions about the future of Medicaid and Medicare. After the Senate Finance Committee nomination hearing, a smiling Tavenner said “they were great to me today,” something that surprised most hearing observers.

Tavenner, 61, started out as a nurse, then worked herself up to executive of a hospital chain before serving as the top health official in the state of Virginia. Senate Finance Committee chairman Max Baucus, D-Mont., said he hopes to have a committee vote before the end of April. One thing that surprised reporters covering the nomination hearing was that more attention was not focused on the president’s health care law and its implementation, especially considering that CMS is the primary agency responsible for setting up the health care exchanges set to begin next January.

Also contributing to this story were: Kaiser Health News, the Wall Street Journal, USA Today, Politico, the Associated Press and the Washington Post.

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