TALLAHASSEE, Fla.--A disturbing new report
mandated by Congress from National Research Council (NRC) concludes that the
rapid growth of the 65-plus population in the United States and the continuing
strain on public resources will make Social Security, Medicare and Medicaid
“unsustainable” over the next three decades.
What’s troubling, though,
are not the report’s conclusions, but its bias toward a strictly budgetary
outlook. Unfortunately, this study—from a federally chartered body charged with
scientifically objective research--is so unbalanced that it does a disservice to
the full range of viewpoints on this politically volatile issue.
The
report, titled
Aging
and the Macroeconomy, fails to take into account the microeconomic
realities facing tens of millions of Americans, especially lower-income and
ethnic minority groups.
The report’s 14 authors are almost all
economists, and the research group does not represent the range of social
gerontologists or public health experts, who might have contributed a broader
understanding of the human impact of programs the report suggests
cutting.
As Nobel Prize-winning economist
Paul Krugman stated in his
New York
Times column, Oct. 1, “Contrary to Beltway conventional wisdom, America does
not have an ‘entitlements problem.’ Mainly, it has a health-cost problem,
private as well as public,” that is not only in Medicare and
Medicaid.
Recommendations Would Disadvantage Those in
Need
The NRC report recommends that the government address the
difficult years ahead by combining major changes to contain spending on Social
Security, Medicare and Medicaid, with efforts to urge people to work longer and
save more during their working years. But these recommendations are likely to
disadvantage the individuals and families who would be most affected by the
emerging threats to a secure retirement.
Today's workers -- many of them
trapped in low-wage, often physically grinding jobs with declining benefits --
are already facing a grim future in which the kind of retirement their parents
were able to take for granted is out of reach.
Unemployment and stagnant
or declining wages have drained American families of the capacity to save for
retirement. And the recession has deeply undermined household wealth, especially
for African Americans, Hispanics and other ethnic families.
The NRC
report acknowledges that only half of American workers have private pensions and
that most of them have seen substantial traditional pensions replaced by
riskier
and more-limited 401(k)s — the ones that depend on the fluctuating stock and
bond markets.
Yet the NRC report’s recommendations that people worker
longer and save more are disconnected from the realities of average workers.
Median wages have remained stagnant or actually declined since the 1970s. Men
with a high school degree or less have suffered as much as a 30 percent decline
in income since 1973. Also, those with lower educational levels are losing
ground to Americans at higher education levels in their life
expectancy.
Increasingly, families have had to rely on debt to cover such
essentials as housing and health care, which cost much more than they did in the
1980s. They don’t need the NRC economists to scold them.
In recommending
that people work longer, the report’s contributors imply support for increasing
the eligibility age for full Social Security benefits. This recommendation,
however, ignores that many workers, especially those doing
manual
labor or other stressful jobs simply cannot work longer even if jobs were
available.
Program Cuts Would Increase Elders’ Poverty
The
report, instead of confronting our need to reverse the 30 years of economic
policies that have undermined modern American retirement security, focuses on
so-called structural changes, formulas that would partly cut the very programs
Americans rely on for security in old age or at times when they can’t work.
Those programs remain the only reliable sources of economic stability for many
current seniors and most future retirees.
The budget reductions the
report’s authors recommend would surely increase the number of older people in
poverty. According to
2011 figures from the
Census Bureau, senior impoverishment is already at 15.9 percent, if one
includes out-of-pocket medical expenses—a cost not factored into the Federal
Poverty Line.
Were the government to adopt the NRC report’s
recommendations, expect access to appropriate health care to decline. Direct
costs for beneficiaries--already 16 percent of income for those over 65,
according to a 2011 Kaiser Family Foundation report—would rise with cuts to
Medicare and Medicaid.
Even under current law, out-of-pocket costs are
projected to reach 26 percent of the average beneficiary’s income by 2020, as
increasing Medicare premiums and deductibles are subtracted from Social Security
checks.
Rising Medicare costs are not a result of inefficiencies unique
to the Medicare or Medicaid programs. What causes these increases are the same
factors that have driven costs in the entire U.S. health care system
significantly above the Consumer Price Index for almost 40 years.
These
factors include advances in medical technology, such as genetically targeted
drugs, and a health care system that is unique among developed nations by being
so driven by shareholder value, high executive compensation and professional
salaries, especially for doctors and administrators. Add to that out-of-pocket
charges for what Medicare doesn’t cover.
Another new study reveals the
enormous costs to patients in the last five years of their lives. Published by
researchers at Mount Sinai School of Medicine, this research
[http://bit.ly/SGOK4t] found that those costs average $38,688. And if
Alzheimer’s disease is a factor, personal costs almost double to $66,105 with
much of that amount coming from long-term care expenses not now covered by the
Medicare program.
These are major reasons the
Center for Retirement Research at Boston College
estimates that over half of boomers will not achieve economic security in
retirement.
Three-Quarters of Seniors at Risk
The level of
economic risk facing retirees has risen steadily since the early 1980s.
According to an analysis conducted by the
Institute on Assets and
Social Policy, 78 percent of all senior households are financially
vulnerable and do not have enough economic security to sustain them for the rest
of their lives.
Among senior households with a single person (mainly
women), 84 percent are financially vulnerable, and 36 percent are at serious
financial risk. Most of this economic jeopardy is generated by the lack of
assets (low financial net worth) largely caused by the their inability to save
while working, by small or no private pensions, by high and rising out-of-pocket
medical costs, and by insufficient monthly income to absorb unexpected expenses.
The Great Recession has increased Americans’ level of financial risk by
reducing retirement investment accounts and the value of equity in homes. Even
though seniors have higher home ownership rates than younger people, they incur
high housing costs because of rising property taxes in many areas, home repairs
(try fixing a leaky roof on just Social Security income) and related
factors.
Also, the report’s implied notion of raising the full Social
Security retirement age ignores the fact that older minorities and aging white
at lower income levels have significantly shorter lives than middle-class and
elite-class whites. They would be substantially disadvantaged by a higher
retirement age. These are also the groups, who will soon constitute a majority
of older Americans.
A Better Strategy
A far better strategy
for strengthening our shaky retirement security system would be to increase
Social Security benefits for low income beneficiaries under or close to the
poverty line, add long-term care as a Medicare benefit, and contain our out of
control health care economy.
Neither this report nor any other that fails
to address all of these issues honestly and fairly should be used as a guiding
framework for dealing with our multi-faceted retirement security crisis. The NRC
promises a follow-up study that will provide more “specific policy choices.” I
hope that one will be more balanced.
Larry Polivka is Executive
Director of the Claude Pepper Center at Florida State University and Scholar in
Residence of the Claude Pepper Foundation. He is the former Director of the
Florida Agency for Aging and Disabled Services.
