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From the category archives: Budget

The Economic Crisis Candidates Continue to Ignore

The Economic Policy Institute’s “The State of American Retirement” combined with the National Institute on Retirement Security’s new report on women and retirement paint a very clear picture of a nation on the brink of an economic crisis that will devastate millions of average American families, if Washington continues to turn a blind eye.

The median family between the ages of 32 and 61 has only $5,000 saved in a retirement account, while the top 1 percent of families has a million dollars or more. For many groups—lower-income, black, Hispanic, non-college-educated, and unmarried—the typical working-age family has no savings at all in these accounts....The State of American Retirement.

“Our retirement system used to reduce inequality, but since the shift to 401(k)s it has only served to magnify it. These accounts are accidents of history that were never designed to replace pensions, and it should come as no surprise that they have not worked for the majority of people.” ...Monique Morrissey, EPI Economist

The numbers are stark:

  • Nearly half of all working-age families have zero retirement savings.
  • Almost nine in 10 families in the top income fifth have savings in retirement accounts, compared to fewer than one in 10 families in the bottom income fifth.
  • Only 41 percent of black families and 26 percent of Hispanic families have retirement account savings, compared with 65 percent of white non-Hispanic families.
  • Only married couples are more likely than not to have retirement account savings.

News that the income inequality hindering American workers now is also carrying over to their retirement is alarming for future generations who are taking an economic hit at every stage of life.  For women, the retirement picture is even worse. 

“A new analysis finds that women are 80% likely than men to be impoverished in retirement. The National Institute on Retirement Security (NIRS) finds that across all age groups, women have substantially less income in retirement than men. For women age 65 and older, the data indicate that their typical income is 25 percent lower than men. As men and women age, men’s income advantage widens to 44 percent by age 80 and older. Consequently, women were 80 percent more likely than men to be impoverished at age 65 and older, while women age 75 to 79 were three times more likely to fall below the poverty level as compared to their male counterparts.”... National Institute on Retirement Security

Just as we’ve seen from climate change deniers, many Republican politicians won’t even acknowledge the retirement crisis exists because improving the nation’s most successful federal retirement programs is anathema to their misguided belief that Wall Street should be handling your savings and for-profit insurance companies managing your health. Instead of supporting proposals to improve the backbone of America’s retirement system, Social Security and Medicare, conservatives continue their campaign to privatize and cut. 

There are legislative proposals which would improve Americans’ retirement picture but they are languishing in the GOP controlled Congress.  You can see many of these proposals on our Legislative tracker.  We also continue to advocate for meaning changes impacting retirement security for women.  Please take a moment and see those details on our Eleanor’s Hope initiative website. 

GOP Plans for Medicare? All Slash No Strengthen

The House Ways & Means Subcommittee on Health held a hearing entitled "Preserving and Strengthening Medicare."  Unfortunately, as the ranking member Rep. Jim McDermott (D-WA) made clear, this hearing actually had virtually nothing to do with preserving and strengthening Medicare:

“This is the first Health Subcommittee hearing of the year, and it could have been an opportunity to have a fresh, constructive conversation about Medicare. Unfortunately, this won’t be the case. It looks like we should expect more of the same from my Republican colleagues this morning – bad ideas repeated incessantly in the hope that the American people eventually fall for them.

The core proposal that my Republican colleagues have offered – to end Medicare as we know it – will have devastating effects on seniors. It will shift costs onto beneficiaries, create more losers than winners, and lead to a death spiral in traditional Medicare.

We all know this.”

NCPSSM President/CEO, Max Richtman, submitted testimony to the Committee and reacted to the day’s proceedings:

“Unfortunately, today’s Congressional hearing on ‘Preserving and Strengthening Medicare’ offered no new ideas and was instead an Orwellian political exercise in which politicians say preserve when they actually mean privatize, and strengthen when they mean slash. 

Republicans in the House envision a future in which millions of seniors will lose their guaranteed Medicare benefits in favor of a privatized CouponCare system in which they receive a government coupon to try and buy private insurance. Millions of seniors in Medicaid will lose their benefits due to block-granting to states without providing the resources to pay for it.  The repeal of the Affordable Care Act will leave tens of millions without insurance and strip benefits from seniors in Medicare.  

The Republican leadership has offered no plans to improve benefits in Medicare or make reforms to reign in the skyrocketing price of drugs and healthcare costs system wide.  Instead, the GOP vision for seniors in Medicare is they must just do more with less. Stagnant wages are grinding away at the middle class’s ability to save for retirement.  Many employers have significantly scaled back or eliminated the traditional retirement benefits offered to their employees.  As a result, current and future retirees simply cannot afford proposals to cut benefits, raise the eligibility age or privatize the program.”...Max Richtman, NCPSSM President/CEO

While the House Ways and Means Health Subcommittee promoted destroying traditional Medicare in favor of a fully privatized system during today’s Congressional hearing, their GOP colleagues are moving a budget through Congress that would make that plan reality.

The House budget would cut Social Security and Medicare by $463 billion over 10 years, while cutting Medicaid and other health programs by $1.028 trillion, not including the Affordable Care Act.  The GOP budget protects the wealthiest Americans and big corporations from any tax increases while imposing massive spending cuts on average Americans and their families.

Max Richtman’s full testimony as submitted to the House Ways and Means Health Subcommittee is here.  

A Tale of Two Medicares

CMS has announced it will raise rates for insurance companies offering privatized Medicare Advantage, rather than trimming back the billions of federal overpayments as required in the Affordable Care Act.  Wall Street and the insurance industry loved the news that taxpayers will continue to overpay Medicare Advantage plans:

“WellCare Health Plans Inc. jumped as much as 12 percent on Monday after the government proposed raising payments next year for private insurers that provide Medicare coverage.Shares in Humana rose 2.6 percent. Centene Corp. and Molina Healthcare Inc. also rose Monday following the CMS’s proposals, adding 4.2 percent and 6.2 percent respectively.”

The health insurance industry’s massive advertising and lobbying campaign to keep their government subsidies has become an annual ritual here in Washington – one that’s more predictable than the timing of the cherry blossoms. To head off any chance that CMS might reduce the massive federal overpayments, as required by the Affordable Care Act, the multi-billion dollar insurance industry floods the airways and hallways of Congress with threats to cut seniors’ MA benefits unless their overpayments are protected.  Clearly, that lobbying works. 

For the second year in a row, CMS has proposed a rate increase. This year’s 1.35%  rate hike, when combined with other industry requested changes, will lead to a 3.55% increase in revenue for America’s health insurance industry.  Last year, CMS initially proposed a .95% rate cut which was reversed after AHIP’s lobbying blitz turned it into a 1.25% increase.  In 2015, Medicare paid $8 billion more to provide coverage for seniors in Medicare Advantage than for traditional Medicare. That will now continue.

The Washington Post’s analysis last year, still fits today:

“Alas, since its origins in the early ’80s, MA has proven no more immune to perverse incentives and system-gaming than any of the government’s other health programs.

First, insurers cherry-picked healthier customers, who are less costly, and hence more profitable, to treat. Congress responded with new payment formulas to reward companies for accepting relatively sick customers. But this led to rampant “upcoding,” whereby MA plans find and report as many illnesses per enrollee as they can plausibly document.

Last fall, {2014} the Department of Health and Human Services released a comprehensive analysis showing that MA costs grew faster than they would have under fee-for-service between 2004 and 2013 — and that only upcoding, not patient demographics or other neutral factors, could explain this.”

Family physician and Senior Health Policy Fellow for Physicians for a National Health Program, Dr. Don McCanne says:

“Ensuring success of the MA plans is part of the plot to eventually privatize Medicare - converting it into a premium support system (vouchers) for a market of private plans that will displace the traditional Medicare program. The value of the voucher equivalents will erode with time, shifting ever more of the costs to the Medicare beneficiaries. It will be disastrous.

They (private MA plans) have been profitable only because they have continued to be successful in enrolling healthier, less costly patients while at the same time receiving overpayments from the government.”

So how did we get here?

Medicare Advantage was created by the Bush Administration to privatize Medicare. Prior to the ACA, the federal government paid MA plans up to 14 percent more than traditional Medicare for identical services, costing taxpayers about $1,000 extra per beneficiary.  MA plans attract younger and healthier customers by offering benefits not included under traditional Medicare, such as gym memberships.  That competitive and financial advantage has paid off, as MA enrollment continues to grow.  Seniors in private Medicare say they like their plans, as do people enrolled in traditional Medicare. 

The real irony in this debate is that while traditional Medicare has been repeatedly targeted in Congress for cuts, $8 billion in overpayments to the insurance industry remain protected. Congressional conservatives claim America can’t afford Medicare yet many of these same politicians defend sending billions of Medicare dollars straight to the insurance industry, in spite of growing concerns that insurers are gaming the system:

  • Independent analysis by the National Bureau of Economic Research shows private plans are “upcoding” or manipulating patient diagnoses in order to game payment systems and generating billions of dollars annually.  
  • Risk scores have risen 9 percent faster in Medicare Advantage, on average, than in traditional Medicare for comparable beneficiaries, MedPAC estimates.  This leads to excessive payments to Medicare Advantage plans. 
  • Last year, CMS took 35 enforcement actions against MA and Part D sponsors for a range of issues, including limited provider access and charges for higher than allowed out-of-pocket costs. Among the enforcement actions last year were 25 fines in the six figures. This year, CMS has fined $1 million to Aetna for Part D directories that erroneously listed 7,000 pharmacies as being in-network. 
  • GAO investigators found Medicare officials rarely enforce rules for private insurance plans intended to make sure beneficiaries will be able to see a doctor when they need care. In Connecticut, UnitedHealthcare, the nation’s largest health insurance company, dropped more than a thousand of health care providers and doctors leaving patients desperately scrambling for care. 
  • Brown University study shows that once medical care becomes costly for seniors in Medicare Advantage and the coverage no longer meets their needs for acute care, beneficiaries are leaving private MA plans to return to traditional Medicare. 

As we wrote here last year,

“Private Medicare Advantage plans continue to see growth as they promise gym-memberships, limited optometric coverage or zero premium plans.  However, as predicted by many healthcare experts and indicated in the Brown study, seniors find that once they actually need help with more costly care, MA plans aren’t providing the coverage they need. 

Ultimately, this means that younger and healthier seniors are being lured into private insurers’ plans only to have to switch to traditional Medicare once they need coverage for more serious health issues (and isn’t that why we have health insurance in the first place – to cover when we get sick, not when we’re healthy?).  Meanwhile, private insurance companies continue to reap the benefits of annual federal subsidies to provide this limited coverage for healthier seniors – which are tax dollars that could have been used in traditional Medicare to serve all beneficiaries.”

Modern Healthcare reports Medicare Advantage has been a boon for health insurers, which views taxpayer-funded insurance as a ripe business opportunity.  Meanwhile, the GOP Congress is preparing another round of cuts to traditional Medicare in their upcoming 2017 Budget plan

The Truth about Social Security’s Math Really Does Matter – Even in Washington

We don’t usually share this is the kind of “inside baseball” Washington story here but today’s a little different...

For months, conservative think-tankers who undermine the value of Social Security, deny the existence of a national retirement crisis and the need to boost benefits have been banging their drum for benefit cuts especially hard.  Why?  Because a scarcely reported CBO report on Social Security replacement rates (now you see why we don’t usually share these kind of stories) claimed Americans received more in benefits than previously believed or reported by Social Security actuaries.

For those who make a living advocating for benefits cuts, like the American Enterprise Institute’s Andrew Biggs, the CBO report was a golden goose.  His columns in the Washington Post, Wall Street Journal, Forbes and more tweets than we can count proclaimed the retirement crisis is phony and not only are Americans receiving enough Social Security benefits, some receive more than they need.

Now, anyone who actually works with beneficiaries knows his claim doesn’t reflect the real-world.  Today apparently, the CBO agrees.  They’ve issued a statement that their December numbers were wrong...significantly so.  

“After questions were raised by outside analysts, we identified some errors in one part of our report, CBO’s 2015 Long-Term Projections for Social Security: Additional Information, which was released on December 16, 2015.

The errors occurred in CBO’s calculations of replacement rates—the ratio of Social Security recipients’ benefits to their past earnings. The estimates reported in December inadvertently included years with earnings below those intended amounts.

The corrected version shows substantially lower mean initial replacement rates for retired and disabled workers. For example, the corrected rate for retired workers born in the 1940s is 43 percent; the value CBO reported in December was 60 percent.”

Los Angeles Times columnist, Michael Hiltzik, has been covering this story including some conversations with 

AEI’s Biggs: 

“Via Twitter, he has now retracted the Forbes piece. He says retractions of the others are coming. [Update: Biggs says by emailthat he has sent a retraction to the Wall Street Journal. His Washington Post piece, however, didn't cite the original CBO figures directly.]

 Biggs told me by email that the CBO's recalculation "doesn't radically alter the way I view the adequacy of Social Security benefits or retirement saving." That's because he had argued for a different formula that he says still shows replacement rates close to the CBO's original figures.”

In other words, the facts won’t alter conservatives’ quest to cut benefits and if the formula being used doesn’t get the results they want, the CBO should just change the formula to fit the anti-Social Security crowd’s political frame. 

Welcome to Washington. 

President Proposes Allowing Medicare to Negotiate for Lower Rx Drug Prices

“It’s long past time for Congress to acknowledge the hard truth that the sky-rocketing cost of prescription drugs is hurting average Americans and our federal budget. Medicare spends billions providing Part D drug coverage each year while beneficiaries including seniors, the disabled and their families also face rising out-of-pocket costs and higher premiums. All the while, drug makers continue to reap the profits of their price gouging. In his budget, President Obama has again proposed lifting the ban preventing Medicare from negotiating prices with the drug companies. Big Pharma has lobbied hard to keep the ban in place but seniors expect, this time, Congress will do the right thing and finally allow Medicare to negotiate for fair prices.”...Max Richtman, NCPSSM President/CEO

Among the other budget provisions beneficial to seniors include:

  • closing the Part D donut hole two years earlier
  • additional funding for in-home services
  • reforms for overpayments going to private insurers in Medicare Advantage
  • a 7.44% increase in administrative funding for the Social Security Administration

However, the President’s budget was not all good news.  Once again, the budget proposes shifting even more healthcare costs to seniors by extending Medicare means-testing to the middle class and increasing out-of-pocket costs such as the home health care copayment and the Part B deductible. 

“The average Medicare beneficiary already spends nearly $4,800 per year in out-of-pocket health care costs with half of all people on Medicare having incomes of less than $24,150. People in Medicare simply can’t afford increased cost-sharing year-after-year.  What’s especially worrisome are efforts to portray expanding means-testing in Medicare as impacting only ‘high-income seniors.’  While that may be good political rhetoric the truth is, if passed, further means testing will actually target middle-class individuals”...Max Richtman, NCPSSM President/CEO 

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