Statement by Maya Rockeymoore, Ph.D.Chair of the Board of Directors
National Committee to Preserve Social Security and Medicare
10 G Street, N.E. Suite 600
Washington, DC 20002
Democratic National Committee
Platform Drafting Committee
July 27, 2012
On behalf of the millions of members and supporters of the National Committee to Preserve Social Security and Medicare, I want to thank Committee Chairman Ted Strickland and the members of the 2012 Democratic National Committee Platform Drafting Committee for inviting me to testify. Today, I will address our views about ensuring the Democratic Party clearly supports protecting, improving and strengthening Social Security, Medicare and Medicaid.
Democrats can be proud of their long list of landmark accomplishments which enable seniors to live independent and dignified lives. It is Democrats who pulled seniors out of poverty through the creation of Social Security, Medicare, Medicaid and the Older Americans Act.
During the 2012 campaign and beyond, the Democratic Party can honor the legacies of Presidents Franklin D. Roosevelt and Lyndon B. Johnson by standing up for seniors. Standing up for Social Security. And, standing up for Medicare and Medicaid.
Unfortunately, too many Washington politicians are uncompromising in their belief that middle class benefits should be cut to pay for tax loopholes for the richest two percent and large profitable corporations who move American jobs overseas. However, rather than fight this intransigence, some of the traditional allies of Social Security, Medicare and Medicaid have said that â€œeverything should be on the table.â€ Everything, including benefit cuts that would harm seniors, people with disabilities and children and have a disproportionately negative affect on women and communities of color.
Responding to the party of NO by being the party of MAYBE is not a winning formula and it won’t be persuasive for a majority of seniors. The polling is clear on that.
Voters of all ages and political persuasions don’t support cutting benefits to middle-class Americans who depend on Social Security and Medicare (now or in the future) to repair our ailing economy. There is no other issue that draws this level of nonpartisan support: 94 percent of Democrats, 82 percent of Independents and 64 percent of Republicans prefer raising taxes on the richest two percent of income earners rather than cutting benefits.
Democrats have a historic opportunity in this year’s election to win over middle class seniors by drawing a clear line in the sand in defense of the core American values of hard work, fairness and compassion embodied in our nation’s most successful programs. Towards that goal, the committee can reassure seniors that Democrats are fighting to protect their earned Social Security and Medicare benefits by using this testimony to draft the 2012 Democratic National Committee platform. Â In addition, we urge you to include language in the platform to defend and expand Medicaid for vulnerable seniors, people with disabilities and children who need health care and/or long-term services and supports.
Importance of Social Security
On August 14, 1935, President Franklin Delano Roosevelt signed into law the Social Security Act. His words on that day defined this historic legislation and have since guided its development.
â€œWe can never insure one hundred percent of the population against one hundred percent of the hazards and vicissitudes of life, but we have tried to frame a law which gives some measure of protection to the average citizen against the loss of a job and against poverty-ridden old age.â€
With those words, FDR made Social Security a bedrock promise for all Americansâ€”that after a lifetime of work, our nation would protect its seniors for all generations. Nearly 77 years later, Social Security continues to be one of America’s shining jewels. And, I want to emphasize, the achievement of Social Security is one of which Democrats can be justifiably proud.
Social Security is a program that touches the lives of virtually all Americans. About 156 million American workers and their employers contribute to the program. More than 55 million Americans receive Social Security benefits, including 38 million retirees, 6.3 million survivors of deceased workers and 10.6 million disabled workers.
Social Security is one of the federal government’s most successful and vitally important programs. The reason for this is that it works. Barely half of all workers have access to retirement plans at work, and millions reach retirement age without enough private savings to provide an adequate income in retirement. Without Social Security, over half of all older Americans would fall into poverty. More than many other federal programs, Social Security does exactly what it was designed to do by providing basic income protection to retired people, people with disabilities, as well as to widows, widowers, and the surviving children of deceased workers. It is important to point out that while essential to so many, Social Security benefits are modest. The average monthly benefit is $1,229, which yields an annual income of slightly less than $15,000.
Given the very modest nature of these benefits, we reject the view of the Republican nominee that Social Security’s modest but vital benefits should be cut directly or indirectly. Instead, we believe that Social Security’s finances should be strengthened by ensuring that the wealthiest among us, those who have benefited so much from the commonwealth should pay their fair share.
Looking forward, we all know that Social Security faces challenges, chiefly a modest gap in the program’s funding. How the Democratic Party handles these issues will determine whether Democrats continue to be seen as defenders and advocates for seniors and for Social Security.
Let’s Strengthen Both Program Financing and Adequacy
While some assert that the Social Security program is in a deep funding crisis, such characterizations are simply not true. Social Security is not bankrupt or in crisis. It has a Trust Fund with a surplus that totals $2.7 trillion now and is projected to grow to more than $3 trillion at its peak. It can pay all promised benefits in full through 2033. After that, the program will still be able to pay 75 percent of all benefits that are owed to beneficiaries in future years.
According to the Social Security Trustees, the program’s funding shortfall, known as an actuarial deficit, is 2.67 percent of taxable payroll. In our view, this shortfall is manageable and resolvable. There are a number of straightforward reforms, that, if adopted would increase Social Security’s funding by more than enough to close the actuarial deficit and pay for some important program improvements that would enhance Social Security’s ability to meet the needs of all Americans, but especially for women and women from communities of color.
Options for strengthening Social Security’s funding include:
- Eliminate the cap on Social Security payroll tax contributions. Currently, there is a cap of $110,100 on the amount of a worker’s wages that are subject to Social Security contributions. One option is to eliminate this cap and modestly adjust the benefit formula when determining benefits for higher-wage earners. By itself, this option would eliminate most of the current actuarial deficit.
- Gradual Increase in the Contribution Rate. Another option is to gradually increase the contribution rate. For example, the Social Security contribution rate could be increased by 1/20th of one percent over 20 years. Gradually phasing in the increase over a long period of time would significantly strengthen Social Security while only modestly affecting workers’ take-home pay.
- Treatment of Salary Reduction Plans. Currently, workers pay Social Security and Medicare taxes on their contributions to retirement accounts, such as 401(k)s, and other such plans, but do not pay these taxes on their contributions to flexible spending accounts. Adopting this change would provide a significant increase in contributions to Social Security as well as protecting workers’ benefits from erosion due to their Flexible Sending Account contributions.
Collectively, these proposals illustrate the kinds of options that are available to policy makers for strengthening the financial condition of Social Security. They are modest in their effect on individual workers, are consistent with the approaches that have been employed in the past, and show what can be done when Social Security is reformed for its own sake rather than as part of an austerity plan designed to shrink the size of government.
If adopted by the Platform Committee, these options would strengthen the Party’s role as the defender of Social Security and would enable the Party to avoid falling into the trap of supporting cuts to what are already very modest benefits or increases in the retirement age. These two benefit cuts are extremely unpopular with all Americans, irrespective of party affiliation.
Reject the Myth that There are Only Unpopular Options
By embracing the policy options we have described for strengthening the financial condition of the Social Security program, the party will avoid the trap presented by those who argue that only unpopular options are available for restoring solvency. By applying taxes more fairly to all workers, benefits do not have to be cut. That is why we oppose proposals that:
- Privatize Social Security for the benefit of Wall Street and that end the program’s guaranteed social insurance safety net.
- Cut Social Security benefits by increasing the retirement age to 69 or even higher.
- Cut Social Security benefit by reducing the COLAs through adoption of the â€œchainedâ€ Consumer Price Index (CPI).
- Cut benefits by altering the benefit formula.
Options for Strengthening Social Security’s Adequacy
While Social Security is vitally important to all Americans, it is especially critical to the financial security of women. There are a number of reasons why this is so. First, they live longer than men. They are less likely than men to have employer pensions. They are also less likely than men to have access to substantial personal retirement savings. These disparities are even starker for women and communities of color. For too many women, retirement is the culmination of an entire careerâ€”an entire lifetimeâ€”of pay and income inequality.
With regard to women from communities of color, improving Social Security is especially important because they depend on Social Security to a far greater degree than others. Women from communities of color realize greater pay and benefit disparities, and have very limited access to private pensions and retirement savings. As a result, they are far more dependent on Social Security. Recent data from the Social Security Administration shows that even with Social Security, over 26 percent of African American women and 21 percent of Hispanic women aged 75 and older were living in poverty.
To strengthen the adequacy of Social Security for all, but especially for women and communities of color, we have proposed, and we urge the Platform Committee to consider, the following policy options:
- Improving Survivor Benefits. Women living alone often are forced into poverty because of benefit reductions stemming from the death of a spouse. Widows from low-earning or wealth-depleted households are particularly at risk of poverty. Providing a widow or widower with 75 percent of the couple’s combined benefit is fair and reduces the likelihood of leaving the survivor in poverty. There would be a cap on the benefit so that the effect would be beneficial primarily to those with average lifetime earnings.
- Provide Social Security Credits for Caregivers. One of the principal reasons women have fewer assets and less income in retirement than do men is that they often interrupt their participation in the labor force to provide care to other family members, usually children and elderly parents or relatives. We recommend that, in calculating an individual’s Social Security benefits, caregivers be granted imputed earnings equal to 50 percent of that year’s average wage for up to as many as five years spent providing care to family members.
- Enhance the Special Minimum Benefits. This alternate method of calculating a worker’s retirement benefit is intended to provide a slightly higher benefit for those who have spent an entire career in low-wage employment. Unfortunately, it is obsolete and no longer works as intended. We propose to update the formula, increase the benefit to a maximum of 150 percent of poverty (about $1,300 in 2012), and make it more accessible to workers. Finally, we would allow credit toward the special minimum benefit of up to 10 caregiver years.
- Equalize Rules for Disabled Widows. Widows and surviving divorced spouses can qualify for benefits based on disability beginning at age 50. However, they are the only disabled persons whose benefits are reduced because they receive them prior to their full retirement age (FRA). The amount of this reduction is 28.5 percent of the deceased spouse’s FRA benefit. In contrast, the benefits paid to disabled workers are not reduced because they receive them prior to their FRA. Instead, they receive 100 percent of their FRA benefit. We propose to end this disparate treatment. In addition, we propose to allow disabled widows to qualify for benefits at any age. Moreover, the 7-year application period should also be eliminated.
- Benefit Equality for Working Widows. Under current law, the benefit for widows and surviving divorced spouses is capped at the amount the deceased husband would receive if he were still alive. If a husband retires before his FRA, his widow inherits his early retirement reduction. We believe the widow’s benefit should no longer be tethered to the reduction her deceased spouse elected to receive when he applied for retirement benefits. The only factor that should be relevant in determining a widow’s benefit should be the reduction that results from the surviving spouse’s own decisions about when to retire.
- Strengthening the COLA. A number of individuals, members of Congress and others have advocated using the chained consumer price index, or CPI, to determine cost-of-living adjustments (COLAs) for Social Security. This is nothing more than a cut in benefits masquerading as a technical change. In fact, the chained CPI will permanently cut COLAs for generations of retirees and the disabled, including those already on the rolls, making it harder and harder for them to make ends meet. Studies have shown that over time switching to the chained CPI will cut the average retiree’s benefit by almost $1,400. We agree that it is critical that the COLA be calculated based on an accurate formula. But if accuracy is really the goal, the law should be changed to use a COLA formula that more accurately factors in the large health care expenses most seniors face. Toward that end, we recommend using the Bureau of Labor Statistics’ CPI for the Elderly as a more accurate and appropriate measure of inflation when calculating COLAs for Social Security.
- Restoring Student Benefits. Currently, Social Security pays benefits to children until age 18, or 19 if they are still attending high school, if a parent has died, become disabled or retired. In the past, those benefits continued until age 22 if the child was a full-time student in a college or a vocational school. Congress ended post-secondary students’ benefits in 1981. Research has shown that recipients of these benefits were disproportionately children of parents in blue-collar jobs, African Americans, and with lower incomes than other college students. We recommend these benefits be reinstated for the children of disabled or deceased workers.
- Improving the Basic Benefit for All. After years of operating under a COLA which does not reflect the higher inflation attributable to health expenditures and the fact that seniors devote a higher percentage of their monthly spending to health care costs, seniors need an offsetting across-the-board benefit increase. This would also compensate seniors for the losses they have suffered during the recent financial crisis and recession. Women, especially who have worked a lifetime with low pay, are financially vulnerable in retirement because they are less likely to have private pensions or discretionary income that would allow for savings. We recommend a five percent increase in the basic benefit (approximately $55 per month).
- Equal Benefits for Same-Sex Married Couples and Partners. Gay and lesbian same-sex couples, whether married or not, are denied a host of benefits under state and federal law that are routinely provided to heterosexual married couples. We believe that the time has come to end this pernicious form of discrimination. The Social Security Act should be revised to provide benefits to domestic partners and members of same-sex marriages. Further, the children of these relationships should receive Social Security benefits under the same terms and conditions as children of heterosexual couples.
- Improving Benefits for Disabled Adult Children. One of the categories of childhood benefits that is payable on a worker’s record is benefits to an adult child who becomes disabled before reaching age 22. Generally, eligibility continues as long as the child remains disabled and is unmarried. Usually, marriage at any time ends entitlement to these benefits and remains a bar to re-entitlement unless the marriage has been annulled. The complicated rules are not well understood and should be repealed. In addition, we recommend that disabled children who live independently from their parents should have their benefit calculated without being limited by Social Security’s general â€œfamily maximumâ€ provision.
The Importance of Medicare
Landmark legislation establishing Medicare – one of our nation’s most popular and successful programs – was signed into law by President Lyndon Johnson 47 years ago on July 30, 1965. Before the enactment of Medicare, when only 50 percent of seniors had health insurance and 35 percent lived in poverty, it was hard to envision a future where older Americans were free from worry that even a minor illness or injury could bankrupt themselves and their children.
Today, nearly 50 million Americans — 41 million age 65 and above and 9 million disabled Americans receiving Social Security benefits — have earned the right to guaranteed health care benefits through the Medicare program regardless of their medical condition or income. Over 20 percent of Medicare beneficiaries are racial and ethnic minorities. Ten percent are African American, eight percent are Hispanic and five percent belong to another racial or ethnic group. By the time the last of the baby boomers reaches age 65, it is expected that close to 80 million people will be receiving Medicare benefits. Medicare, along with Social Security and Medicaid, is vital to economic and health security in retirement or when someone becomes disabled.
Medicare is very important for individuals with modest incomes and health problems. Over half of Medicare beneficiaries have annual incomes of less than $22,500 — a little over 200 percent of the federal poverty level — and savings of less than $53,000. Forty-five percent have three or more chronic conditions, and more than a quarter have a cognitive/mental impairment.
Having guaranteed health insurance coverage without regard to health status is particularly beneficial for communities of color. Two-thirds of African Americans and Hispanics have incomes below $22,500, and they make up a large share of beneficiaries who have incomes below 100 percent of the federal poverty level. In addition, people from communities of color have a higher risk than Whites for certain chronic conditions such as diabetes. As a result, communities of color have a disproportionate stake in Medicare’s future.
Improve and Strengthen Medicare
The Democratic Party should support improving and strengthening Medicare by building on provisions in the Affordable Care Act that have already resulted in extending the solvency of the Medicare Part A Trust Fund by an estimated eight years, lowering Part B out-of-pocket costs for beneficiaries, expanding coverage for preventive services and annual wellness visits, and helping with drug costs in the Part D prescription drug coverage gap known as the “”donut hole.””
The 2012 Medicare Trustees Report shows that passing health care reform legislation was important in extending the solvency of the Medicare Trust Fund. Medicare’s costs are projected to be substantially lower due to savings in the Affordable Care Act that come from reducing the rate of increase in provider payments; phasing out overpayments to Medicare Advantage plans; and reducing waste, fraud and abuse. The Trustees project that the Medicare Part A Hospital Insurance (HI) Trust Fund will be solvent until 2024 when payroll taxes alone are estimated to be sufficient to cover 87 percent of HI costs. Repealing the Affordable Care Act would move up the insolvency date to 2016. Costs for Part B are growing due to the aging population and rising health care costs, but these increases are lower than what was projected before enactment of the Affordable Care Act. Total health care spending in the United States has been growing at a faster rate than the economy for many years, regardless of whether it is funded through government or private sources, and it is projected to continue doing so in the future. However, Medicare continues to control costs better than private insurance. Fortunately, comprehensive reforms in the Affordable Care Act are expected to contain costs in the entire health care sector, including Medicare.
Additional savings and improvements in the quality of care will come as provisions of the Affordable Care Act are implemented. These provisions provide for better coordination of care, especially for the majority of Medicare beneficiaries who suffer from multiple chronic conditions; provide incentives to reduce hospital readmissions and infections; boost payments for certain services provided mainly by primary care physicians; and further tackle unnecessary Medicare spending due to fraud and abuse. Going beyond the Affordable Care Act, there are many benefit improvements we support including providing Medicare coverage for hearing aids, dental care and dentures, and routine vision and foot care, as well as establishing an annual catastrophic cap on beneficiaries’ out-of-pocket spending for Medicare-covered services. It is also important to resolve the issue of observation status so that beneficiaries are eligible for Medicare skilled nursing facility benefits after they are hospitalized for three or more days, whether or not they were classified as being in observation status or as being an inpatient.
In addition, the National Committee has long supported provisions, many of which are contained in the President’s budget proposals that would benefit the Medicare program and its beneficiaries. These include allowing the federal government to negotiate drug prices, requiring drug manufactures to provide rebates for drugs used by beneficiaries dually-eligible for Medicare and Medicaid, and promoting lower pharmaceutical costs by providing for faster development of generic versions of biologic drugs, and prohibiting “”pay-for-delay”” agreements between brand name and generic pharmaceutical companies that delay entry of generic drugs into the market.
Let’s Protect Medicare for Seniors and People with Disabilities
The National Committee is opposed to proposals that would shift costs to Medicare beneficiaries. These include increasing out-of-pocket costs in today’s Medicare program as well as proposals to privatize Medicare by turning it into a premium support system.
The Democratic Party should continue to strongly oppose the proposal included in the House-passed GOP/Ryan Budget that would end traditional Medicare as we know it by changing Medicare from a defined benefit program to a voucher/premium support defined contribution program, which would leave many seniors at the mercy of private insurance. This proposal would raise costs for seniors because it caps Medicare spending at Gross Domestic Product +0.5 percent — likely lower than health care inflation — so the amount the federal government pays for health care would be reduced, but beneficiaries’ costs would increase. It would make it harder for seniors to choose their own doctors since seniors in certain geographic areas and many low-income beneficiaries could find that their only affordable options are private plans that limit their choice of doctors. In addition, the Ryan budget would take away benefits Medicare beneficiaries are receiving now, such as help paying for drugs when they reach the Part D prescription drug coverage gap — the so-called “”donut hole”” — and preventive screenings and wellness visits without out-of-pocket costs, because it repeals the Affordable Care Act.
Over half of Medicare beneficiaries have incomes below $22,500 per year, and they are already paying 27 percent of the average Social Security check for Part B and D cost-sharing in addition to paying for health services not covered by Medicare. We are troubled by the view that people will make wiser choices about using health care services if they have more “”skin in the game.”” Proposals that shift additional upfront costs to beneficiaries could lead many seniors to forego necessary care, which, in turn, could lead to more serious health conditions and higher costs down the road. These proposals include increasing the Part B deductible and Part B premiums so that they cover a larger percentage of program costs, requiring a copayment for home health services, and increasing the cost of supplemental Medicare policies and/or limiting their benefits.
Medicare beneficiaries with annual incomes over $85,000 for individuals and $170,000 for couples are already paying higher income-related premiums, and we are concerned about proposals to further increase the number of people affected by this policy. Wealthier people are already paying more, and they paid in more during their working years since there is no cap on the Medicare payroll tax like there is for Social Security. Additional means testing would undermine the social insurance nature of Medicare; raise costs for middle-income seniors; and drive higher-income beneficiaries out of Medicare and into the private insurance market, which would be harmful for traditional Medicare.
Covering Older Americans Not Yet Eligible for Medicare
In addition to privatizing Medicare, we oppose the Ryan budget because it would increase the age of eligibility for Medicare from 65 to 67 by increasing it two months per year from 2023 to 2034. The Ryan budget also calls for repealing provisions in the Affordable Care Act (ACA), which make insurance available and more affordable for 65 to 67 year olds. Without the guarantees in the ACA, such as requiring insurance companies to cover people with pre-existing medical conditions and to limit age rating, it would be very difficult and expensive for older people who would no longer be eligible for Medicare coverage to purchase private insurance.
LONG-TERM SERVICES AND SUPPORTS, MEDICAID, AND DUAL ELIGIBLES
Importance of Long-Term Services and Supports/Medicaid
Seniors and people with disabilities should have access to quality affordable long-term care services and supports, available at home and in the community. Home and community-based long-term services and supports (LTSS) refer to a range of options for older adults and people with disabilities that enable them to remain in their homes and live independently. More than 11 million Americans of all ages need LTSS as a result of a physical, cognitive, or mental limitation. Funding for these services is primarily paid for by Medicaid, which covers over 62 percent of all LTSS. LTSS also accounts for two-thirds of all Medicaid spending. Only about 10 percent of adults have private long-term care insurance that covers these services.
Compassionate Societies Offer Access to Quality and Affordable Health Care and Long-Term Care
The National Committee supports the Medicaid expansion included in the Affordable Care Act, which would provide states with 100 percent federal funding for the first three years and 90 percent in subsequent years. Democratic Governors and state lawmakers must insist that their states use this opportunity to expand coverage to more low-income individuals and prevent them from become sicker and more costly to treat over time. This expansion is particularly important to 50-64 year olds (young seniors) who need coverage.
Additionally, we support efforts included in the Affordable Care Act that would rebalance Medicaid’s â€œinstitutional biasâ€ and shift more resources to home and community-based services. Medicaid regulations and practice should encourage home and community-based care unless nursing home or other institutional care is the better choice for an individual.
Cuts to Medicaid Would Shift Costs to States and Families That They Can’t Afford
The Medicaid program remains a vital safety net for many older adults, people with disabilities and children. It is especially important to communities of color. About 50 percent of all Medicaid beneficiaries are members of ethnic or racial minorities. Without Medicaid, millions of low-income individuals likely would forgo needed medical assistance and become sicker, costing the health care system and taxpayers more in the long run. Because Medicaid is so important to the frailest members of our society, the Democratic Party should oppose proposals to change Medicaid into state block grants. Specifically, we oppose the House Republican/Ryan budget which would make draconian cuts to Medicaid and end the program as we know it. It would transform Medicaid from its current state/federal partnership to state block grants and cut funding by $810 billion, or 22 percent, over ten years.
With a block grant system, the federal government would provide each state with a fixed dollar amount and states would be required to make additional contributions if they lack the funds to cover increases in the number of patients or the cost of medical treatments for Medicaid beneficiaries. States could address funding shortfalls in an”