AARP has common sense solutions for Medicare, Social Security

Margaret Brackett Contributing Columnist

November 13, 2013

There is a nationwide effort for AARP to listen to public concerns and help Americans have health coverage and have Social Security a self-financed program. Teresa Arnold, AARP South Carolina State Director, addresses two commonsense solutions for Medicare and Social Security.

“Today, Medicare provides guaranteed, affordable health coverage for 49 million Americans. Yet the program faces a number of challenges in the coming years because of rising health care costs and changing demographics. Unfortunately, some in Washington believe the way to address the long-term challenges facing Medicare is to cut benefits or force seniors to pay more. AARP believes there is a better way. We can stabilize the system for future generations and keep the promise we’ve made to seniors with responsible and commonsense solutions that will improve care, reduce costs, and find real savings for taxpayers. We can start by clamping down on drug companies unfair prices, reducing waste and inefficiency, and coordinating patient care so we can improve patient health and safety, and reduce costs by cutting out unnecessary tests and procedures,” said Arnold.

Responsible solutions

Reducing prescription drug costs: Right now, some brand name drug companies are driving up the cost of health care by entering into agreements with generic drug companies that pay the generic company to delay bringing a competing product to the market. These agreements have delayed consumers’ access to less expensive generic drugs.

Let Medicare negotiate lower drug prices: Unlike private insurance plans, Medicare is legally prohibited from negotiating with pharmaceutical companies for lower drug costs. Allowing Medicare to use the bargaining power of its 49 million beneficiaries to negotiate for lower prescription drug prices, particularly for high-priced brand name drugs, could save money for seniors and reduce the cost of health care.

Improve care coordination: In 2010, Medicare spent nearly half of its funding on care for the 14 percent of Medicare beneficiaries who had six or more chronic conditions. By creating systems that better connect doctors and health care facilities and make better use of information technology, we can ensure patients receive safer, better care. More effective care coordination will also reduce medical errors; help prevent dangerous, preventable hospital readmissions; ensure patients are getting recommended care; and save taxpayer dollars..

Cracking down on waste and inefficiency: Right now, payment incentives, as well as fear of litigation, are resulting in unnecessary tests and procedures that drive up health care costs. In addition to payment reform to reward value and not volume, we should look at alternative ways to address medical malpractice claims so that doctors, hospitals and other health care providers focus on improving care including reducing medical errors, not on running wasteful tests and procedures because they fear lawsuits. Any alternative process to address malpractice claims must be designed to help reduce medical errors and ensure that injured patients receive fair and timely compensation for their injuries.

Harmful cuts

Unfortunately, there are several proposals being talked about on Capitol Hill that would undermine the health security of seniors and future generations. For example, some in Washington are considering charging Medicare patients new copays for lab tests and home health services. Such proposals would be harmful to Medicare patients who already pay copays, premiums and deductibles for their doctor, hospital and prescription coverage, spending an average of 20 percent of their income out-of-pocket costs.

Social Security

Social Security is a self-financed program. It is separate from the rest of the budget; financed from employee and employer payroll tax contributions, as well as the interest on bonds held on the Social Security trust funds. Social Security is barred from spending more than it takes in, so it does not contribute to the deficit and will not in the future.

AARP believes that any changes to Social Security, which has run surpluses for most of the last 30 years, must be done within the proper context of ensuring the retirement security of present and future generations of Americans, and not for purposes of reducing the federal budget deficit. We have therefore opposed and will continue to oppose, changes to Social Security for, or within the context of, deficit reduction.

Social Security does face a long-term shortfall, but its trust funds currently hold over $2.7 trillion in special-issue Treasury bonds. The trust funds can only be used to pay for Social Security benefits.

That is why we are calling for a separate debate about retirement security so we can keep the promise to seniors and strengthen the program for future generations, not harmful cuts crammed into a budget deal.

Chained CPI is a harmful proposal that would cut benefits for seniors who have earned their benefits and veterans who have sacrificed so much for our country.

The protection from inflation that the cost-of-living adjustment (COLA) provides is a fundamental part of the Social Security program. A lower COLA would mean seniors, veterans, and people with disabilities would be less and less able to keep up as the cost of the things they spend money on like health care, utilities and prescription drugs keep going up.

Chained CPI would cut Social Security by $127 billion over the next ten years alone taking $2,000 out of the pocket of the average senior. The cut would start now and get bigger every year; hurting seniors the most as they age and spend down their savings. For example, changing the cost-of-living adjustment would mean the average senior would lose $2300 after ten years of retirement. After 20 years, they would lose $8,900.

Washington needs to address our nation’s budget challenges, but not by cutting the benefits seniors have earned through a lifetime of hard work. Some policymakers in Washington want to make changes to Social Security as part of a political deal to increase the nation’s borrowing limit. One proposed change would reduce or eliminate Social Security benefits for people who have incomes above a certain level, otherwise known as means testing.

Social Security benefits have always been provided to anyone who has paid into the system and who meets the work and age requirements. Regardless of their other income—investment, pension, savings—an individual receives Social Security benefits if they have earned Social Security benefits

Although to some means testing sounds like a reasonable measure, it would change the fundamental nature of Social Security as an earned benefit and erode the important relationship between contributions made to Social Security and benefits received from it.

Some policymakers in Washington want to make changes to Social Security as part of a political deal to increase the nation’s borrowing limit. One proposed change would increase the full retirement age for Social Security.

First and foremost, it is important to note that the full retirement age for Social Security is already going on right now as a result of changes made by Congress in 1983. The full retirement age is currently 66 and will continue to rise to 67 for all those born after 1960. Additional increases in the full retirement age would reduce Social Security benefits by around 6 to 8 percent for each year the age increases.

Social Security is not a line item in a budget. It is an earned benefit seniors today rely on and with fewer jobs offering pensions, future generations will rely on it even more. That’s why before any decisions about adjustments to Social Security are made in Washington, we need a national debate about how any of the proposals on the table will affect individuals, families and businesses.