PRESIDENT CLINTON RELEASES NEW STATE-BY-STATE REPORT DEMONSTRATING
URGENT NEED FOR MEDICARE REFORM
February 29, 2000
President Clinton today will release a new report, called America's
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
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
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
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
THE NEED IS CLEAR FOR THE PRESIDENT'S PLAN TO STRENGTHEN AND MODERNIZE
MEDICARE. The President's 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 program's 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
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 Medicare's 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
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
Creates a Medicare reserve fund to add protections for catastrophic
drug costs. To build on the President's 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,
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.