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Celebrating Older Americans Month

Real Retirement Security Solutions or More of the Same?

It’s easy to become cynical if watching Washington work (or not work, as is often the case) is your job.  So forgive us for not popping a cork in celebration of the Bipartisan Policy Center’s new Personal Savings Initiative.  Don’t get us wrong, it’s the right idea for the right time.  We’ve been saying for a long time that our nation is facing a retirement crisis far greater than the fiscal Armageddon promised by conservatives if we refused to take their advice to slash middle-class benefits. As NCPSSM President/CEO, Max Richtman, has written before:

“Three decades of stagnant middle-class incomes, disappearing pensions, limited ability to start and maintain personal savings, and the failure of the 401K experiment lay the foundation for a retirement crisis that could further threaten millions of older Americans and their families.

According to the New School for Social Research, 75 percent of Americans nearing retirement have less than $30,000 in their retirement accounts. Almost half of middle-class workers will be poor or near poor in retirement and living on a $5-per-day food budget. The National Institute for Retirement Security reports four out of five working families have retirement savings less than one times their annual income and 45 percent do not have any retirement assets at all.

While Washington has been obsessed with the federal budget deficit, there's been virtually no Congressional conversation about the $6.8 trillion retirement savings deficit. What will happen to the millions of American families who are ill-prepared for retirement? There's almost no conversation about how to prevent this retirement crisis from impoverishing our families or about how younger generations will handle parents and grandparents who cannot support themselves. In spite of this current and growing retirement crisis, Social Security and Medicare, programs vital to a basic secure retirement, continue to be the favored targets for some in Congress who are determined to use benefit cuts to reduce the federal deficit.”

While the Pete Peterson funded Bipartisan Policy Center’s stated goal is to address personal savings, Social Security benefits received an inordinate amount of attention in today’s kickoff event.  Not so surprising when you consider that this group is chaired by former Democratic Senator and fiscal hawk Kent Conrad and Wall Streeter/former Bush appointee, Jim Lockhart.  The group is dominated by conservatives and center right former politicians and staffers, Republican political appointees, industry reps and think-tankers.  As was the case with the failed Bowles-Simpson Fiscal Commission, there are a few members who break that mold and will no doubt find themselves swimming against the tide once the discussion turns to Social Security.  Which the Chairmen made very clear today, it will, since “everything is on the table.”

Sound familiar?  It should since that’s Washington-speak for get ready for middle-class benefit cuts -- but this time they’ll be wrapped in a package to increase personal savings and strengthen retirement security?  It’s no wonder we’re cynical. 

Negotiating for Lower Drug Costs in Medicare Part D

USA Today has a must-read editorial supporting our position that Medicare should be allowed to negotiate with drug-makers for lower prescription drugs, just as the Veterans Affairs department currently does.

“Part D already costs about $80 billion a year and is on track to double by 2022 as benefits improve and Baby Boomers retire. For two reasons, a significant chunk of that money is wasted on overpayments to drug companies: When Part D began, millions of patients were shifted over from Medicaid, the state-federal program for low-income people that gets far lower drug prices than Medicare. Suddenly, the cost of providing drugs to the same people shot up. Congress barred Medicare from negotiating the way Medicaid and the Department of Veterans Affairs do with drug makers to get lower prices. Instead, lawmakers insisted the job be done by private insurance companies.”

The fact that Medicare is forbidden in the law that created Medicare Part D to negotiate lower prices is no accident.  The drug lobby worked hard to ensure Medicare wouldn’t be allowed to cut into the profits which would flow to big Pharma thanks to millions of new customers delivered to them by Part D.  Even some Republican House members (this was a GOP sponsored bill), including Rep. Walter Jones from North Carolina and Rep. Dan Burton from Indiana, were aghast at the whole process:

"The pharmaceutical lobbyists wrote the bill," says Jones. "The bill was over 1,000 pages. And it got to the members of the House that morning, and we voted for it at about 3 a.m. in the morning," remembers Jones.

Why did the vote finally take place at 3 a.m.?

"Well, I think a lot of the shenanigans that were going on that night, they didn't want on national television in primetime," according to Burton.

Unfortunately not much has changed since 2003.  Roll Call has this wrap-up of what drug companies spent during the last quarter alone on lobbying Congress:

Five pharmaceutical companies have reported million-dollar increases in their spending on lobbying the federal government during the first quarter of 2014. Pfizer Inc., Novartis, Johnson & Johnson Services, Bayer Corporation, and Merck & Company have each boosted their lobbying of the executive and legislative branches.

Here are the top pharmaceutical spenders in the first quarter of 2014:

Pharmaceutical Research & Manufacturers (PhRMA) $4,680,000 – up from $4,050,000 in 2013 Q4.

Pfizer Inc. $3,190,000 – up from $2,090,000.

Novartis $2,580,000 – up from $920,000.

Amgen USA Inc. $2,560,000 – up from $2,330,000.

Eli Lilly & Co. $2,086,000 – down from $2,430,000.

Johnson & Johnson Services $2,110,000 – up from $860,000.

Bayer – $2,040,000, up from $1,000,000.

Merck & Co. $2,000,000 – up from $820,000

These are the same companies which claim any attempts to rein in their overpayments in Medicare will kill their research and development of new drugs:

“The drug companies say they must impose higher prices in the U.S. to pay for research that enables them to innovate and develop new drugs that save our lives. But that’s not true. Half of the scientifically innovative drugs approved in the U.S. from 1998 to 2007 resulted from research at universities and biotech firms, not big drug companies, research shows. And despite their rhetoric, drug companies spend 19 times more on marketing than on research and development.”  Healthcare for America Now

Meanwhile, in their opposing USA Today editorial big Pharma also argues that people like Part D so it shouldn’t be changed and, by the way, prescription drugs help people stay healthy.

“Surveys show 90% or more of Part D enrollees are satisfied with their coverage and say it works well. The use of medicines under Part D also helps to reduce spending on other health care services in Medicare, a fact that was recently acknowledged by CBO.”

Of course, access to prescription drugs helps people stay healthy but what does that have to do with whether or not Medicare should be forced to overpay for those drugs? Naturally, seniors like Part D.  Why wouldn’t they when before its passage they had absolutely no drug coverage?  That doesn’t mean Americans support paying more than they, or the government, should in order to pad drug makers’ pockets.  

New Medicare Advantage Rates Preserve Insurance Industry Subsidies...Again

For the second year in a row, America’s massive health insurance industry lobby launched a Washington lobbying and advertising blitz hoping to scare seniors into believing they’ll lose their Medicare and politicians will lose their seats if the industry’s government overpayments aren’t protected.  Mission accomplished. Rather than trimming rates, the Obama administration raised them:

“Private Medicare plans would see a 0.4 percent boost in their payment rates for 2015 under a final rate announcement made by Centers for Medicare and Medicaid Services officials Monday.

Officials with Medicare said the better-than-expected news for insurers came about in part as a result of healthier enrollees signed up for both Medicare Advantage and traditional fee-for-service plans, which means less of a cost burden on the health insurance system for the aged.” Congressional Quarterly

When CMS says “in part” what they aren’t mentioning is the part where the administration basically caved (for the second year in a row) to the insurance industry’s million dollar lobbying blitz to keep its billions of dollars of federal overpayments intact.   

“Today’s announcement by CMS to, once again, preserve government overpayments to private insurers in Medicare Advantage is bad policy and bad economics for the Medicare program. These subsidies were supposed to be gradually trimmed in order to expand benefits and improve the quality of care for all seniors in Medicare. However, each year the insurance lobby threatens to cancel coverage or charge more to seniors in MA plans rather than accept a reduction in their overpayments or reimbursement rates. 

For many years, private insurance companies have claimed they can provide better coverage to seniors at a lower cost.  The reality proves otherwise.  Since 2003, all seniors in Medicare (including those not even enrolled in Medicare Advantage) have paid higher premiums to help fund the billions in government overpayments to private Medicare Advantage insurance companies.  Over the years, as much as 14% more per beneficiary has been paid to MA plans than is paid to cover individuals enrolled in traditional Medicare.  It’s a wasteful federal boondoggle that was rightfully corrected by passage of the Affordable Care Act (ACA) in 2010.  Additionally, thanks to the ACA, growth in health care costs have been decreasing which means that reimbursement rates also go down.   As reimbursement rates have decreased, MA plan enrollment has increased. 

Let’s be clear, contrary to the health insurance industry’s massive lobbying campaign claims, Medicare doesn’t make the decision about cuts to seniors’ MA coverage, including increasing premiums or reducing access to doctors. That decision rests squarely in the board rooms of the nation’s private insurance industry, which is unwilling to give up a penny of their government giveaway in favor of continued threats of diminished coverage and higher premiums for seniors.

This annual drama with private insurers in Medicare proves, once again, that when private MA plans are unwilling to compete on a level playing field with traditional Medicare, seniors will ultimately pay the price. So much for providing better coverage for less.”...Max Richtman, NCPSSM President/CEO 

Boosting Social Security Benefits

By Max Richtman, NCPSSM President/CEO

Momentum continues to build inside and outside the halls of Congress to reverse course on the single-minded quest to cut Social Security benefits which has dominated our political discourse for years.  Not surprisingly, commentators who bought into the billion dollar Wall Street campaign to convince America we can’t afford a strong Social Security system are distressed at this turn of events.  Apocalyptic screeds with headlines like “Increasing Social Security Benefits Would Wreck Retirement Security” portray efforts to boost these earned benefits as partisan pandering. They conveniently ignore the fact that legislation increasing benefits would also extend Social Security’s long-term solvency by decades. The American people have never bought into the false choice that the only way to “save Social Security” is to slash benefits. Congress now has the opportunity to plot a course that addresses our looming retirement crisis while also strengthening Social Security’s long-term finances. 

There’s no doubt that, for years now, the steady drumbeat for cutting Social Security benefits has been so deafening as to drown out any discussion about what those cuts would actually mean for millions of Americans.  According to the 2014 Retirement Confidence Survey by the Employee Benefit Research Institute, a sizable percentage of workers report they have virtually no savings and investments. More than a third (36 percent) of retired civilian workers say they have less than $1,000 (up from 28 percent in 2013). A quarter of workers and 17 percent of retirees indicate that their current level of debt is higher than it was five years ago.  Social Security remains the only stable source of income for many families who are still rebuilding after our nation’s recent brush with economic collapse.  Yet rather than address this retirement crisis head-on, we have wasted years of political energy focused on cutting benefits to pay down the deficit rather than strengthening the Social Security program -- until now.

Legislation sponsored by Sen. Tom Harkin (D-IA) and Rep. Linda Sanchez (D-CA) would change the benefit calculation formula the Social Security Administration uses, so that benefits would gradually increase by approximately $70 per month. The Strengthening Social Security Act would also change the way the Social Security Administration calculates the Cost of Living Adjustment (COLA), ensuring that benefits more accurately reflect the increasing costs facing seniors today. Finally, this legislation would phase out the current payroll tax cap so that all Americans contribute to Social Security taxes fairly.  In 2014, workers who earn less than $117,000 contribute 6.2 percent of their wages in Social Security payroll taxes. Workers who earned above $117,000 pay no Social Security payroll taxes above that level, meaning the effective tax rate for Social Security actually decreases for America’s higher income workers. In fact, workers who earn over a $1 million per year only pay Social Security tax on one-tenth or less of their earnings which creates a gaping loophole for millionaires. The “Strengthen Social Security Act of 2013” gets rid of this loophole, boosts benefits, and would extend the solvency of Social Security by almost two additional decades, until 2049. 

The latest survey by the National Academy of Social Insurance shows large majorities of Americans, both Republicans and Democrats, agree on ways to strengthen Social Security, without cutting benefits. Of those polled, 74 percent of Republicans and 88 percent of Democrats agree that “it is critical to preserve Social Security even if it means increasing Social Security taxes paid by working Americans.”  Simply put, the American people are willing to pay more for Social Security.  They understand the growing impact these benefits have on individual lives and on our larger economy.

Families spend $816 billion in Social Security benefits nationwide each year.  When 57 million Americans use the purchasing power of those modest benefits, they are supporting local businesses and jobs, communities and state economies with billions of dollars they simply wouldn’t have without Social Security.  Boosting Social Security now makes sense not only for millions of Americans and their families but also for our economic recovery.  The waning anti-Social Security lobby will try to stop our progress, but the American people understand that boosting benefits is the right thing to do and now is the right time to do it, for millions of middle-class families and our nation’s economic recovery.  


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