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NJ Democrats Seek to Exempt New Jersey Seniors from Risky Medicare Privatization Scheme

February 25, 2004
Press Release

Washington, D.C. U.S. Rep. Frank Pallone, Jr. (D-NJ) and all six of his Democratic New Jersey colleagues today introduced legislation in the U.S. House of Representatives that would prevent New Jersey seniors from being subjected to a new pilot program for privatizing Medicare.  U.S. Sens. Jon S. Corzine (D-NJ) and Frank Lautenberg (D-NJ) introduced similar legislation relating to New Jersey in the Senate.

"Seniors in New Jersey want no part of this privatization scheme.  Baby boomers in New Jersey want no part of this.  New Jerseyans want to know that the Medicare program, as we know it, will be there for them when they need it," said Senator Corzine.  "This legislation will provide that assurance.  Under this bill, no New Jersey county and no New Jersey senior will be subjected to this disastrous privatization scheme. This privatization scheme is not a true competition.  It is simply a plan to force seniors into private managed care plans and out of the Medicare program they trust.  There is no real choice here."     

"Its clear that premium support is another example that this bill is not intended to help seniors, but instead is a giveaway to HMOs and special interests. New Jersey seniors should not be forced into HMOs and the legislation we are introducing today will prevent Republicans from using New Jersey as a laboratory for their experiment to privatize Medicare," said Senator Lautenberg, "New Jersey seniors should not be forced to pay more to stay in traditional Medicare.  It doesnt make sense to overpay HMOs so that they can be competitive. This isnt about competition; its about the Republican mission to destroy Medicare while New Jersey seniors pay the price."

"I join with my New Jersey Democratic colleagues today in voicing our opposition to New Jersey's inclusion in any demonstration program that would force seniors into private health care plans that are only concerned with the bottom line," Congressman Pallone said. "Not one of us supported this risky privatization plan and, therefore, would strongly oppose it ever including New Jersey's seniors. If Republicans truly believe privatizing the Medicare program is the best way to help seniors with their health care and prescription drug bills, you'd think they'd welcome having the demonstration program in their own back yard. However, to date, I haven't heard of one Republican supporting such a risky proposition."

As a result of a provision in the new Medicare law, beginning in 2010, more than one million Medicare beneficiaries nationwide, and 186,000 New Jersey Medicare beneficiaries who live in Camden, Salem, Burlington and Gloucester counties could be subjected to an experiment with Medicare privatization.  This demonstration program, called "premium support" is slated to run in six metropolitan statistical areas (MSAs). 

The program will give seniors a set Medicare premium payment similar to a voucher that would be based on a combination of the prices that private plans in their area charge and the cost of Medicare fee-for-service in their area.  Seniors choosing to enroll in a health plan that costs more than the amount of that voucher would have to pay the difference. 

Initially, it seems like a straightforward choice to seniors.  However, those seniors who choose to remain in the traditional fee-for-service will pay significantly higher premiums than they pay now.  According to documents released by the Centers for Medicare and Medicaid Office of the Actuary on August 9, 2003, seniors living in Gloucester and Hudson counties in New Jersey could pay as much as $1700 a year for traditional Medicare -- $1,000 more than they pay now. 

Furthermore, the new private plans will be able to cherry pick the healthiest seniors to enroll in their plans while turning away older, sicker people.  As a result, they will be able to provide lower cost health care.  Thus, younger, healthier beneficiaries will choose to enroll in private plans where they will pay lower premiums while sicker, older beneficiaries will be forced to remain in the traditional Medicare, increasing the costs of that program.  

Private plans will also receive large federal subsidies to enable them to compete with traditional Medicare.  The new Medicare law subsidizes private plans by $1,920 per beneficiary at a total cost of $14 billion to taxpayers -- so that these plans may compete.