“If nothing changes, Social Security benefits will be subject to a 23 percent cut in a decade.”
“Since any changes to shore up Social Security’s bottom line will likely require huge tax increases or changes to how benefits are paid, policy makers are also running out of time to implement those changes in ways that don’t cause major disruptions to the economy and Americans’ retirement plans.”
“The most straightforward solution to Social Security’s problem is to raise the payroll taxes that fund the program to make up for the shortfall on the benefit side of the ledger. But that would only exacerbate the problem by placing a bigger burden on younger, generally poorer workers.
According to the report, Social Security could be kept afloat for the next 75 years by hiking the payroll tax by 4.15 percentage points in 2034 (or implementing a smaller increase sooner). The payroll tax is currently charged at a 16.5 percent rate, with employers and employees each covering half. That works out to a nearly 25 percent tax hike. Alternatively, the report says, benefits could be cut by about 25 percent.”
LC: We could also fund it by higher taxes on the wealthy.
“To pretend that Social Security and Medicare shouldn’t be touched is nothing short of political malpractice. Over the next 30 years, the two programs will run a $116 trillion shortfall. This number accounts for the significant amount of interest payments on the debt the government will ring up in the process. While we might be able to stumble along indefinitely, all that borrowing will slow—perhaps even halt—our economic growth, making funding the programs that much more difficult.”
“Almost half of people on Medicare, 31 million Americans, are now enrolled in a Medicare Advantage plan, nearly double the share of 10 years ago. It is widely assumed that Medicare Advantage will cover a majority of the program’s beneficiaries within the next few years.”
“Medicare Advantage allows private insurers to offer their own plans that provide Medicare benefits as well as some additional perks not available in the original program. The secret to the program’s success is simplicity. Traditional Medicare is a fragmented program; Part A covers hospital care and Part B covers outpatient services. Patients must enroll in a separate Part D plan for prescription drug coverage that is administered by private insurers. Most people also purchase supplemental coverage, extra insurance that helps reduce their out-of-pocket costs.
Medicare Advantage, also known as Part C, combines those benefits into one insurance plan that also includes an annual limit on out-of-pocket costs, something that does not technically exists in regular Medicare.
But the benefits to patients seem to come at a cost to taxpayers. Though the health insurance industry disputes these findings, MedPAC, the independent committee tasked with overseeing Medicare on Congress’s behalf, found Medicare Advantage plans cost the federal government more money per patient than the original program would have if those same people had stuck with the traditional benefits.
Private companies are also making healthy margins on their Medicare business.”
“Medicare Advantage enrollees are more likely to report trouble affording health care than people on traditional Medicare. Some of the behavior by Medicare Advantage plans, such as using AI to decide when to stop covering services for their enrollees, may be becoming more common in the private sector but is still unheard of for public programs.
The trade-off the United States seems to be making is accepting more administrative bloat and more stringent provision of benefits in exchange for a more navigable Medicare plan. The trade-off is one other countries have made as they designed universal health care programs. (A similar trend is underway in Medicaid.)
But as concern grows about Medicare facing a potential financial cliff, and evidence mounts about the costs of Medicare Advantage, the risks of the trade-off are becoming clearer. Medicare is no longer what it used to be: Once the epitome of government-run health insurance, its benefits are on the verge of being primarily funneled through private companies. Any attempts to change the program will have to wrestle with that reality.”
“In traditional Medicare, for example, patients can go to any doctor or hospital that accepts Medicare; Medicare Advantage has more limited provider networks, and patients can be on the hook for higher costs if they are treated at an out-of-network doctor or hospital.
The federal government pays Medicare Advantage plans a flat rate for the expected cost of covering their particular customers and the insurers are required to adhere to certain rules about benefits and costs. But companies still have flexibility about how to run their plans and have a financial incentive to limit expenses. The less money they spend, the more they get to keep for themselves.
Still, customers will vote with their feet and, after slower-than-expected initial uptake, Medicare Advantage is now growing so quickly that it will soon be the dominant form of Medicare.”
“The premiums people pay for a Medicare Advantage plan can be significantly lower than the combined cost of supplemental coverage and a Part D plan — less than $50 compared to more than $200 on average, per Terry and Muhlestein — with the added benefit of having only a single insurance card. According to a 2022 Commonwealth Fund survey, the additional benefits offered by Medicare Advantage plans (such as dental or vision) and the limits on out-of-pocket costs were the most common reasons seniors gave for choosing the alternative over the original program.”
“Medicare Advantage patients are less likely to receive medical care at the highest-rated facilities for their particular needs, compared to people with traditional Medicare, a reflection of more restrictive provider networks.”
“A report from federal investigators published in April 2022 found that tens of thousands of Medicare Advantage customers were denied coverage for services they should have been entitled to. A significant number of prior authorization denials (13 percent) and payment denials (19 percent) reviewed by the investigators were for services that should have been covered by the program but were not.”
“According to MedPac, since 2004, Medicare has always paid more to Medicare Advantage plans for the cost of covering their customers than the program would have spent if the same beneficiaries had instead been enrolled in traditional Medicare. Some years, the private plans were receiving a nearly 20 percent markup compared to the original benefit structure.”
“The growth of Medicare Advantage is contributing to the financial crunch. Those plans receive funding based on the type of service provided to their customer, which means money for hospital care comes from Part A. Annual Part A payments to Medicare Advantage plans are expected to increase from about $176 billion in 2022 to $336 billion by 2030.
With revived concerns over Medicare’s solvency and evidence of excess spending in Medicare Advantage, policymakers are starting to look at making changes to the program. But that won’t be easy.”
“States have outsourced much of the administration of Medicaid to managed care plans. Countries like the Netherlands have set up health systems that use private insurers, operating under strict government oversight, to provide insurance benefits to their citizens. Giving people more choice and a more streamlined experience can have its benefits, as evidenced by the popularity of Medicare Advantage in the US.
But asking private actors, with profit motivations, to administer government benefits to which people are supposed to be entitled brings risks. People are more likely to have trouble affording health care and their claims are more likely to be denied; that is true in places like the Netherlands, compared to other countries with more direct government administration, and that is true of Medicare Advantage when compared to the traditional Medicare program.”
“In one scenario outlined by the CBO, Congress would have to cut 86 percent of all discretionary spending if it wanted to balance the budget by 2033 without touching the military, veterans programs, or entitlements like Social Security and Medicare. In a slightly altered version of that same scenario in which the Trump tax cuts were not allowed to expire as intended in 2025, Congress would have to cut 100 percent of discretionary spending—and the country would still face a $20 billion deficit.”
“it should be clear that any attempt at bringing the federal budget deficit under control must kill (or at least wound) the Republicans’ sacred cows of military spending, entitlements, and the recent Trump tax cuts. Right now, however, leading Republicans including former President Donald Trump and Speaker of the House Kevin McCarthy (R–Calif.) have vowed to keep Social Security out of any long-term spending deals. Rep. Jim Banks (R–Ind.) has promised to oppose any bill that cuts defense spending.
As for the tax cuts, they’re technically temporary—a gimmick that allowed Republicans to game the CBO’s scoring of the tax cut bill—but keeping the lower individual income tax rates in place past 2025 is a top priority for Republicans.”
“the CBO’s numbers aren’t partisan and neither is the blame for America’s massive budget deficits. These latest projections only reveal how difficult the choices ahead will be. If Republicans are serious about trying to balance the budget, there can be no more sacred cows.”
“Perhaps the greatest success of the American health care system these last few benighted years is this surprising fact: The uninsured rate has reached a historic low of about 8 percent.
That’s thanks in part to the pandemic — or, more precisely, the slew of emergency provisions that the government enacted in response to the Covid crisis.
One policy was likely the single largest factor. Over the past three years, under an emergency pandemic measure, states have stopped double-checking if people who are enrolled in Medicaid are still eligible for its coverage. If you were enrolled in Medicaid in March 2020, or if you became eligible at any point during the pandemic, you have remained eligible the entire time no matter what, even if your income later went up.
But in April, that will end — states will be re-checking every Medicaid enrollee’s eligibility, an enormous administrative undertaking that will put health insurance coverage for millions of Americans at risk.
The Biden administration estimates upward of 15 million people — one-sixth of the roughly 90 million Americans currently receiving Medicaid benefits — could lose coverage, a finding that independent analysts pretty much agree with. Those are coverage losses tantamount to a major economic downturn: By comparison, from 2007 to 2009, amid the worst economic downturn of most Americans’ lifetimes, an estimated 9 million Americans lost their insurance.”
“Florida Republican Sen. Rick Scott’s plan to “rescue America””
“Scott’s proposal would radically overhaul how the federal government operates, forcing Congress to re-pass every federal law or else let them lapse — a move that, in Democrats’ telling, would endanger much of what the government does, including beloved federal programs like Medicare and Social Security.
It’s a short proposal, with little detail to flesh it out. But on its face, its meaning is plain: Every five years, every federal law would need to be passed anew in order to stay on the books.”
““Instead of making the wealthy pay their fair share, some Republicans want Medicare and Social Security to sunset,” Biden said in his State of the Union address. “It is being proposed by individuals. I’m politely not naming them, but it’s being proposed by some of you.”
It was a new twist on a familiar trope: Republican proposes cutting government benefits, Democrat attacks him for it. And it seems to have left a mark: After more than a week of uproar since the State of the Union, Scott formally revised his 12-point “rescue America” plan to specify that its provision requiring every federal law to be re-passed every five years would not, in fact, apply to Social Security and Medicare. And so, at least officially, the senator has papered over the main political weakness of his plan.”
“Social Security will be insolvent by 2034. One of the trust funds for Medicare will be insolvent even sooner. When insolvency hits, both programs will be subject to mandatory benefit cuts. The exact size of the cuts will depend on payroll tax collections in that year, but the current estimate is that Social Security will be able to pay only 80 percent of promised benefits in 2034.
As I wrote last month, when Republicans such as former President Donald Trump were making similar vows not to cut Social Security benefits: Promising to do nothing amounts to promising a roughly 20 percent benefit cut in a little more than a decade. There is no getting around that fact.”
“Standing up for seniors (and everyone else who has been paying into Social Security and Medicare for their entire working lives) requires acknowledging that there is no reality in which the politicians do nothing and the entitlement programs continue functioning normally. The choice is between making changes now or accepting mandatory cuts in about a decade.”
“programs for the poor are only a tiny portion of the U.S. welfare state. In fact, the Congressional Budget Office estimates that more than 60 percent of American households receive more in government benefits than they pay in taxes. To get an idea of just how big the American welfare state has become, consider that those transfer payments from the federal government are equal to 34 percent of all wages and taxes in the U.S.”
“The largest transfer programs are the middle-class entitlements, Social Security and Medicare. In addition, a large portion of the third biggest entitlement program, Medicaid, actually goes to the middle-class elderly and disabled individuals, not the poor. Those three programs alone now make up more than half of all federal spending.”
“we need to understand that, in practice, when an individual pays Social Security taxes, none of those taxes are set aside for that individual’s benefits. Rather, they are used to pay benefits to those who are currently retired. Social Security is merely a transfer payment from workers to retirees. In that sense, it operates exactly the same as any other transfer or welfare program.”
“Many individuals will receive more than taxes paid plus a reasonable amount of interest on those taxes.”
“according to the Social Security system’s trustees, the program faces a future shortfall of more than $43 trillion7 (measured in discounted present value over an infinite horizon—that is, if the government put away $43 trillion today and earned 3 percent interest on those funds, it would have enough money so that, combined with payroll taxes, it could pay all future benefits). Unfortunately, however, the federal government doesn’t have an extra $43 trillion. As a result, there is simply no way that Social Security can pay future benefits without a massive tax increase.”