The GOP candidates in Florida in February. (AP)
What do the presidential candidates know about the retirement security crisis, and what do they plan to do about it?
ASK THIS | March 05, 2012
A scholar at the Claude Pepper Foundation writes that the presidential candidates should be required to clearly and fully articulate their policies. And journalists then have an obligation to assess the extent to which these proposed policies respond to the objective facts about the economic realities of old age.
By Larry Polivka
How is it possible that the Republican presidential primary in Florida came and went without anyone pressing the candidates to tell voters precisely what their positions are on economic and health security for older people?
Members of the media have not served the interests of the American voter well by letting the candidates avoid taking a clear stand on these issues. Indeed, reporters should immediately begin to determine how well-informed the candidates, including President Obama, are on the economic and health care needs of older people, and how they would ensure the future of Social Security, Medicare, and Medicaid as viable pillars of the American retirement security system if elected president.
Each candidate should be required to clearly and fully articulate his policies. And the media have an obligation to assess the extent to which these proposed policies respond to the objective facts about the economic realities of old age.
Here are twelve questions that would help determine the factual basis of their reasoning:
Q. What has happened to private sector pensions and retiree health care benefits over the last 30 years, and how has this affected the economic and health care security of current and future retirees?
Only half of all employees now have a pension, and 65 percent of these pensions are some form of a defined contribution whose value is determined by the unpredictable and variable performance of equities markets. This change in private pension plans since 1980 is a major reason most pension experts expect a declining percentage of future retirees to have sufficient financial resources to maintain a comfortable middle class standard of living in retirement – namely 70 to 80 of what they earned while working -- especially as they get older.
Furthermore, the percentage of large firms providing workers with retiree health care coverage has declined from 66 percent in 1998 to 31 percent in 2008.
These trends will make Social Security and Medicare even more vital to the economic wellbeing of future retirees than current retirees, half of whom already depend on Social Security for at least 50 percent of their total income.
These are some of the increasingly difficult realities of retirement security for older Americans and the context in which related public policy issues should be addressed. If a presidential candidate is not fully familiar with these realities and their likely progression over the next 20 years, he is not prepared to formulate responsive and effective policies.
Q. Has Social Security contributed to the growth of the federal budget deficit? If not, why is it often included in discussions of programs that should be cut to reduce the deficit?
Social Security cannot, by law, ever spend more than is available in the Social Security trust fund or than is generated by the payroll tax after the trust fund is depleted, now estimated to occur in 2036. After 2036, if current policies remain in place, promised benefits would have to be cut about 23 percent. But that can be avoided if steps are taken to replenish the trust fund, such as adding about 1.2 percent to the payroll tax for employees and employers.
Some point out that taxpayers will have to come up with the $2.6 trillion to pay back the Social Security Trust Fund as it cashes in its U.S. Treasury securities over the next 24 years. But that debt is backed by the full faith and credit of the U.S. government and defaulting on it would be no different than defaulting on Treasury securities owned by any other entity -- and is therefore essentially inconceivable.
Q. Do you think Social Security should be strengthened for future retirees to help compensate for the decline in private retirement resources and to keep the elder poverty level from increasing?
Q. Do you think the formula for the annual cost of living adjustment (COLA) should be adjusted to lower or raise Social Security payments in the future?
Some policymakers and analysts have suggested replacing the consumer price index (CPI) with something called the “CPI-chained.” The suggested replacement would lower the annual COLA increases generated by the regular CPI and reduce payments for older beneficiaries by 8 to 13 percent. This would be particularly harmful because older beneficiaries are the most vulnerable to becoming impoverished.
Many advocates for the elderly instead support the use of the CPI-E (Elderly), which would raise the COLA adjustment above the CPI by including more information on health care cost increases, which are especially burdensome for the elderly. The CPI-E would help contain increases in the poverty level among the elderly by more accurately adjusting for out-of-pocket spending on health care.
Q. Should the minimum Social Security payment be raised to a level sufficient to ensure that no beneficiaries would have incomes below the poverty line?
This improvement in the minimum benefit would be especially helpful to single women and minority beneficiaries who are far more likely than married women and whites to spend their later years living in poverty.
Q. Are you concerned about the rising out-of-pocket costs for Medicare beneficiaries? What would you do about it?
Median out-of-pocket spending by Medicare beneficiaries now exceeds 16 percent, which is approximately twice the percentage paid for health care by those younger than 65. A quarter of beneficiaries pay 30 percent or more of their income for health care.
Q. What would you do to contain Medicare costs without increasing those out-of-pocket costs?
Q. Would you support raising the eligibility age for Medicare from 65 to 67 or higher?
The candidates, including President Obama, have expressed interest in raising the eligibility age, even though it would save the program relatively little ($5 to $6 billion annually to raise the age to 67), deny coverage to just the kind of people who already have great difficulty finding affordable insurance, and actually increase overall health costs because private insurance costs more than Medicare.
Q. Would you support converting Medicare to a partially or fully privatized program based on some form of on premium support, such as a means tested voucher for each beneficiary?
Congressional Republicans support a budget plan calling for privatization through vouchers of Medicare beginning in 2021, and the Republican presidential candidates have expressed support for this position. An analysis by the Congressional Budget Office shows that the Republican proposal would increase beneficiary out-of-pocket costs by over $6,000 in 2021 and would cost beneficiaries almost all of their annual Social Security benefits by 2050. This is a form of cost containment that would essentially destroy Medicare in efforts to supposedly save it.
Q. What policy initiatives, if any, would you proposed to begin reducing cost increases in the U.S. health system?
Increases are now projected to drive health care spending above 20 percent of GDP over the next 5-10 years. These cost increases are the main reason for rising Medicare spending, and they are not likely to be constrained within Medicare alone.
The Republican position is that competitive forces unleashed by privatization will contain Medicare cost increases, but little if any evidence exists to support that notion. In fact, Medicare in its current form costs less than private insurance operating in presumably competitive private markets – nearly 10 percent less than Medicare Advantage, the Medicare managed care program administered by HMOs.
The Obama Administration is banking on several cost containment initiatives in the Affordable Care Act to contain both Medicare and total health care costs, but it will take years to determine if these still unproven strategies will achieve significant cost savings.
Q. What policies would you support to reduce the huge and growing burden on families when one of their members become “functionally dependent” and requires some level of long-term care assistance?
Over 70 percent of long-term care services are provided by family members and friends, and the only significant public source of assistance is provided through Medicaid, which has stringent eligibility criteria including that the individual must be at or below poverty level. The number of people not receiving the long-term care they need is growing rapidly, and is set to explode over the next 10 to 20 years. Private long-term care insurance is proving to be less affordable for most people with each passing year (only 3 percent are now insured) and neither the president nor the Congressional Republicans seem prepared to pursue alternative funding sources such as the CLASS program, which was authorized by the Affordable Care Act, and would be voluntary for employers.
The Obama Administration supports somewhat increased funding for the expansion of home and community-based services; the Republicans support block grants for Medicaid at reduced levels that would almost certainly mean less funding for long-term care services even as the need for care increases. But neither party seems especially interested in addressing the looming long-term care crisis.
If the media and aging advocates don’t press them, then the crisis will only worsen and make any reasonably cost-effective response increasingly more difficult.
Q. For President Obama: What would you tell voters who think you and congressional Democrats like Rep, Steny Hoyer have failed to maintain a politically advantageous separation from Republicans, who have made it clear that they intend to cut Social Security benefits and privatize Medicare for those younger than 55?
The President and some congressional Democrats, especially the House Minority Whip, have blurred differences with the Republicans on the future of Social Security and Medicare by supporting deficit reduction proposals that would include cuts in both programs. Democratic Sen.Ron Wyden has agreed with Republican Rep. Paul Ryan to support Medicare changes including a major privatization (premium support) provision. Democrats have historically benefitted from their strong support for both programs, and many now feel that this advantage in an extremely difficult election year will be lost..
Many Democrats fear that in an election contested under difficult economic conditions, one of the President’s strongest leverage points is an aggressive defense of our retirement security programs. An aggressive defense of Social Security and Medicare may be one of the President’s best strategies for reaching working class and formerly middle class whites who have suffered from high unemployment and big loses in net worth and are now afraid that they will not have enough resources to live well in retirement.
As I described in a previous Neiman Watchdog article the U.S. is facing a retirement security crisis that policymakers have allowed to develop for several years. If the media do not begin to hold our presidential candidates accountable for what they know and propose to do about this crisis, the crisis will only worsen and darken the future for millions of older people and their families.