While the arguing over the Affordable Care Act has died down, let’s talk about the more complex problem regarding health care and the social safety net we all depend on already, or someday will.
Without some significant changes, Social Security and Medicare will go broke. And the longer repairs to the looming shortfalls are put off, the harsher the fixes will need to be.
The Affordable Care Act, or Obamacare, actually provides medical coverage for about 25 million people. Social Security and Medicare eventually provide for nearly everyone in a nation of more than 320 million people.
But the fiscal stability of both programs is faltering. The last significant funding and age-eligibility adjustments — signed into law by President Ronald Reagan in 1983 when Social Security was in deep financial trouble — went into effect in the early 1990s. Reagan’s plan slowly increased the full Social Security retirement age from 65 to 67, decreased early retiree benefits, made the benefits checks of high-income recipients taxable and hiked payroll tax deductions for workers. It also helped solidify Medicare by increasing the payroll tax that helps fund it, and by removing an earnings cap on contributions.
These were bipartisan moves that were absolutely necessary — passed with the support of Senate Majority Leader Howard Baker, a Republican, and House Speaker Tip O’Neill, a Democrat, and signed by a Republican president.
Today, we have no Baker, no O’Neill, no Reagan — and no hint of political leaders actually wanting to take on the plight of fortifying vital entitlement programs. But significant changes are again absolutely necessary.
According to Social Security trustees, the program has an unfunded liability of $34 trillion in the 75-year window between now and 2091. Social Security will exhaust the surplus built up over the past 35 years and run out of money in 2034. At that point, benefits would have to be cut by about 25 percent. And that is not because politicians “raided the lockbox” of Social Security, although they have. A 2034 bankruptcy date includes cashing in all of the IOUs the Social Security trust fund holds in lieu of cash Congress took to pay bills.
As bad as that sounds, the situation with Medicare is far worse, with bankruptcy projected for 2029 and an unfunded liability of $49 trillion over the next 75 years. And that’s under laws that, according to the program’s trustees, demand Medicare payment cuts to medical providers that would put many of them out of business. Those almost certainly will never be enforced by Congress, just as previous reimbursement cuts mandated by law have been circumvented, meaning the providers won’t go out of business, but the shortfall will be much larger than projected.
The tiny bit of good news about Medicare is that there has been a recent slowing in the rate of spending increases that experts say is caused by reshaping the program to create more efficient treatment, accountability and quality. But the oldest segment of the population served by Medicare is growing exponentially. Caring for octogenarians, nonagenarians and centenarians is wildly expensive. And new, high-priced medical treatments are being developed every day.
In his first inauguration speech in 2001, President George W. Bush promised that, “We will reform Social Security and Medicare, saving our children from struggles we have the power to prevent.” We didn’t. President Barack Obama created the Simpson-Bowles Deficit Reduction Commission, whose mandate included recommending ways to reform the two entitlement programs. It released a report in 2010 that has only gathered dust.
Two actions could stabilize Social Security: Removing the cap on earnings from which payroll deductions are levied ($127,200 in 2017), and increasing the levy for employers and employees by 1 percent to 7.2 percent each. Every year we wait means larger tax increases will be necessary — or bigger cuts in benefits.
Stabilizing Medicare funding, a far more difficult problem, demands both getting more money into the system and controlling spending. One out of every four Medicare dollars spent each year goes to the care of the 5 percent of recipients in their final year of life, and often does little to better their situation. What’s needed is a system that helps patients and families make smart decisions about which procedures are undertaken, and makes compassionate but reasonable rules about not paying for pointless procedures.
Beyond raising our blood pressure as we argue about them, Obamacare and its potential repeal have had little effect on most of us. The opposite is true of Medicare and Social Security. They are careening toward bankruptcy, and few are saying a word.