Social Security and Medicare
February 2000
Social Security is a successful program which assists workers, the disabled and their spouses and children. It takes in money from payroll taxes paid by all workers on all or a portion of their income. Historically, the money it took in would go right out to pay benefits to retired or disabled workers or their surviving spouses and children. In recent years, this income has exceeded the guaranteed benefits resulting in a surplus. This surplus was the result of the expanded workforce made up of the large post-war baby boom generation. In about thirty years, these numbers may reverse themselves as the baby boomers reach retirement age, increasing the number of beneficiaries while at the same time, the number of workers contributing to the system declines. This could create an imbalance which can for a time may be buffered by the surplus funds.
Social Security reform continues to be a much discussed issue but with little action taken. Last year President Clinton and Republican members of Congress outlined several steps they would take to strengthen Social Security into the next century. Their approaches differed considerably and, in the end, no legislative action was taken. The Social Security Trustees in their 1999 annual report related more optimistic projections about Social Security's solvency due in large part to the strength of the economy. Both the Administration and members of Congress have said that they will continue to work on strengthening Social Security. It is unlikely that any genuine reform legislation will pass Congress this year.
Medicare provides health care not just to the elderly but also the disabled and low-income individuals. In 1999, 39 million Americans relied on the Medicare program for their health care, with 12% under age 65 and 12% 85 or older. Nearly half of all beneficiaries have incomes below 200% of the poverty level [$15,480 for individuals]. Some of the nation's most vulnerable - the oldest-old [those 85 and older], the under 65 disabled, racial and ethnic minorities, and women - are disproportionately represented among the low-income segment of the Medicare population.
Since its creation in 1965, Medicare spending has grown at the same rate as private insurance. More recently, Medicare spending has slowed, largely the result of changes enacted as part of the 1997 Balanced Budget Act [BBA]. The BBA reduced payments to providers, including Catholic hospitals and health plans. As a consequence of these reductions, the provider community's ability to provide care has been dramatically limited, resulting in harm to Medicare beneficiaries and others who rely on health systems. USCCB and the Catholic Health Association worked throughout the first session of this Congress to urge Congress and the Administration to undo the harm that had resulted to hospitals and other care facilities because of the excessive cuts in reimbursements contained in the 1997 budget act. As a result, Congress increased provider payments in this year's for hospitals, hospices, nursing homes, Medicare+Choice plans, home health agencies, and for durable medical equipment.
There were a number of bills introduced in Congress to reform Medicare. Some of them were based on the Medicare Commission discussions. Though it did not issue a report, the Commission was divided between those who wanted to maintain the program's guarantee of a defined benefit and those who wished to eliminate the guarantee and substitute a defined contribution to the cost of insurance. The President has announced his intention to push for bipartisan Medicare reform that meets the health, demographic, and financing challenges to the program. He will continue to promote his plan to modernize Medicare, including the creation of a voluntary prescription drug benefit. The Republican House leadership has formed a taskforce to develop a proposal to offer a prescription drug benefit to Medicare recipients. It is likely that there will be some legislation related to the prescription drug benefit before Congress this year. However, comprehensive Medicare reform remains a contentious issue and is not likely to be resolved during this session of Congress.
Social Security: In May 1999, the Administrative Board of the U.S. Catholic Conference released a statement, A Commitment to All Generations: Social Security and the Common Good. In the statement, the bishops recognized that the Social Security program is the largest and one of the most successful social programs in the United States because it offers an effective, dignified way for Americans to honor their obligations to the elderly, persons with disabilities, and their dependents.
The statement identifies five key criteria which USCCB will use to evaluate reform proposals.
- Changes in Social Security should not put at risk those individuals and families whose resources are already very limited.
- The disability and survivors' portions of the Social Security program should remain linked to the retirement portion to ensure continuity of commitment to workers and their families in cases of disability and death.
- Any changes made in the tax structure should be weighted in favor of the poor. Those with lower incomes should bear less of the total Social Security tax burden than those who are more affluent.
- Benefit inadequacies with respect to the benefits received by some women should be remedied.
- Principles of equity and concern for the common good support bringing employees from all sectors of the economy into the Social Security program.
Medicare: In a letter sent to the Senate Finance Committee, Cardinal Mahony expressed his concern about the continuing ability of the Medicare program to fulfill its promise to those who rely on its services. He recognized the important role that Medicare plays in assuring genuine health coverage to the elderly and disabled. He noted that the bishops have long demonstrated their commitment to affordable and accessible health coverage for all people both through their public policy work and the numerous Catholic-sponsored hospitals, clinics and nursing homes.
The Cardinal also pointed to the Medicare program which has enabled health care to be offered in ways that recognize and protect human dignity. In order to continue to fulfill this mission, he called upon the Committee to recognize that the nation must commit sufficient resources to ensuring its financial solvency as well as reflecting the advances in medical care. In this time of projected budget surpluses, he urged Congress to dedicate a portion of projected surpluses to strengthening the financial stability of the Medicare program.
While no comprehensive reform of Social Security or Medicare is likely this year, it is still important to educate ourselves as well as members of Congress and candidates for office about the strengths of these programs and urge them to:
- continue the guarantees of both programs, especially for those who rely so heavily on them for basic income and health care support; and
- extend prescription drug coverage through the Medicare program, especially to those most in need.
For more information, contact: Patricia A. King [202-541-3188 or
pking@usccb.org] or Cynthia Phillips [202-541-3235 or
cphillips@usccb.org]