Balanced Budget Act: Good or Bad for Seniors?

Image source: Wall Street Journal

On November 2, 2015, the Balanced Budget Act of 2015 (BBA) was signed into law by President Barack Obama. According to the President’s statement on the day of the signing, “Democrats and Republicans came together to set up a responsible, long-term budget process, and what we now see is a budget that reflects our values, that grows our economy, creates jobs, keeps America safe.” He also mentioned that “It protects our seniors by avoiding harmful cuts to Medicare and Social Security.” 

Here’s where things stand for key aging services programs. I’ll let you be the judge on whether it is “good” or “bad” for seniors, based on the facts below:

Social Security:  

Social Security payments will not be increasing next year because inflation is so low, but regulations bar Social Security recipients from seeing their checks reduced. The BBA:
  • Prevents a 19% cut in Social Security Disability Insurance benefits that would have occurred in late 2016.
  • Ensures 7 years of certainty that the Social Security Disability insurance program will pay full benefits.
  • Tweaks how payments into Social Security by employers and employees are allocated to give the disability insurance program some breathing room. Currently, the government collects 6.2% of income from employees and 6.2% from employers (along with 12.4% from those who are self-employed.) Of that, 10.6% goes to the main Social Security trust fund, and the other 1.8% to the disability fund. The BBA increases the share going to the disability fund to 2.37 % for three years, buying time for Congress to come up with a longerterm solution to the challenges facing both Social Security trust funds.
  • Closes a loophole that allowed wealthy beneficiaries to manipulate their benefits to maximize retirement credits. Previously, “file and suspend” which we just wrote about last month, allowed married couples to have one spouse start claiming spousal benefits at full retirement age while the other allowed his or her own benefit to continue growing. The Center for Retirement Research at Boston College estimated that these strategies cost the government roughly $10 billion annually. The budget deal eliminates these claiming strategies, though the provision does not take effect for six months. Note that no one currently using these strategies or eligible to use them will be stopped.
  • Prevents a 20% across-the-board cut in Social Security disability benefits for 11 million people next year, which was the result of a quickly drying-up trust fund.
  • Maximizes penalties for those charged with Social Security Disability Insurance (SSDI) fraud and abuse, while strengthening oversight and reporting requirements.
Medicare 

Medicare Part B premiums were on track to increase. However, the legislation averted a pending premium hike for many Medicare enrollees, while extending a 2% cut in payments to Medicare providers, and limiting outpatient payouts under the popular seniors program.
The BBA:
  • Staves off a 52% premium increase from hitting millions of seniors in Medicare next year.  As it stood, the roughly 70 % of beneficiaries who have premiums deducted from the Social Security check would not pay higher premiums — but 30 % of beneficiaries would have had to cover the entire increase, and their premiums could have risen 52%. With the Budget Act, the Treasury will lend $7.5 billion to the Medicare program, so beneficiaries paying the increase will see premiums rise roughly 15% — a sharp hike, but much less than without the loan. And in 2017, Medicare beneficiaries will start repaying the loan to the tune of $3 per beneficiary per month. 
  • Provides for a new Medicare payment policy for new outpatient providers. Previously, medical services delivered by physicians were reimbursed at much higher rates in a hospital setting than they are in a non-hospital setting. The budget rationalizes that for new provider-based outpatient services, the same payment will be received for outpatient services that are the same as those delivered in hospitals. 
Medicaid 

The Budget proposes targeted reforms to Medicaid that are projected to save $7.3 billion over the next decade. These reforms will improve the longterm sustainability of Medicaid by increasing the efficiency of health care delivery without compromising the quality of care for seniors, children, low income families, and people with disabilities. Specifically, the BBA: 
  • Extends two important programs within Medicaid: the Transitional Medical Assistance program and Medicare Part B premium assistance for low income Medicare beneficiaries. 
  • Specifies both the rate increase for Medicaid primary care providers, as well as flexibilities to facilitate enrollment of Medicaid and CHIP-eligible children.
  • Provides that manufacturers of single-source drugs, whose prices rise faster than the rate of inflation, would pay an additional rebate to the Medicaid program. 
Other Senior Programs 

The budget provides sequester relief to programs like the Older Americans Act, Low Income Home Energy Assistance Program, and Social Security field offices without cutting Social Security, Medicare, and Medicaid benefits. 

Unfortunately, the Budget Act provides NO relief to seniors who will receive no cost of living adjustment in 2016.

What do you think of the BBA? Please comment below on our blog.

Have you planned for your future and for your loved ones? 

As you can see, whether it’s “good” or “bad,” the laws that affect seniors are always changing. However, the need to plan in advance remains. If you have not done Incapacity Planning, Estate Planning, or Long-Term Care Planning (or had your Planning documents reviewed in the past several years), or if you have a loved one who is nearing the need for long-term care or already receiving long-term care, please don’t hesitate to call us for a no-cost initial  consultation: 

Fairfax Elder Law: 703-691-1888
Fredericksburg Elder Law: 540-479-1435
Rockville Elder Law: 301-519-8041
DC Elder Law: 202-587-2797

Comments

  1. Christopher Manthey says

    Regarding Social Security, I agree with eliminating “file and suspend,” which I think is an abuse. But you did not mention that the BBA basically eliminates spousal benefits for anyone with more than a minimal work history. Previously, you could receive spousal benefits at your full retirement age and then wait until 70 to claim your retirement benefits. Now, anyone filing for spousal benefits will be deemed to be also filing for their retirement benefits, and will only receive the higher of the two. This eliminates spousal benefits for anyone who is married and has a significant work history of their own, as their retirement benefit will probably be the higher one. This was sneaked into the bill with no discussion and no publicity.

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