Heal Them or Harm Them? Fate of Social Security, Medicare Rests in Lawmakers’ Hands

 

Alarming headlines this month are raising fears that Social Security and Medicare are going bankrupt – which is exactly what lawmakers clamoring to slash benefits want Americans to believe.

Signing the Social Security Act into law in August 1935, President Franklin Roosevelt said, “We can never insure 100 percent of the population against 100 percent of the hazards and vicissitudes of life, but we have tried to frame a law which will give some measure of protection to the average citizen and to his family against the loss of a job and against poverty-ridden old age… If the Senate and the House of Representatives in this long and arduous session had done nothing more than pass this bill, the session would be regarded as historic for all time.”

Annual reports from the programs’ trustees predict that Social Security’s trust fund will dry up in 16 years, and Medicare’s in half that time.

With 10,000 baby boomers reaching retirement age every day, no one argues that the system isn’t in trouble. The dispute is about how – or if – to fix and strengthen it.

Democrats have long fought for repairs that would save the programs and could even expand benefits. Republicans want to cut benefits and raise the age of eligibility, among other restrictions.

“It’s day and night – the difference between helping working people or hurting them,” International President Lonnie R. Stephenson said. “One side is fighting to protect the benefits you’ve spent your entire work lives earning. The other wants to cripple Social Security and Medicare and put your retirement security in the hands of the same reckless financiers that collapsed the economy 10 years ago.”

The problem with the trustees’ annual forecasts isn’t the reports themselves, which are comprehensive. It’s how the news media boil them down, with stories that hype dire numbers and underplay what many economists believe are virtually foolproof ways to right the ship.

“It happens like clockwork,” Reuters retirement columnist Mark Miller wrote, and the response to the 2018 trustees’ reports was no exception: “The reports yielded wildly inaccurate news stories – amplified by the social media echo chamber – suggesting that Medicare and Social Security are headed for insolvency in the not-too-distant future – meaning that they would not be able to pay out the money owed for benefits.”

In fact, the annual projections have always fluctuated. In 2009, Medicare’s trust fund wasn’t supposed to last past 2017. In the mid-1990s, Social Security’s reserves were expected to be depleted by 2029; now it’s 2034, an estimate that hasn’t changed in four years.

Even if Congress did nothing to fix the programs, the trustees’ reports show that Social Security would have sufficient funds to continue paying 77 percent of benefits after 2034 and Medicare could still cover more than 90 percent of benefits if, as predicted, its trust fund is depleted by 2026.

In the 115th Congress alone, Democrats have introduced more than a dozen bills to repair and expand Social Security,

Gradually raising the Social Security payroll tax by one percentage point would go a long way toward balancing its books, as would raising or eliminating the cap on taxed earnings. The cap is currently $128,400, sparing more richly compensated workers from paying anything additional into the system.

“New payroll tax revenue could close the gap by anywhere from 28 percent to 90 percent, depending on the cap’s height and to what extent the new revenue is used to boost payouts to high-income households,” Miller wrote in a previous Reuters column.

Republicans are unrelenting in calls to raise the retirement age and cuts benefits, cherry-picking the trustees’ reports to justify those demands. They insist on referring to Social Security and Medicare as “entitlements” rather than social insurance programs that wouldn’t exist without the taxes that come from American workers’ paychecks.

 

Thirty years after Social Security was enacted, President Lyndon Johnson signed the 1965 Medicare bill, which now covers 44 million Americans in retirement.

Even the trustees – all Trump appointees – couldn’t ignore that GOP policies have undermined the programs’ solvency and that the 2017 tax cuts will accelerate the downhill slide.

“The trustees made crystal clear that policies of congressional Republicans and the Trump White House have damaged the financial prospects of both programs,” wrote Los Angeles Times business columnist Michael Hiltzik. While “the GOP continually claims that it’s imperative to make both programs healthier, the truth is that Republicans are doing their best to cut the legs out from under both.”

The same four trustees signed both reports. Their conclusions should carry considerable weight given that three of them are members of the Trump Cabinet – Treasury Secretary Steven Mnuchin, Health and Human Services Secretary Alex Azar and Labor Secretary Alex Acosta. The fourth trustee, Nancy Berryhill, was appointed by President Trump in January 2017 to serve as acting commissioner of the Social Security Administration, a title she continues to use despite her term expiring last November.

Harmful policies and tax cuts are imperiling more than future benefits. Social Security already faces a well-documented customer service crisis, and its administrative budget can’t afford to lose another dime, stakeholders say.

“Hours-long lines stretching out the door have become a common feature of field offices,” Nancy Altman of Social Security Works wrote for Slate.com. “Hold times on SSA’s 1-800 hotline have increased to the point that nearly half of callers hang up in frustration. Importantly, these are services for which the American people have already paid.”

It simply can’t be run any more efficiently, Altman said. “Out of every dollar spent, just seven-tenths of a penny goes to administration. That is strikingly more efficient than counterpart private sector programs. Moreover, Social Security’s administrative costs, like its benefits, do not add even a penny to the deficit.”

Medicare faces a brutal beating. House Republicans released a budget plan June 19 that would drain $537 billion from the program over the next decade. Medicaid would take an even bigger hit. Together the sweeping cuts would total $1.5 trillion -- the widely cited projection of what GOP tax cuts will add to the federal deficit.

It’s straight from the “starve the beast” playbook, said Bruce Bartlett, who served as a policy advisor to President Ronald Reagan. In a cautionary Washington Post column before the GOP tax cuts were enacted last year, he said conservatives “want to force a major overall spending cut that would be a political non-starter without first passing a tax cut that creates a deficit so large, something must be done about it.”

Exploiting the epic budget deficit they created, Republicans were calling for draconian cuts to the safety net while the ink on the tax bill was still drying. Their ceaseless attacks on the Affordable Care Act, aka Obamacare, have also done grave damage, according to the Medicare report.

“The Medicare trustees note that the Affordable Care Act resulted in ‘significantly fewer uninsured’ Americans treated at hospitals, but that trend now is likely to be reversed,” Hiltzik said, chastising the media in his LA Times column for “glaring oversight” in covering the reports.

For instance, little was said about Republicans in Congress eliminating the Independent Payment Advisory Board that the ACA established to help extend Medicare’s solvency, slow its cost growth and improve quality of care. Shutting it down “leaves no mechanism in place to achieve those ends,” Hiltzik said, summarizing the report’s own findings.

U.S. Rep. Sander Levin of Michigan condemned the ACA cuts in a column for The Hill and denounced Speaker Paul Ryan’s “dangerously ideological and counterproductive” plans to go further – “to end Medicare as we know it by instituting a voucher program.”

“The Affordable Care Act showed us that Medicare can be strengthened without cutting benefits – through commonsense efforts to increase revenues and reduce overpayments, while also expanding innovative payment models that reward value in care, rather than volume,” Levin wrote June 13. “In fact, thanks to the changes made by the ACA, the solvency of the Hospital Insurance Trust Fund was extended by more than a decade, while seniors’ benefits were strengthened, not cut.

Not all media reports missed the mark. Under the headline, “Congress Can Save Social Security for Millennials, It Just Won’t,” Vice.com explained that “grim predictions are nothing new.”

“Privatization advocates have used them to justify their agendas for decades,” Vice reported. “But policy wonks actually have solid ideas for how to address Social Security’s financial woes, and there’s some understanding on how to address Medicare’s shortfall as well. Congress has just declined to act on them—for decades.”

A Philadelphia Inquirer editorial June 14 bluntly warned of a day when many more Americans will be “old and sick and poor” if nothing is done:

“The long cold winter of retirement will hit us all. How long and how cold depends on who takes leadership now on fixing these critical systems.”