Should Individuals Be Able to Opt Out of Medicare Part A Without Losing Social Security Benefits? (S. 3560)

What is S. 3560?

(Updated February 11, 2020)

This bill — the Retirement Freedom Act — would allow seniors to opt out of Medicare Part A but still collect Social Security benefits. Currently, opting out of Medicare Part A (which covers hospital, in-patient, nursing home, hospice, and some in-home care) makes senior citizens ineligible to collect Social Security benefits.

Argument in favor

Senior citizens should be able to choose the healthcare plan that best suits their needs. Currently, Medicare can make it difficult for senior citizens to go to their preferred doctors. Automatically enrolling all senior citizens into Medicare Part A is also expensive, so this bill would help reduce the fiscal strain on Medicare.

Argument opposed

Medicare is intended to be a mandatory social safety net program, and allowing individuals to opt out undermines its financial stability. It also could be seen as a precursor to privatizing Medicare or making other reforms to the entitlement program that impact the level of care current or future beneficiaries receive.

Impact

Senior citizens; and Medicare Part A.

Cost of S. 3560

A CBO cost estimate is unavailable.

Additional Info

In-Depth: Sen. Ted Cruz (R-TX) introduced this bill to empower senior citizens and create more healthcare options by allowing seniors to utilize private health insurance without losing their Social Security benefits:

“For too long, Social Security has been wrongly tied to Medicare Part A enrollment. Seniors all across the country should be empowered with the freedom to choose a health insurance plan that fits their needs, without the fear of losing their Social Security benefits. [This bill will] empower America’s seniors with healthcare freedom, as Congress continues to deliver on our promises.”

The 60-Plus Association supports this bill. Its founder and Chairman, James Martin, argues that this bill gives senior citizens healthcare choices while also reducing financial strains on Medicare:

“Senior citizens should not be forced by the federal government to choose between the right health care and receiving their Social Security benefits. For too long, retirees have been required to enroll in Medicare Part A in order to preserve their earned Social Security. That’s not right and Senator Ted Cruz’s Retirement Freedom Act frees seniors from this requirement. This legislation would give seniors the freedom to choose a private health care plan that better suits their medical needs than Medicare Part A, without losing out on the Social Security benefits they’ve earned through a lifetime of paying payroll taxes. By giving seniors this option, it would also ease the financial strains on the Medicare system by reducing the number of enrollees.”

Conservative activist group FreedomWorks’ president, Adam, Brandon, supports this bill, arguing that it addresses “liberty and individual choice” in healthcare:

“At its core, the Retirement Freedom Act is about liberty and individual choice to expand Americans’ ability to make health care decisions for themselves free from government overreach. However, it is also a positive step toward reforming our broken entitlement system, which continues to drive our national debt further and further up, to the $21.5 trillion it sits at today. When Medicare began in 1965, mandatory spending at $49.1 billion made up just under 28 percent of the total $178.1 billion federal budget. In 2017, mandatory spending at $2.518 trillion consumed over double that percentage -- 63 percent of the $3.981 trillion federal budget.

This type of spending is unsustainable and is driven in large part by exorbitant spending on Medicare. By simply allowing individuals who do not want to receive benefits from Medicare Part A to opt out of it, our country can save billions of taxpayer dollars and begin to slow the growth of unchecked entitlement programs that have driven us so deeply into debt… [I]f only one percent of eligible seniors opt out of Medicare Part A under this change, we will see an immediate savings of $1.5 billion. Enhancing health care freedom and saving taxpayer dollars while taking a much needed step toward Medicare solvency is a common sense measure for our elected officials to enact.”

This bill has one cosponsor, Sen. Rand Paul (R-KY). In addition to the 60-Plus Association and FreedomWorks, the Association of Mature American Citizens (AMAC) also supports this bill.

Of Note: Medicare Part A is the hospital insurance portion of Medicare. It covers Medicare inpatient care, including care received while in a hospital; nursing home care; some instances of in-home care; and hospice care. Most senior citizens are automatically eligible for Medicare Part A at age 65 if they’re already collecting Social Security or Railroad Retirement Board benefits.

Currently, opting out of Medicare Part A renders a senior citizen ineligible to collect Social Security. If a senior citizen has already started collecting Social Security, they’d be responsible for refunding all Social Security money they’d previously received. This rule is the result of the ruling in Hall v. Sebelius, in which three retired federal employees receiving Social Security retirement benefits wanted to drop their Medicare Part A coverage. 

The ruling was against the retirees, citing the original law Congress enacted when creating the Medicare program. In that ruling, the judge said that “requiring a mechanism for plaintiffs and others in their situation to ‘dis-enroll’ would be contrary to congressional intent, which was to provide ‘mandatory’ benefits under Medicare Part A for those receiving Social Security Retirement benefits."

Currently, few seniors opt out of Medicare Part A because doing so would affect their Social Security benefits. However, it’s unclear that many seniors want to opt out of Medicare Part A to begin with, as it doesn’t have a premium.

Some senior citizens on Medicare do find, however, that they may have limited choices of doctors with Medicare versus private insurance. In a 2013 poll of Angie’s List members on Medicare, one-third of respondents said they’d contacted a doctor who either didn’t accept Medicare or new Medicare patients.

Media:

• Sponsoring Sen. Ted Cruz (R-TX) Press Release
  
• FreedomWorks Press Release (In Favor)
  
• 60-Plus Association Press Release (In Favor)