When the presidential race begins to focus seriously on issues, you’re likely to hear a lot about Social Security and to some extent Medicare. The nub of debate will center on two questions: Should we cut Social Security or expand it? Should Medicare beneficiaries assume more of the cost of their healthcare and reduce the government’s obligation over time? The questions are connected.
In a recent op-ed in the Los Angeles Times, Andrew Biggs, a resident scholar at the American Enterprise Institute, a right-of-center think tank, argued that a broadly expanded Social Security program is not necessary, nor can the country afford it.
He used a lot of numbers to show the case for expansion “rests on misunderstood data and a willingness to ignore Social Security’s rising unfunded liabilities.” One study he cited showed “about 71 percent of individuals ages 66-69 are adequately economically prepared to retire, given expected consumption.”
Others, such as Teresa Ghilarducci, an economics professor at The New School in New York City, challenge that thinking. Ghilarducci said income declines with age. As assets are used up, she says, it’s not uncommon for people in their mid and late 70s to make ends meet by skimping on food and medications. She adds that her own studies show “there’s a generation of near retirees, age 55 to 64, who will be worse off than their parents or grandparents in terms of maintaining their standard of living in retirement. Sources of income are more limited and less secure (than they were in the days of fixed pension plans) because they are attached to stock and bond markets.”
What does this Social Security debate have to do with healthcare? Everything, I would argue, and the political chatter up to this point has failed to connect the dots.
Ghilarducci’s 55- to 64-year-old age group is most likely to be affected by often-proposed changes in Medicare such as raising the age of eligibility from 65 to 67 or requiring seniors to assume more of the cost of care through higher deductibles and higher out-of-pocket maximums similar to Obamacare policies.
“The whole concept of Social Security is to provide a foundation for economic security, and it’s impossible to be economically secure if you are one illness away from bankruptcy,” said Nancy Altman, who heads the advocacy group Social Security Works, a group that favors expansion. “You can’t be economically secure if you can’t pay for your drugs.”
A few years ago I was interviewing the head of a senior center in an affluent area of Manhattan who described this economic insecurity. Seniors with low incomes were coming to the center for a reduced-cost meal.
She told me those clients, mostly women, lived in small, walk-up apartments — not in the luxury buildings lining the nearby avenues — and that it was tough stretching their limited incomes over rising rents and growing medical costs, particularly for drugs.
How could that be with Medicare’s drug benefit, I asked. They can’t afford the copays, she explained, pointing out the women often had to choose between food and medicine. The monthly Social Security benefit for women 65 and older averages only $1,083. I hadn’t connected the dots myself on that one.
Before Christmas a reader in Indiana told me about his family’s healthcare predicament. He and his wife retired in the fall of 2014 and took early Social Security benefits. They didn’t worry that they were still three years away from receiving Medicare benefits, because they could buy insurance under the Affordable Care Act.
“Our Social Security and pension incomes plus Obamacare convinced us that the time was right to retire instead of waiting to age 65 and going on Medicare,” he said.
Their first-year premium was an affordable $427. The 2016 premium zoomed up to $977 even with a tax subsidy. The deductible went up too. The couple realized they had made a mistake.
“You can imagine how stunned we are and now wish we would have never retired,” he wrote.
He hadn’t bargained on having to spend his Social Security and pension benefits for higher insurance premiums resulting from increasing healthcare costs.
His is a cautionary tale. Healthcare costs will continue to rise in the absence of any stringent cost-control measures, which are not likely. Meanwhile, Social Security benefits are likely to be lower. “Congress mandated more than 30 years ago that the age for collecting Social Security benefits would gradually rise. “People born in 1960 or later will face a 6.5 percent benefit cut even if they work until age 70,” said Altman.
More Americans will face this squeeze. How about some discussion on the campaign trail?
How are you accommodating higher healthcare costs in your family’s budget?
Trudy Lieberman, a journalist for more than 40 years, is a contributing editor to the Columbia Journalism Review, where she blogs about health care and retirement at cjr.org. She can be reached at email@example.com. This column was distributed by The Rural Health News Service.