Social Security and Medicare Issues
Democrats are slow to embrace Medicare and Social Security benefit reductions
The Washington Post reports, "While Democratic leaders are offering quiet support for Obama’s renewed campaign to strike a grand bargain with Republicans that would include cuts to Social Security and Medicare, a significant number of Democratic lawmakers are digging in their heels and vowing to protest any reduction in promised benefits." Democratic opposition to entitlement cuts was most evident on Wednesday (March 13, 2013) when Senate Budget Committee Chair Patty Murray (D-Wash) proposed a budget plan that contained only minor reductions in Medicare and Medicaid. Read more in the Washington Post.
Medicare- America's big transfer-of-wealth program (December 2, 2012)
Currently, a person earning $1 million per year pays Medicare premiums of $29,000 per year, while someone earning $10,000 pays just $290 per year. Yet, these two people are entitled to the same benefit, starting at the same age - 65. To the Obama Administration this is unfair, and the millionaire needs to pay even more! Therefore, he will be subject to an additional 3.8% tax on his investment earnings. However, this is still not fair in the eyes of many politicians, so there are proposals to "means test" benefits for the rich people who don't need them. Undoubtedly, some rich people have more cars than they need. Perhaps we should take those also. Read about the new tax. Read about Senator Claire McCaskill's plan for "more aggressive means testing from higher co-pays from those people who can afford it.”
President Clinton dissembles during his Obama convention speech (September 7, 2012)
On Wednesday night, President Clinton said Candidates Romney and Ryan lied when they "attacked the president for allegedly robbing Medicare of $716 billion." However, a Washington Post fact checker says that Clinton is the one who is not telling the truth. In addition, Clinton was disingenuous when he said, “I didn’t know whether to laugh or cry because that $716 billion is exactly, to the dollar, the same amount of Medicare savings that [Ryan] has in his own budget.” Well... yeah! Once something becomes the law of the land (as is the case with Obamacare) it has to be factored into budgets - by both Democrats and Republicans. However, Clinton implied that Ryan was endorsing the cuts, and that is not the case. Indeed, Mitt Romney has stated that, if elected, he will work to eliminate those cuts. See Washington Post article.
A lack of jobs is a factor in the recent surge in disability claims (July 17, 2012)
There are several reasons for the recent surge in disability claims, one of which is an economy that has not produced enough jobs. Read more.
"Life of Julia" misleads on Social Security, per Washington Post
"Note how carefully the Obama campaign’s statement is worded. It says that, under Obama, Julia 'receives monthly benefits that help her retire comfortably.' It does not promise that projected benefits will not be cut, but it certainly implies that." Read more.
New Program: Senior Medicare Patrol (May 16, 2012)
A new program called Senior Medicare Patrol uses senior-citizen volunteers to help other seniors learn about Medicare fraud and how to detect it. Read more.
107 Charged in Medicare Fraud Busts in 7 Cities (May 2012)
Per the Associated Press, 107 doctors, nurses and social workers have been charged with defrauding Medicare of $452 million. "Patient charts were doctored to show services that were billed to Medicare but often never given, according to an indictment." Medicare fraud is estimated to cost $60 to $90 billion each year. Read more.
News is more bleak for Social Security and Disability funds (April 2012)
The Social Security Board of Trustees has stated that the combined assets of the Social Security and Disability Insurance Trust Funds will be exhausted in 2033, three years sooner than projected last year. The DI Trust Fund will be exhausted in 2016, two years earlier than last year’s estimate. Read more.
Romney has said little regarding Social Security and Medicare plans (February 2012)
So far, we don't know much about Governor Mitt Romney's plans with respect to Social Security and Medicare. However, in February 2012 the presidential candidate proposed that we raise the Social Security retirement age for younger workers, and that we index the benefits of higher earners to cost of living inflation, rather than wage inflation. He also advocated the creation of a voucher system that could provide future senior citizens with the funds needed to buy private insurance, in lieu of normal Medicare benefits. These are sensible proposals, but lacking in detail. Read more in the Detroit Free Press.
Bi-partisan Medicare reform proposal wins praise (December 2011)
The Wyden-Ryan plan is, simply put, a much better version of Ryan's previous proposal. Starting in 2022, it would give seniors subsidies that they could use to buy insurance through
new regional marketplaces called exchanges, similar to the ones created by the 2010 healthcare reform law. But rather than eliminating Medicare for anyone not yet 55 years old, as Ryan proposed, Wyden-Ryan would continue to make the current Medicare program available as an option through the new exchanges. Read more.
Choosing a Medicare prescription drug plan can be confusing. (November 2011)
The more you know, the easier it will be to find one that makes the most sense for you. This article in the Milwaukee-Wisconsin Journal Sentinel has some valuable tips.
The long-term health care problem (October 24, 2011)
AP: The Obama Administration has pulled the plug on its Community Living Assistance Services and Supports program (CLASS), leaving the long-term health needs of Americans in doubt. Read more.
Associated Press: Obama's Deficit Plan Tightens Squeeze on Medicare (September 2011)
AP reports that the President's plan would do some heavy cost cutting or shifting. "Drug companies, hospitals, nursing homes and state health care programs assessed the damage Tuesday from the president's latest deficit-reduction proposal to Congress. While Medicare and Medicaid would be spared radical reengineering, the plan spreads plenty of pain. Future retirees would be on the hook for a greater share of their Medicare costs." It is estimated that payments to the pharmaceutical industry would be cut by $135 billion over 10 years, leading some to wonder if drug research would be affected. Read more.
Heritage Organization: Obama’s Medicare Plan is an Open Secret (July 2011)
Robert Moffitt claims that President Obama's health care proposals will "end Medicare as we know it" by slashing payments to providers. This will result in fewer health care providers. Says Moffit: "If the president’s Medicare payment cuts continue, the number of Medicare providers who find themselves in the red will jump to 25 percent by 2030, when the Medicare rolls reach an esti�mated 80 million beneficiaries." Read more.
The Ryan Plan - What's good about it, and what is not (April 7, 2011)
Congressman Paul Ryan's plan for Medicare is "by far the most significant - and revolutionary - proposal" in his budget. While it is far from perfect, the plan represents a serious effort and reining in costs by promoting competition among health care providers. We hope it will be debated seriously, without demagoguery. Read an evaluation by Shawn Tully, senior editor-at-large of CNNMoney. Click here.
Washington Post: Republican Rep. Ryan's Social Security plan would cut benefits for high earners (October 2010)
Lori Montgomery writes: Republican Rep. Paul Ryan's plan "would reduce benefits by gradually raising the retirement age and gradually trimming benefits for the top 70 percent of earners." Read more.
SS to run deficits until fund is exhausted (1/28/11)
Congressional budget experts say that Social Security payouts will exceed collections by about $45 billion this year, and that deficits will continue indefinitely. The fund (which currently comprises IOUs from Treasury) is expected to be exhausted by 2037. Thereafter, Social Security will have to reduce benefits sharply or start borrowing from the general Treasury. Read story.
Trustees report for 2009 shows deterioration in SS and Medicare (5/13/09)
In a recently-released report, the Social Security and Medicare Trustees note that the economic recession is exacerbating the financial difficulties for Social Security and Medicare. Social Security reserves will be exhausted in 2037 - four years earlier than previously forecasted. Medicare cash will be exhausted by 2017, which is two years earlier than previously expected. To bring Medicare into balance over the next 75 years would require an immediate cut in outlays of 53 percent, or a tax increase of 134 percent (increasing the rate from 2.9 to 6.78 percent of payroll). Social Security could be restored to balance over the next 75 years with an immediate benefits cut of 13 percent or by increasing the payroll tax rate from 12.4 to 14.4 percent. Read the Trustees summary report>>. Read story in the New York Times>>.
Plurality of Americans want private option for Social Security (3/12/09)
By 46 to 38 percent, Americans believe workers should be allowed to opt out of Social Security to provide for their own retirement planning, according to a recent Rasmussen Reports national telephone survey.
A majority of voters also agree with President Obama's proposal for workers to pay Social Security taxes on more of the income they earn each year. Sixty percent (60%) say people should pay Social Security taxes on all or most of their annual income. Twenty-nine percent (29%) disagree, and 11% are undecided. Sixty-two percent (62%) of voters also say people who pay more in Social Security taxes should receive more in retirement benefits when they retire. Twenty-two percent (22%) are against that idea, with 16% undecided.
Currently, a worker pays Social Security withholding tax equal to 6.2% of his or her gross wages, up to but not exceeding $102,000 per year. The same 6.2% tax is imposed on employers. As part of his plan for shoring up Social Security, Obama has proposed levying the 6.2% tax on wages of $250,000 and above but not on earnings between $102,000 and $250,000. [Note: Under current law, the benefit payment rate on wages over $54,000 per year is only a small fraction of the benefit rate for lower wages. In other words, there is already a large transfer of wealth from higher-earning workers to lower-earning workers.]
The survey results are from a national telephone survey of 1,000 Likely Voters conducted by Rasmussen Reports on December 21, 2008. The margin of sampling error for the survey is +/- 3 percentage points with a 95% level of confidence.
Democrats resist President Obama on Social Security (2/22/09)
The New York Times reports that Democrats are resisting President Obama's call for a bipartisan panel to study Social Security reform. Some liberal Democrats say they will resist plans to cut benefits, and that Obama's "political capital" would be better spent on health care and other issues.
PRAs would help, but they're not enough!
The PPTO agrees that Social Security reform is needed, and believes that a properly-designed
system of Personal Retirement Accounts (PRAs) could be a valuable part of such reform.
However, the PPTO believes that PRAs are not enough: Other reforms are also needed (see below).
PPTO proposes some fixes for Social Security
[As printed in the Chicago Sun Times on February 6, 2005]
Congress should give serious consideration to the president's proposal to create an optional system of personal retirement accounts. A modest system of personal accounts could increase retirement wealth and could help bridge the gap between rich and poor (by giving low-income workers a chance to bequeath assets to their children).
However, we also need to eliminate some of the ''sacred cows'' of the Social Security system.
We need to stop shifting extra benefits to affluent workers with stay-at-home spouses. Spousal and survivor benefits are "extra" benefits because they are acquired through marriage -- not by the payment of Social Security tax. ''Means testing'' those extra benefits (to eliminate them for the wealthiest 30 percent of workers) could eliminate up to 60 percent of the actuarial deficit.
About 5 million state and local government workers are exempt from Social Security tax. By simply requiring the newly hired government workers to join Social Security, we could eliminate about 11 percent of Social Security's pending actuarial deficit.
The current method of taxing benefits is illogical, inequitable and confusing. If we start taxing Social Security benefits in the same way we tax other pension benefits, as much as 24 percent of the actuarial deficit could be eliminated.
We no longer require disabled beneficiaries (below retirement age) to get vocational rehabilitation. This is one reason Social Security disability costs are soaring.
Joe Fried, Director
Public Program Testing Organization
CATO reports success in Chile's PRA program (9/9/05)
"The Superintendent of the AFP System in Chile (the equivalent of PRAs) announced recently that rates of return remain high for the 7 million workers who have opted in to the personal accounts system. Over the last 36 months, the five available investment funds have averaged a real rate of return of 30.8 percent. However, only 10 percent of the participants are invested in the lowest performing option (which at 12.7 percent is still enjoying rapid growth)—overall, 90 percent of participants in the AFP system have seen returns between 27 and 55 percent over the last three years." Read more.
Why don't liberals support Social Security reform? (7/5/05)
A recently-issued Cato study suggests that liberals should welcome Personal Retirement Accounts because they would advance liberal ideals. In the study, Noble Lies, Liberal Purposes, and Personal Retirement Accounts, a Cato policy analyst claims that "Social Security has a barely progressive overall structure, if it is progressive at all." And, he suggests that "a system of personal retirement accounts plus a means-tested safety net would serve the 'social insurance' function better than the Social Security status quo according to liberal standards." To read the study, click here>>
Bush's proposed SS plan is in use in several countries around the world!
Although the Bush proposals regarding Private Retirement Accounts were rejected by Congress, about 30 countries have reformed their pay-as-you-go Social Security systems with personal retirement accounts (PRAs). As a result of these changes, Britain, Chile and many others have virtually no unfunded liability. To read more about this study by the National Center for Policy Analysis, click here>>
Is it possible for someone to pay more in taxes than his income? Yes - if that person is a senior citizen. (3/15/05)
Some senior citizens are subject to two special taxes which, in combination, produce marginal tax rates that can EXCEED income. On the other hand, many Social Security recipients pay very little tax on their benefits. If we were to tax Social Security benefits in the same simple manner used for most pension income, greater equity would be achieved AND SOCIAL SECURITY INSOLVENCY COULD BE CUT BY AS MUCH AS 24%. To read more, click here. (And if you don't believe the calculation, show it to your CPA!)
We need a wide-ranging debate, says Social Security Expert(2/10/05)
Eugene Steuerle, a senior fellow at the Urban Institute and former deputy assistant Treasury Secretary, says that the Social Security debate should not be limited to Personal Retirement Accounts. In an op-ed in USA Today (2/10/05) Dr. Steuerle describes a system that is outdated and in need of comprehensive reform:
"Yes, we should debate these [PRA] accounts and their funding. But the real problem is that Social Security was designed decades ago for the needs of a different age."
Steuerle notes that single workers and 2-earner couples get short shrift from the system, compared to 1-earner married couples. Other problem areas include the failure of Social Security to adequately deal with changing life expectancies, poverty, and rising disability costs. Read this excellent article by clicking here>>.
Is Social Security Insurance? Get real!
Defenders of the Social Security status quo like to say that we should not compare the program to private pensions. Instead, they say, Social Security is "insurance" to cover the misfortunes of life. If you are middle class or affluent, you shouldn't expect too much from Social Security - after all, you don't need it. But is the insurance analogy logical? Jon Hall, a guest columnist for the Kansas City Star, has prepared an excellent analysis of this issue. Click here>>.
Have SS actuary's underestimated life-span increases?(12/31/04)
The New York Times reports that a leading demographer, Prof. Samuel Preston of the University of Pennsylvania, believes that the Social Security Administration has greatly underestimated likely increases in longevity rates. If he is right, the fiscal problems of Social Security will be far worse than now predicted. Read more by clicking here>>.
Would Chile's Social Security program work in U.S.?
Jose Pinera, former secretary of labor and social security in Chile, discusses Chile's successful reform program with Colin McNickle, editor with the Tribune-Review. To read article, click here>>.
Sales tax to replace Social Security PR tax?
Economist Laurence J. Kotlikoff proposes to use a federal retail sales tax to replace the Social Security payroll tax. In addition, his plan would eliminate further Social Security benefit accruals. Only benefits owed to current retirees and current workers would be paid (using the retail sales tax receipts). In addition, he proposes that a personal retirement account system be established for those now entering the work force.
The new personal retirement accounts would be split 50-50 between spouses, and invested in a single, global, market-weighted indes fund. All workers would get the same fully diversified portfolio and rate of return. The government would guarantee against economic loss (so individuals could only gain on their invested funds).It's an interesting proposal.
Read more about it in the WashingtonPost.com.
Private Retirement Accounts:Would administration costs outweigh benefits?
During the run up to the 2004 presidential election the Kerry campaign cited a study claiming that private retirement account administration costs would "eat 20% of the benefits" in an account held by an average worker. (Click here to see AP report.) Theoretically, this study by Austan Goolsbee, University of Chicago Business Professor, makes sense - but the assumptions are ridiculous. The professor assumes that all workers would opt for privately-managed accounts when their balances reach $5,000. No worker would have to do that, and many or most workers probably would not do that. Workers could be given the option of keeping their funds in something similar to the Thrift Savings Plan used by federal workers since 1986. In the Thrift Plan, annual overhead charges average just one tenth of one percent (0.1%). For a brief and balanced overview of this issue, refer to an excerpt from the book, How Social Security Picks Your Pocket, by Director Joe Fried. The excerpt is found by clicking here.
The impact of taxes on retirees ... it's disgraceful
The taxation of Social Security benefits is complex and inequitable. Many retirees pay a double tax on their benefits, and are subject to harsh penalties for working while collecting those benefits. This can result in effective marginal tax rates exceeding 100%! In How Social Security Picks Your Pocket, author Joe Fried (PPTO Director) illustrates and quantifies this outrageous problem. Read More>>
Ticket to Shirk?
The Ticket to Work program, designed to encourage the disabled to return to work, is off to a slow start. Maybe that’s a good thing. Read more>>
Is it time for Personal Retirement Accounts?
If properly designed, a system of optional Personal Retirement Accounts (PRAs) could give almost all retirees significantly better retirement benefits. Let's take a close look at one of the proposals included in the report of the bi-partisan President's Commission to Strengthen Social Security. Read more>>
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