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Senior Citizen Politics
Social Security,
Medicare Cuts in Bulls Eye for Federal Commission Trying to Reduce
Budget
 Bi-partisan
commission charged with identifying policies to improve the fiscal
situation of the federal budget got off to thunderous start
Nov. 11, 2010 -
Senior citizens, that turned out in droves to support the Tea Party
rallies urging cuts in federal spending, came face-to-face with reality
today as the co-chairs of the National Commission on Fiscal
Responsibility and Reform released a long list of spending cuts that
could be made. Although a small part of the total savings from these
ideas, projected to be $200 billion a year, it does suggest significant
reductions in Social Security, Medicare and Veterans programs that are
critical to millions of elderly Americans.
The proposal
includes increasing the retirement age for Social Security and plans to
reduce the growth of the Medicare program. In all, the proposals would
lower deficits by $4 trillion through 2020 and "stabilize" debt. Liberal
groups immediately lashed back at what they see as excessive cuts in
spending, according to
The New York Times.
AARP responded
with a news release with the headline, “Deficit Commission Proposal
Hurts Middle Class Americans,” and the subtitle, “Threatens Retirement
Security and Shifts Health Costs Onto Seniors.”
The commission,
established by President Barack Obama, which is sometimes referred to as
the "fiscal commission," or the “deficit commission,” took no formal action. The outline of possible
budget cuts and adjustments was presented by the co-chairs,
Republican Senate Majority
Leader Alan Simpson and former Clinton Chief-of-Staff Erskine Bowles.
The cost savings
measures also focused on reducing the defense budget and making all
areas of government more efficient and less costly.
But for seniors
and their advocates, it was all about the entitlement programs.
“With the
release of the Co-Chairs’ proposal from the President’s Fiscal
Commission today, AARP has responded with concern about how these
recommendations would hurt the health and financial security of middle
class Americans in particular, and believes that the proposal is
contrary to the best interests of American families,” according to a
news release by AARP.
“During these
tough economic times, the last thing we should be considering is
targeting the guaranteed, inflation-protected Social Security benefits
that millions of Americans count on every day,” said Nancy LeaMond, AARP
Executive Vice President.
“Americans,
particularly the middle class, are facing declining pensions, lack of
savings and rising health care costs, and these unbalanced proposals
take the country in the wrong direction instead of answering their real
fears. Americans are worried about their retirement security and the
future of their children and grandchildren, and they do not want our
leaders to target Social Security, Medicare and Medicaid.”
“We're also
deeply concerned that the Co-Chairs' Proposals would aim to reduce the
deficit by shifting health care costs onto seniors in Medicare. Raising
costs on the sick and the most economically vulnerable is both wrong and
counter-productive policy.
“Instead, we
should be focused on efforts to lower costs throughout the health care
system. Our members and millions of Americans who receive Social
Security, Medicare and Medicaid are not only worried about the impact of
potential cuts for themselves, but for the future health retirement for
their children and grandchildren. Cuts to these programs may mean less
security and a bleaker picture for them,” said LeaMond.
AARP said it
wants to commission to “to refocus on the impact of cuts on real people
when proposing any changes to Social Security, Medicare, Medicaid and
other vital programs, and reframe the discussion with the goal of
achieving health and retirement security for all Americans.
The
Los Angeles Times
reported that in addition to holding off on Social Security benefits
until age 68, "[t]he proposal suggests expanding a number of initiatives
in the healthcare overhaul Obama signed into law in March, including
strengthening a controversial independent board designed to identify
savings in Medicare.
The
report by the co-chairs urges drug companies to expand discounts, pushes
doctors to accept modest cuts in their Medicare fees in exchange for
creating a more stable payment system, and recommends that Medicare
beneficiaries pay more of the cost of care." Those proposals all
attracted opponents during the health debate.
All of
this is just the beginning of the review, though, says
The Associated Press.
"The full commission has yet to make recommendations, and the chairmen
acknowledged their plan was dead on arrival -- but said it would prompt
a more realistic national debate about what it'll take to solve the
nation's fiscal woes."
The
18-member panel has a Dec. 1 deadline to offer final recommendations,
but it's unclear whether the members will reach consensus, and at any
rate, a congressional vote on the advice would be "non-binding," the AP
reports.
One
example of the possible solutions being advanced by the commission that
is a contentious one - the public option, says
The Wall Street Journal.
"The plan sets a long-term goal of containing the growth in federal
health-care spending – a major contributor to the deficit – so it
accounts for no more than 1% in excess of gross domestic product after
2020."
Under
the draft plan, a public health insurance organization would be created
if that threshold is exceeded. "Given that Democrats with wide
majorities in Congress couldn't pass a public option, it's hard to
imagine a scenario where one is adopted."
"Bowles and Simpson recommended a variety of other short- and
medium-term plans for cutting healthcare spending that could be used to
pay for freezing scheduled cuts to doctors' Medicare reimbursements
(which doctors consider their highest political priority),” according to
The Hill.
“Averting cuts to doctors' Medicare payments would cost about $275
billion over 10 years. To defray that expense in the medium term, the
chairmen have suggested asking doctors and other health providers to
take responsibility for slowing the growth of healthcare costs."
More Information and Links
>>
Website for National Commission
on Fiscal Responsibility and Reform
Links to the
Co-Chairs' Proposal
●
CoChairs' Proposal (outline with explanations)
●
$200 Billion in Illustrative Savings (shows savings expected from
each proposal)
Commission Members
Co-Chairmen:
● Sen. Alan Simpson, Former Republican Senator from Wyoming.
● Erskine Bowles, Chief of Staff to President Bill Clinton
Executive Director:
● Bruce Reed, Chief Domestic Policy Adviser to President Clinton
Commissioners:
● Sen. Max Baucus (D-MT)
● Rep. Xavier Becerra (D-CA 31)
● Rep. Dave Camp (R-MI 4)
● Sen. Tom Coburn (R-OK)
● Sen. Kent Conrad (D-ND)
● David Cote, Chairman and CEO, Honeywell International
● Sen. Mike Crapo (R-ID)
● Sen. Richard Durbin (D-IL)
● Ann Fudge, Former CEO, Young & Rubicam Brands
● Sen. Judd Gregg (R-NH)
● Rep. Jeb Hensarling (R-TX 5)
● Alice Rivlin, Senior Fellow, Brookings Institute;
former Director, Office of Management & Budget
● Rep. Paul Ryan (R-WI 1)
● Rep. Jan Schakowsky (D-IL 9)
● Rep. John Spratt (D-SC 5)
● Andrew Stern, President, Service Employees
International Union
Outline of Social Security Proposals
Ensure Long-Term
Social Security Solvency
Increase
progressivity of benefit formula
● Gradually
move to a more progressive benefit formula by creating a new bendpoint
at the 50th percentile and reducing upper replacement factors slowly
over time, phased in by 2050
Index retirement
age to increases in longevity
● This option
is projected to increase the age by one month every two years after it
reaches 67 under current law, meaning the normal retirement age would
reach 68 in about 2050 and 69 in about 2075
● Hardship
exemption for those unable to work beyond 62
Switch to a
more accurate measure of inflation (chained CPI) for calculating COLAs
Include newly
hired state and local workers in Social Security after 2020
Broaden the Payroll
Tax Base
Gradually
increase the taxable maximum to capture 90 percent of wages by 2050
● Under
current law, the taxable maximum is pegged to growth in average wages.
In 2009, the taxable maximum captured almost 86 percent of earnings, but
it will fall to 82.5 percent by the end of the decade.
● Phasing into
a higher taxable maximum slowly will prevent large marginal changes and
will prevent rapid buildup of the trust fund.
Promote Smart
Retirement Decisions
Allow greater
flexibility in how benefits are claimed
● Give
retirees the choice of collecting half their benefits early and the
other half at a later age to minimize impact of actuarial reduction and
support phased retirement options.
Direct SSA to
design a way to provide for the early retirement needs of workers in
physical labor jobs
● Require SSA
to have accommodation in place before longevity indexation begins and
set aside funds to pay for new policy.
Improve
information on retirement choices
● Develop an
education campaign to encourage greater personal savings, delayed
retirement, and phased retirement.
● Better
inform beneficiaries of the costs and benefits of collecting benefits
early.
Restoring Social
Security Solvency 75 Year 75th Year
|
|
75 Year |
75th Year |
|
Gradually phase in progressive changes to benefit formula by 2050 |
45% |
51% |
|
Special minimum benefit for lifetime low earners |
-8% |
-6% |
|
Index retirement ages to life expectancy |
21% |
36% |
|
Benefit boost to oldest old retirees |
-8% |
-6% |
|
Gradually increase taxable maximum to 90% of covered earnings by
2050 |
35% |
22% |
|
Apply refined cost of living measure (chained-CPI) to COLA |
26% |
17% |
|
Cover newly hired state and local workers after 2020 |
8% |
0% |
|
Add increased flexibility in retirement claiming options |
- |
- |
|
SHARE OF
EXISTING SHORTFALL CLOSED: |
116% |
108% |
Alternative Social
Security Options
●
Increase benefits for low-income widows
Reduces balance by 0.06% of payroll
●
Cap
spousal benefit at one-half of average worker’s benefit
Improves solvency by 0.08% of payroll
●
Reinstate college benefits for child survivors
Reduces balance by 0.07% of payroll
●
Tax
cafeteria plans in same manner as 401(k) plans
Improves solvency by 0.22% of payroll
● Uncap the
Disability Insurance (DI) portion of FICA taxes (1.8%)
Improves solvency by 0.34% of payroll
●
Fully or partially tax employer-sponsored health insurance
Solvency impact dependent on design
●
Convert delayed retirement credit into one-time bonus
No
solvency impact
● Include
automatic stabilizer with future benefit and/or revenue changes
|
 This
information was reprinted from
kaiserhealthnews.org with permission from the Henry J.
Kaiser Family Foundation. You can view the entire Kaiser
Daily Health Policy Report, search the archives and sign up
for email delivery. © Henry J. Kaiser Family Foundation. All
rights reserved. |
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