Candidates avoid Medicare, Social Security finance woes
By Associated Press | June 23, 2016, 6:50 EDT
WASHINGTON (AP) — The nation’s framework for economic security and health care in retirement is financially unsustainable, but you wouldn’t know it from listening to the presidential candidates.
This week the Social Security and Medicare trustees warned of tough choices ahead to keep the two programs solvent over the long run. Together, Social Security and Medicare account for about 40 percent of federal spending, providing inflation-protected monthly checks and health insurance for tens of millions of seniors and disabled people. Working families benefit, too, when elders can live independently.
But the taxes supporting both programs can’t keep pace with rising spending. Over time, Medicare and Social Security will rely more and more on accumulated reserves in their trust funds. Eventually there won’t be enough to pay full benefits. Medicare’s trust fund will run out in 2028, and Social Security’s in 2034.
The candidates have said little to acknowledge the issue, although it’s at the root of the government’s budget problems. They may not be able to avoid it once in the White House. Health care costs, in particular, can be volatile. And liberals and conservatives agree it’s important to act sooner rather than later, to avoid disruptions for retirees and workers.
Unusual for a Republican, Donald Trump has promised not to cut Social Security, Medicare or Medicaid, the health care program for low-income people. His campaign has suggested he’d revisit government benefit programs — known as entitlements — after his tax-cut plan boosts economic growth. But critics say the Trump plan would just pile up more debt, making it harder to deal with changes to big programs.
“I don’t know where he’s going to get the money,” said economist Douglas Holtz-Eakin, president of the American Action Forum, a center-right think tank. “Maybe he’s got it in the Cayman Islands or something?”
Hillary Clinton, the presumptive Democratic nominee, has proposed expanding Social Security benefits for widows and family caregivers, as well as making upper-income earners pay more to support the program. She may have to go further, since liberals, including Vermont Sen. Bernie Sanders, are pressing for expanded benefits. President Barack Obama also wants to do more.
On Medicare, Clinton wants to give the government authority to negotiate drug prices but doesn’t see a need for major restructuring. Advocates, meanwhile, want Medicare benefits expanded to include dental care, vision and hearing aids.
“Just when you thought we couldn’t go any further on pandering, it turns out we have,” said Maya MacGuineas, president of the Committee for a Responsible Federal Budget, a nonpartisan group that advocates for reducing federal deficits. The election is perpetuating a myth that nothing needs to be done, she added.
The future of entitlement programs has been debated in presidential elections for decades, but this year seems different. Social Security has long been called the “third rail” of American politics because touching it can doom candidates. Now, Medicare looks to have taken on the aura of invulnerability as well.
Advocates for older people are not quite ready to celebrate.
“This isn’t an election year like any other that we’ve seen,” said Nancy LeaMond, a vice president of AARP, the seniors lobby. “The fact that it hasn’t focused on issues, and it’s more about personalities and nicknames, means that there hasn’t been very much discussion in the press.”
Ignoring the problems doesn’t mean they get magically resolved.
Previous overhauls of Social Security and Medicare involved a combination of benefit cuts and tax increases. With Medicare, cuts to hospitals, insurers, doctors and other service providers also play a major role. But there’s probably less room for provider cuts now because Obama’s health care law and budget deals with Congress already have reduced payments.
Social Security is the bigger program, but its fiscal problems may be easier to deal with. That’s because Medicare spending is driven not just by an aging population, but by unpredictable health care costs.
Social Security proposals in the mix include tax hikes and a somewhat stingier formula for annual cost-of-living increases. Medicare proposals include privatizing the program, with the government contributing a set amount for health insurance, as well as gradually increasing the eligibility age to 67, from 65 currently. Medicare tax increases aren’t ruled out, either.
For now, House Speaker Paul Ryan, R-Wis., is the rare national political figure keeping the entitlements debate alive. But Ryan studiously avoids tax increases, which would have to be part of a deal to bring Democrats along.
Procrastination will only make the inevitable changes more wrenching, while starting now would allow for gradual adjustments.
“If you wait until the last minute, it is much harder to do structural reforms,” said economist Doug Elmendorf, dean of the Kennedy School of Government at Harvard. “You don’t want to change the rules for people while they are receiving benefits, or when they are about to start receiving benefits.”