FOR IMMEDIATE RELEASE, Wednesday, July 23, 2008
Contact: Brian Cook (202) 225-3202

WASHINGTON, D.C. – Representative Pete Stark (D-CA), Chairman of the Ways and Means Health Subcommittee, spoke out in support of the pending House vote to turn off the Medicare Trigger.

“The Medicare trigger was cooked up by Republicans behind closed doors as a political ploy to foster an unfounded panic about the strength of Medicare's finances. We must turn off the trigger and reject Republican attempts to arbitrarily limit Medicare financing. This is nothing more than their effort to turn the program from an entitlement to a voucher.

“The trigger was crafted to do a hatchet-job on Medicare, cutting benefits and shifting costs to beneficiaries. We ought to govern more thoughtfully than that. I hope my Republican colleagues will join us, as they did in this month’s legislation to strengthen Medicare, to take positive steps for the Medicare program by shutting off the arbitrary and misguided process that the trigger would set in motion.”

Background: Current law establishes three main sources of financing for Medicare: payroll taxes, general revenues, and beneficiary premiums. The Medicare Modernization Act created a new mechanism -- the “45 percent trigger” -- to allegedly measure the adequacy of Medicare’s finances. The trigger 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. If so, a “Medicare funding warning” is issued, setting in motion various processes. The President is 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, setting in motion a requirement for the President to submit legislation.

In order to meet the target threshold, legislation needs to cut benefits, provider payments, shift more of the burden to beneficiaries in the form of higher cost-sharing, or rely more heavily on payroll taxes. The President sent such a bill to Congress. It proposed raising drug benefit 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. 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 House-passed CHAMP Act, which passed the House by a vote of 225-204, would have repealed the trigger. CHAMP’s provisions for reducing overpayments to private plans would also have extended Medicare’s solvency.

The recently enacted Medicare Improvements for Patients and Providers Act (P.L. 110-235) will also extend Medicare’s solvency and will result in a one-year delay in when Medicare financing crosses the 45 percent threshold. In fact, according to the Congressional Budget Office, its impact on Medicare financing is the same as to the President’s bill.