FOR IMMEDIATE RELEASE, Friday, February 15, 2008
CONTACT: Yoni Cohen, (202) 225-3202

WASHINGTON, D.C. – Representative Pete Stark (D-CA), Chairman of the Ways and Means Health Subcommittee, today commented on President George Bush’s response to the so-called Medicare “trigger.”

“President Bush pulled the Medicare “trigger” today, targeting beneficiaries with even higher costs while continuing to protect the insurance industry. His response was frontloaded with other proposals that have no effect on Medicare’s finances and are merely there to hide the beneficiary hit.

“How can the White House seriously propose leaving excessive subsidies for private insurance plans untouched while increasing cost sharing to beneficiaries who already paid more for their Medicare through the tax code? Corporate welfare for insurance companies costs Medicare billions and drains years from Medicare’s solvency. If the President really cared about the fiscal strength of Medicare, he would work with us to reduce or eliminate overpayments to private health plans, as was done in last year’s Children’s Health and Medicare Protection (CHAMP) Act.

“The trigger was created as a political ploy to foster a panic that Medicare is unsustainable. Republicans want to limit general revenue financing for Medicare, but have no problem funding the entire defense budget with general revenues. The trigger is part of the Republicans’ goal to privatize Medicare by arbitrarily limiting funding and converting Medicare from an entitlement program into a voucher.”

Background: The Medicare Modernization Act created a new mechanism -- the “45 percent trigger” -- to allegedly measure the adequacy of Medicare’s finances. This measure looks at the amount of Medicare spending financed by general revenues. The trigger is set in motion if the Medicare Trustees project in two consecutive annual Trustees Reports that funding from general revenues will exceed 45 percent of Medicare spending within a 7-year window. The President is then required to submit legislation within 15 days of the submission of the next budget, and there are expedited procedures in the House and Senate for consideration of legislation, which may be the President’s bill or another bill. Both the 2006 and 2007 Trustees reports projected general revenues would exceed the 45% threshold within the designated timeframe; thus, 2008 is the first year that the “trigger” is pulled, which requires the President to submit legislation.

The House-passed CHAMP Act would have repealed the trigger. CHAMP’s provisions for reducing overpayments to private plans would also have extended Medicare’s solvency.

The President’s response to the trigger rejects the provider cuts in his budget, and includes other policies that have no effect on Medicare financing. The only provision addressing Medicare financing would raise premiums for 1.5 million beneficiaries (4.5 percent of total beneficiaries) in 2009, growing to 3.7 million beneficiaries (8.0 percent) hit with higher costs by 2018. In addition, according to the Office of the Actuary, more than 800,000 beneficiaries would drop out of the Administration’s drug program as a result of this proposal. The premium hike will bring in $9.2 billion in increased revenues over ten years, and cut spending by another $1.8 billion from beneficiaries leaving or not signing up for the program, for a total fiscal effect of $11 billion over ten years.