Parsing the State of the Union – Plans for Social Security & Medicare

There was a lot to like about yesterday’s State of the Union address.  Here are a few highlights:

President Barack Obama State of the Union, January 12, 2013

“It is our unfinished task to restore the basic bargain that built this country.”

 “Most Americans Democrats, Republicans, and Independents understand that we can’t just cut our way to prosperity.”

“The greatest nation on Earth cannot keep conducting its business by drifting from one manufactured crisis to the next.”

“Deficit reduction alone is not an economic plan.”

“We’ll reduce taxpayer subsidies to prescription drug companies…We’ll bring down costs by changing the way our government pays for Medicare.”

“Our government shouldn’t make promises we cannot keep but we must keep the promises we’ve already made.

NCSSM President Max Richtman was invited to watch the State of the Union along with other national advocates last night and meet with White House staff in a post-speech briefing. He was encouraged by the President’s focus on economic recovery:

“President Obama is right to keep his focus on economic recovery, including job creation and economic investment.  His promise to restore the basic bargain that built this country must include preserving and strengthening the nation’s retirement and health security programs, Social Security and Medicare.  There are Medicare reforms that can save money such as reducing taxpayer subsidies to prescription drug companies as the President proposed tonight.  We can also allow Medicare to negotiate for lower drug prices, allow prescription drug re-importation in Part D and lift the payroll tax cap in Social Security.”  NCPSSM President/CEO, Max Richtman

However, the news wasn’t all good for seniors who depend on Medicare and Social Security as the President, once again, urged increased means-testing for Medicare and left the door open for Social Security benefit cuts by changing the cost of living allowance formula.

“Reform proposals such as Medicare means testing, as the President proposed tonight, or cutting the annual COLA through the adoption of a chained CPI as the President has said remains on the table, will violate his promise not to ‘damage a secure retirement’. 

We urge the President to stick to his previously stated views that Social Security’s long-term solvency should not be a part of the deficit debate since it’s not a driver of our deficits.  Contrary to the political spin, changing the cost of living formula for millions, including; veterans, retirees, and people with disabilities isn’t a “technical change” it’s an immediate benefit cut. For seniors it means $130 per year for the typical 65-year old retiree that would grow exponentially to a $1,400 cut after 30 years of retirement. 

While we welcome President Obama’s continued efforts to move Congress toward a path of fiscal responsibility, America’s seniors know that in Washington, so-called ‘sensible reforms’ can mean virtually anything. We urge the President to remember that reducing already modest benefits to seniors isn’t the path to economic growth.”…Max Richtman, NCPSSM President/CEO

It certainly sounds reasonable to “ask more from the wealthiest seniors,” as the President proposed last night, right?  But that’s already happened in Medicare.  Medicare is already means-tested with beneficiaries who earn above $85,000 already paying higher premiums. So, if that’s not enough, who does the President actually consider as a “wealthy senior?” How about someone earning $47,000? The truth is current proposals to increase Medicare means testing would hit far more than “wealthy” seniors. In fact the Kaiser Foundation found that middle-class retirees earning just $47,000 would be hit with higher costs.   Increased Medicare means-testing is simply another way to pass costs to middle-class seniors…not the “wealthy” receiving Medicare.

“And those of us who care deeply about programs like Medicare must embrace the need for modest reforms otherwise, our retirement programs will crowd out the investments we need for our children, and jeopardize the promise of a secure retirement for future generations.” …President Obama

This intergenerational warfare argument attempts to pits America’s young versus old and is a favorite of the Pete Peterson/anti-Social Security crowd.  It also ignores the reality that seniors aren’t “greedy geezers” who are only interested in preserving their own benefits at the expense of their children and grandchildren.  Quite the opposite.  Seniors understand the value of these programs and know future generations will depend on them, as much or even more than they do. Seniors have a unique perspective, having participated in the private healthcare system and in Medicare. They know, first hand, that Medicare isn’t the problem. Instead, Medicare should be used as a model to guide the improvement of our entire American health care system.  Medicare remains more efficient than private health care and many of the quality driven reforms the President touted last night are already happening in Medicare.  The growing aging population isn’t news but it does provide opportunities for innovation that could lead to meaningful reform of America’s private health care system that still costs more and provides less than health care in other industrialized countries.  It’s time for Washington to stop blaming the program for a problem it didn’t create, while pitting young versus old at the same time.

But we can’t ask senior citizens and working families to shoulder the entire burden of deficit reduction while asking nothing more from the wealthiest and most powerful. . . After all, why would we choose to make deeper cuts to education and Medicare just to protect special interest tax breaks?  How is that fair?  How does that promote growth?…President Obama

It’s clearly not fair, especially when you consider that 75% of deficit reduction has already come from cuts impacting average Americans.

For too long, many in Washington have pretended that “shared sacrifice” means that if a millionaire loses a tax break then the middle-class and poor must also lose their modest benefits in Medicare or Social Security. This false equivalency pretends that a tax dollar lost to a millionaire or huge corporation is the same as a benefit dollar lost to a retiree living on $14,000 a year from Social Security. America’s seniors know that’s not a fair and balanced approach, it’s not sensible reform and it’s not the path to economic recovery…Max Richtman, NCPSSM President/CEO

And I am open to additional reforms from both parties, so long as they don’t violate the guarantee of a secure retirement…President Obama

Cutting Social Security benefits by $130 each year starting immediately with the adoption of the Chained CPI and shifting costs to middle-class seniors in Medicare will absolutely threaten the secure retirement for millions of American seniors.  The average retiree receives only $14,000 per year in Social Security yet 75% of seniors paid $10,000 in out of pocket health care costs, even with Medicare.

Seniors received an average COLA of 1.3% over 4 years with no increases in two of those years. Arguing that these benefits are too generous and seniors have to sacrifice even more in the name of deficit reduction shows how out of touch Washington has become with the real-world economic realities facing average Americans, especially seniors.