The End of Medicare? What the Ryan Budget Plan, which the Republican-controlled House passed on April 15, 2011, would really do to Medicare, and why it would be a terrible idea if it became law. (re-recorded due to technical difficulties with the original recording.)
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The Ryan budget plan, which was recently passed by Republicans in the US House of Representatives, purports to “reform” Medicare by offering a defined benefit plan. Congressman Ryan calls it a “premium” plan that allows Medicare beneficiaries to choose health insurance “the same way members of Congress do.” Neither of these claims is true. Far from being a premium plan, it’s actually a voucher system that will put seniors at the mercy of the insurance industry. And it’s not at all close to the health plan offered to Congress.
When you examine it closely, the Ryan plan would replace the existing Medicare plan (rated favorably by 96 percent of its beneficiaries) with vouchers that would be used to purchase traditional health insurance from for-profit companies. To allow for inflation, the system would be tied to the Consumer Price Index (CPI). If approved by the Senate and signed by the President, the plan would go into effect in 2012 and increase the age of eligibility from age 65 to 67.
To put it mildly, this plan would pose a number of problems for future retirees.
First, the cost of health care rises at a rate far greater than overall inflation. In 2007, for example, health care costs grew at 6.1 percent, the lowest rate in a decade. But that was still far greater than the 2.8 percent climb of the CPI. Since 2000, the increase in CPI has ranged from -0.34 to 3.85 percent. At the same time, health care costs rose by 6 to 8 percent! And this year, the cost of employer-paid health insurance premiums is anticipated to grow 8.8 percent. Yet, according to a report by the non-partisan Congressional Budget Office, the Ryan plan does nothing to address the real issue of rising health care costs.
Second, under the Ryan plan, much more of the money would go to pay administrative costs than under our current Medicare program. Under Medicare, 98 cents of every dollar pays for health care delivery. But under private insurance, which the Ryan is based on, 36-85 cents of every dollar pays for care. So much of the taxpayer money intended to pay for seniors’ health care actually would be used to pay shareholder dividends and bloated CEO salaries.
Third, seniors are the least desirable consumers of health insurance because they’re the most prone to illness and they have by far the most pre-existing conditions. As a result, insurance companies will charge far more for even minimal coverage. Without highly inflated premiums (maybe this is why Ryan calls it a “premium” plan) it’s unlikely that insurance companies will offer coverage to seniors at all.
The inescapable conclusion is that, under the Ryan plan, seniors living on fixed incomes will have difficulty paying for health insurance, making each illness potentially catastrophic. Or, put more succinctly by the senior editor of Fortune magazine, the Republican-passed plan proposed by Congressman Ryan is “Medicare hocus pocus.”
Conservative Myths about Social Security: You hear Republicans say these things every day, but none of them are true.
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For many years, conservatives opposed to Social Security have created and perpetuated a number of myths regarding our social safety net. Following are just a few of those myths and the non-partisan truth about the program:
Myth 1 – We have to cut Social Security in order to “save” it. The argument goes something like this: We have to cut Social Security benefits in order to avoid cutting benefits. Say what? Like any insurance program, actuary tables must change from time to time. Our government started planning for the baby boom back in the ‘50s, and several changes have been made since. According to most data, the Social Security Administration will be able to pay full benefits until 2037. Without changes, retirees would receive 80 percent of benefits after that. The program only needs some minor “tweaks” such as raising the income cap on contributions as Ronald Reagan did in the 1980s.
Myth 2 – I can do it better myself. This is what we refer to as the “Nanny State Blues.” For years, conservatives who dislike everything associated with our government have promoted the notion that our citizens should take responsibility for their own retirement plans. They believe that, if everyone simply kept the money withheld from their paychecks as FICA contributions, they would enjoy a greater return on investment which resulting in a more comfortable retirement. For a few people that may be true. However, studies have shown that it takes an annual salary of $60,000 or more to save adequate funds for retirement. That means that the majority of our population can’t afford to save for retirement.
Myth 3 – My boss doesn’t like it. Of course not. Most employers are in business to maximize their profits. They don’t like paying employees any more than they have to. The fact is the portion of your Social Security contributions paid by your employer is part of your overall compensation. And for employers, it’s simply one of the costs of doing business.
Myth 4 – Privatization is always better than a government program. Really? Who built our roads? Our schools? Who operates the Postal Service? The military? VA? The government does many things that private business can’t or won’t (at least not for the money available). Social Security insurance is one of them. The Social Security Trust Fund is invested in US Treasury Bills, the safest investment vehicle in the world. Imagine what would have happened if you had planned to retire in 2008 as stock markets crashed. Imagine what happens to those who don’t invest wisely. Do we simply cast them aside when they can no longer work?
Myth 5 – Illegal immigrants receive benefits. This is blatantly untrue. You must be a US citizen in order to receive a legal Social Security identification number. And you must be a citizen in order to receive benefits. However, illegal immigrants who work with a stolen Social Security number do have contributions for FICA and Medicare deducted from their paychecks. That money goes into the trust fund, but the illegals can never receive benefits from it. By some estimates, these unclaimed contributions amount to $70 billion.
Myth 6 – The US and Mexico have a secret agreement for illegals to get Social Security benefits. This is an Internet myth that first began circulating when George W. Bush was President. It wasn’t true then. It’s not true now.
Myth 7 – Social Security is an “entitlement”. Once again, despite conservatives and the media having labeled an entitlement, it’s insurance. You pay the premiums with each paycheck and, if you live long enough, you are “entitled” to receive benefits.
Social Security and the Deficit Hawks: Why Social Security isn’t an entitlement, and isn’t going broke, despite what conservative Republicans would like you to believe.
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Shamed by scenes of the elderly living in abject poverty following the Great Depression, Congress passed the Social Security Act which was signed into law by President Franklin Roosevelt on August 14, 1935. At the time, poverty rates among senior citizens exceeded 50 percent. Since that time, millions of Americans confronted by old age, poverty, disability and unemployment have benefited from the act.
Although Republicans, and more recently, the media have labeled Social Security with the perjorative term “entitlement” it is simply a form of insurance defined by actuaries as a government-sponsored insurance program funded by premiums paid by or on behalf of participants. Indeed, the FICA withholding you see on your paycheck stands for “Federal Insurance Contributions Act”. These contributions represent less than six percent of an individual’s annual income up to $106,000 per year. Any income above $106,000 is exempt from withdrawals.
Fact is, Republicans have been opposed to Social Security from the beginning, claiming that it would cause a loss of jobs. Obviously it didn’t. And the new deficit “crisis” has provided Republicans with arguments to dramatically change or end the program now. Many want to replace it with individual investment accounts, feeling that they could better ensure their retirement by investing their FICA withdrawals themselves. First, the benefit payments from an insurance program like Social Security should never be compared to the returns on investment accounts. Moreover, replacing Social Security with individual investment accounts could be disastrous for many seniors in the event of another economic depression or a repeat of the Great Recession of 2008. If the stock markets plummeted, the retirement incomes of most seniors would crash with them.
So how about the solvency of Social Security? Currently, the program has a $2.5 trillion surplus. Remarkably, administrative costs of the program account for less than one percent of its total. However, due to the impending retirement of Baby Boomers, it is estimated that the program will not be able to make full benefit payments in 25 or 30 years. But the program is not “broke.” Indeed, it can be fixed with relatively minor tweaking. One option is to raise the cap on income as the Reagan Administration did in the 1980s. Removing the cap altogether would definitely solve the problem as would limiting benefits to only those who actually need them – those retirees with annual household incomes of less than $50,000, for example.
Contrary to those who want to “end the entitlements”, the facts show that dramatically changing Social Security or ending the program entirely could be devastating for our nation. The majority of beneficiaries have little significant income from other sources since options such as employer-provided pension plans are virtually non-existant today. Additionally, the benefits from our Social Security program already lag behind most other advanced countries. The Organisation for Economic Cooperation and Development (OECD) ranks the U.S. 26th out of 30 OECD nations. On average, OECD nations replace 61 percent of a retiree’s earnings with pension plans. In the U.S., the number is roughly 40 percent.
Following are some pertinent articles on the subject from the Center on Budget and Policy Priorities:
Social Security Does Not Need a “Bailout” by Kathy Ruffing
Policy Basics: Top Ten Facts about Social Security on the Program’s 75th Anniversary
Bowles-Simpson Social Security Proposal Not a Good Starting Point for Reforms by Kathy Ruffing and Paul N. Van de Water
Social Security Benefits are Modest by Kathy Ruffing and Paul N. Van de Water
If you missed our interview with Ann Kirkpatrick live on KAZM, you can hear it right here, right now on the Democratic Perspective blog. We’ll be posting podcasts of every program as soon as they become available. Enjoy!
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On the very first edition of Democratic Perspective, former Congresswoman, Ann Kirkpatrick, confirmed her intent to run for the U.S. House of Representatives in 2012. This is the same office she held from 2009 until January of this year.
Kirkpatrick was born and raised on an Apache reservation near McNary, Arizona. After graduating from the University of Arizona and the University of Arizona College of Law, she served as Coconino County’s first woman deputy county attorney, as city attorney for Sedona, as a member of the Flagstaff Water Commission, and as a teacher of Business Law and Ethics at Coconino Community College.
Prior to her term in Congress, Kirkpatrick was twice elected to the Arizona House of Representatives where she served as the ranking Democrat on the House Ways and Means Committee, as well as the Education K-12 Committee and Natural Resources Committee. As a member of the legislature, she helped pass voluntary all-day kindergarten and contribution limits to candidates for office. She also worked to crack down on meth dealers and to cut taxes for veterans.
Kirkpatrick was elected to the U.S. House of Representatives on a platform of tax cuts for 86 million middle class families, making health care affordable and accessible to all, and encouraged renewable energy projects to end America’s dependence on foreign energy and create jobs for rural Arizona.
Among those endorsing her campaign were former Arizona Governor Janet Napolitano, U.S. Representative Gabrielle Giffords, the Arizona Education Association, the Arizona Police Association, the Arizona Conference of Police and Sheriffs, the International Association of Firefighters, county sheriffs, tribal leaders, the Arizona Republic, the White Mountain Independent and the Arizona Daily Sun.
During her time in Washington, Congresswoman Kirkpatrick’s work included positions on the Committee on Homeland Security, the Subcommittee on Border, Maritime and Global Counterterrorism, the Subcommittee on Intelligence, Information Sharing and Terrorism Risk Assessment, the Subcommittee on Transportation Security and Infrastructure Protection, the Committee on Small Business, the Subcommittee on Finance and Tax, the Subcommittee on Rural and Urban Entrepreneurship, the Committee on Veterans’ Affairs, the Subcommittee on Disability Assistance and Memorial Affairs, and the Subcommittee on Economic Opportunity.
The congresswoman voted in favor of the Affordable Health Care for America Act and the American Recovery and Reinvestment Act. In addition, she proposed seven bills and successfully passed five on behalf of veterans, including H.R. 2879, which closes a donut hole for terminally ill veteran service members who want to collect their life insurance, and H.R. 3553, which removes disability payments as consideration of income under means-tested housing assistance. She was featured on Fox News for sponsoring bill H.R. 4720, Taking Responsibility for Congressional Pay Act, to reduce the National debt by lowering the salaries of Congressional members.
Unfortunately, Kirkpatrick was defeated in her bid for re-election in 2010 despite her successful record.
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