The truth about ‘greedy’ seniors and the ‘war’ between generations

By Mark Miller

CHICAGO (Reuters) – Former U.S. senator Alan Simpson summarized the argument well: seniors fighting Social Security benefit cuts were nothing more than “greedy geezers” stealing from young people “who are going to get gutted.” The Wyoming Republican’s memorable phrase from 2012 is a good example of the colorful language of so-called intergenerational warfare – pitting generations against one another with zero-sum-game economic arguments.

That kind of rhetoric might be useful for some politicians, but it is economic nonsense. Families do not live in economic silos, separated from one another, and some recent evidence shows that a large segment of the senior population is anything but greedy. In fact, they are struggling to meet basic living expenses – and the economic pain also affects younger family members.

Consider the results of a recent survey by AARP.  It found that one-third of midlife adults with at least one living parent (32%) are providing financial support to them, usually for living expenses such as groceries and medical costs. More than half of midlife adults (54%) provided $1,000 or more to their parents in the last year; within that group, 34% provided help ranging as high as $5,000, and 13% provided help as high as $10,000.

“I think some people have an image of the older generation living high on the hog, draining America’s coffers by spending their Social Security on cruises to the Bahamas,” said George Mannes, senior editor of the AARP magazine. “But a lot of older people are really living close to the bone.”

The AARP survey results are disturbing – but really only hint at the number of older households coping with financial stress.

A more detailed measure is the Elder Index, produced by the Gerontology Institute at the University of Massachusetts Boston. The index measures the cost of living for older people living as couples or alone – but independent of children. It is built around the typical budgets of seniors.

“It’s very stripped down – it doesn’t include anything anyone would remotely consider unnecessary,” said Jan Mutchler, a professor of gerontology at the university. That means expenses like food, housing and utilities and minimal levels of transportation – and of course, healthcare costs.

The index is calculated for every county in the United States, which means it takes into account regional variances in the cost of living.

The university recently released new data for 2019, and it shows that 50% of Americans over age 65 living alone have incomes that are below the index – in other words, they lack the resources to pay for their basic living needs. For couples – who usually benefit from two Social Security checks and are more likely to have other income – the comparable figure is 23%.

Those figures are shocking, and they are much more dire than the federal measure of poverty used to establish eligibility for many state and federal assistance programs. For example, a measure used by the U.S. Department of Health and Human Services defined poverty for single people last year at annual incomes of $12,490 and $16,910 for couples. That translates into poverty rates of 18% for singles and 5% for couples – much lower than what the Elderly Index suggests.

These elders live in what Mutchler calls a “gap.” “They’re not poor enough to be considered poor by the federal government, but they fall below what they need to get by and so they’re struggling.”

REMEDIES

The best way to ease this economic stress is through strengthening our two key social insurance programs. “Strengthening and stabilizing Social Security and Medicare is very important,” Mutchler said. “And then, we should strengthen and expand support for the housing needs of older people.”

To which I would add – not just older people today. Strengthening our social insurance programs will be even more beneficial for young people, who will arrive at retirement with smaller retirement accounts and much less likely to lay claim to a traditional defined benefit pension.

Social Security reform has been a hot topic on the presidential campaign trail this year, with Democrats competing for pole position as champions of expanded benefits.

A review of candidate positions on Social Security reform by the Center for Retirement Research at Boston College found several Democrats backing across-the-board benefit expansion, and a larger number favoring increases targeting vulnerable seniors. The latter include increasing Social Security’s special minimum benefit, which aims to keep very low-income workers out of poverty in retirement; expanding Social Security benefits for caregivers; and raising benefits for surviving spouses.

Targeted increases enjoy broad bipartisan support. A 2016 commission on retirement security organized by the Bipartisan Policy Center  endorsed several ideas of this type.

“It’s entirely appropriate to focus on parts of the population where current benefits are inadequate,” said Shai Akabas, director of economic policy at the Bipartisan Policy Center. “People with low incomes can work a long career and still be getting benefits below the poverty line, or not very much above it. We need to make sure seniors who have worked for many years are not forced to live in poverty in retirement.”

President Donald Trump ran in 2016 opposing any cuts to Social Security benefits and pledged to “protect” Social Security in his recent State of the Union address. But he also recently hinted that he might push for benefit cuts in a second term in an interview with CNBC. And his 2021 budget plan, unveiled this week, contains an array of cuts to social insurance and safety net programs, including tightened eligibility requirements for Social Security’s disability program.

No moderator has posed a question about Social Security to candidates at any of the presidential debates so far. Perhaps they think it is a topic of interest only to the geezers, or the “OK boomers.”

But they would be wrong.

(Reporting by Mark Miller in Chicago; Editing by Matthew Lewis)

 

Capital One says information of over 100 million individuals in U.S., Canada hacked

FILE PHOTO: The logo and ticker for Capital One are displayed on a screen on the floor of the New York Stock Exchange (NYSE) in New York, U.S., May 21, 2018. REUTERS/Brendan McDermid

(Reuters) – Capital One Financial Corp said on Monday that personal information including names and addresses of about 100 million individuals in the United States and 6 million people in Canada were obtained by a hacker who has been arrested.

The suspect, a 33-year-old former Seattle technology company software engineer identified as Paige Thompson, made her initial appearance in U.S. District Court in Seattle on Monday, the U.S. Attorney’s office said.

According to a complaint filed in the District Court for the Western District of Washington at Seattle, Thompson posted information from her hack, which occurred between March 12 and July 17, on coding platform GitHub. Another user saw the post and notified Capital One of the breach.

Law enforcement officials were able to track Thompson down as the page she posted on contained her full name as part of its digital address, the complaint said. Capital One said it identified the hack on July 19.

A representative for the U.S. Attorney’s office said it was not immediately clear what the suspect’s motive was.

The incident is expected to cost between $100 million and $150 million in 2019, mainly because of customer notifications, credit monitoring and legal support, Capital One said.

The hacker did not gain access to credit card account numbers, but about 140,000 Social Security numbers and 80,000 linked bank account numbers were compromised, Capital One said. Other personal information accessed included phone numbers and credit scores.

About 1 million social insurance numbers of the company’s Canadian credit card customers were also compromised.

The Capital One hacker was able to gain access to the data through a misconfigured web application firewall, the U.S. Attorney’s office said.

Credit-reporting company Equifax Inc said last week it would pay up to $700 million to settle claims it broke the law during a 2017 data breach when roughly 147 million people had information, including Social Security numbers and driver’s license data, compromised.

Capital One shares fell 4 percent in late extended trading.

(Reporting by Uday Sampath in Bengaluru; Editing by Sonya Hepinstall and Peter Cooney)

Medicare hospital fund reserves likely to be exhausted in 2026: U.S. report

FILE PHOTO: U.S. Administrator of the Centers for Medicare and Medicaid Services (CMS) Seema Verma (C) is joined by Concerned Women for America CEO Penny Nance (L) at the White House in Washington, U.S., April 13, 2017. REUTERS/Jonathan Ernst/File Photo

(Reuters) – Medicare’s hospital insurance fund will be depleted in 2026, as previously forecast, and Social Security program costs are likely to exceed total income in 2020 for the first time since 1982, according to a government report released on Monday.

The report from the board of trustees for Social Security and Medicare also projected that Social Security funds could be depleted by 2035, leading to potential reductions in expected payouts to retirees and other beneficiaries.

U.S. healthcare costs are expected to be a hot topic during the 2020 presidential campaign, with uncertainty around possible cost-cutting solutions already weighing on healthcare stocks this year.

Senator Bernie Sanders, among a large field of contenders for the Democratic presidential nomination, has unveiled a “Medicare-for-All” plan that would eliminate private insurance and shift all Americans to a public healthcare plan.

However, Republicans have denounced the proposal as impractical and too expensive.

“At a time when some are calling for a complete government takeover of the American health care system, the Medicare Trustees have delivered a dose of reality in reminding us that the program’s main trust fund for hospital services can only pay full benefits for seven more years,” Seema Verma, administrator for the Centers for Medicare & Medicaid Services (CMS), said.

The report said costs associated with the Medicare Supplementary Medical Insurance (SMI) trust fund, which covers drug costs in Part B and D in the program for seniors, are likely to grow steadily from 2.1 percent of gross domestic product in 2018 to about 3.7 percent of GDP in 2038, given the aging U.S. population and rising costs.

Cost projections for Part D drug spending, which covers prescription medicines obtained at the pharmacy, are lower than in last year’s report because of slower price growth and a trend of increasing manufacturer rebates, CMS said.

Part B primarily involves specialty drugs administered on an in-patient basis.

Trustees project that the SMI fund for Part B and Part D will remain adequately financed into the indefinite future because current law provides financing from general revenues and beneficiary premiums each year to meet the next year’s expected costs.

The Trump administration in January proposed a rule that would overhaul the use of rebates in government-run healthcare plans, potentially ending a decades-long system under which drugmakers provide large discounts off the list price of their medicines to benefits managers and insurers rather than to consumers.

(Reporting by Tamara Mathias in Bengaluru; Editing by Bill Berkrot)

A higher Social Security retirement age comes with risks for many workers

FILE PHOTO: An elderly couple looks out at the ocean as they sit on a park bench in La Jolla, California November 13, 2013. REUTERS/Mike Blake

By Mark Miller

CHICAGO (Reuters) – Is it time to raise the Social Security retirement age? The idea crops up often as a partial fix for the long-term financial challenges facing the program.

A higher retirement age would reduce the number of years on average that people receive benefits, as a way to cut program costs. But according to an economist at the Urban Institute who specializes in employment and retirement decisions made by older Americans, raising the retirement age would inflict serious harm on roughly one-quarter of Social Security beneficiaries.

In a report issued by the Urban Institute last month, Richard W. Johnson examines the arguments in favor and against a higher retirement age, considering trends and disparities in American workers life expectancy, health status and the labor market conditions that older workers face.

When Social Security was created in 1935, benefits began at age 65. Starting in 1956 for women, and in 1961 for men, retirees could claim benefits as soon as age 62, but monthly benefits were reduced permanently depending on how early they filed. Meanwhile, the age when 100 percent of earned benefits are paid – the full retirement age (FRA) – began to rise gradually under reforms legislated in 1983. The FRA is gradually increasing to age 67 for workers born in 1960 or later; for example, workers born between 1943 and 1954 reach their FRA at age 66; for people born in 1955 the FRA will be 66 and two months.

Social Security faces a long-run financial imbalance – the program is now spending more than it takes in annually in payroll taxes. The Social Security trustees project that the program will be unable to pay full benefits beginning in 2034; unless Congress takes action, benefits would be slashed across-the-board by about 25 percent.

Congress has three options for avoiding this dire outcome. It could raise revenue by increasing the payroll tax and increasing the share of wages subject to the tax. A second option is to cut benefits by reducing cost-of-living adjustments or through other benefit formula changes. The third option is raising retirement ages – effectively reducing the number of years, on average, when benefits are received. That could close roughly 27 percent of the long-term shortfall, Johnson calculates.

A LONGEVITY ARGUMENT

Rising longevity is one argument often made in favor of that last reform. Americans live several years longer, on average, than they did when the early retirement age was introduced, and longevity is forecast to rise 2.8 years by 2050, Johnson reports. The program’s costs will rise as people live longer, he told me in an interview. Is there a certain number of years of life we want to finance in retirement that we maintain by shifting that period later?

The retirement age debate usually focuses on the FRA, but Johnson focuses mainly on whether the early retirement age should be increased. If we want to raise the FRA, we also would want to raise the early age, he said. If the gap between the two gets too large, it would create inequities.

Here is what that means. Johnson calculates that filing at 62 currently translates into a 30 percent monthly benefit cut compared with filing at the FRA; if the FRA were increased to 69 without lifting the early age, that early-filing reduction would jump to a whopping 40 percent. That might be a wash in lifetime benefits, depending on how long you live, he said. But the larger point for most retirees is, you pay your bills on a monthly basis.

But increasing the early filing age would create hardships for many workers. If it were raised to age 65, Johnson estimates that 25 percent of workers aged 62 to 64 would face serious financial problems; that represents the share that is not working and has a health-related work limitation.

These workers are more likely to have health problems in their early sixties that limit their work ability, Johnson concludes, and many will not be able to pass the strict medical and functional screens of Social Security Disability Insurance. He also cites ongoing reluctance among employers to hire older workers, and the fact that the recent gains in life expectancy have gone mainly to people with more education and income.

We were seeing improvements in health status until 2000, but those have leveled off and we don’t know what will happen in the future, Johnson said. The most concerning part is we’re now seeing some indications that health status is declining for people in their sixties now, and for people in their forties and fifties, mainly due to rising obesity rates. All of that will make it much more difficult to raise retirement ages.

Rising income inequality also contributes to the problem, he finds. Lower-income workers are more likely to retire early – and that means they will have lower incomes throughout retirement. Conversely, median income for older households without any health-related work limits rose 34 percent from 1996 to 2014, adjusted for household size and inflation. This was due to their greater likelihood of staying employed and receiving wage income.

What kind of policy changes could be made to buffer the most vulnerable people from higher retirement ages? Johnson suggests exempting workers in physically demanding occupations; making the Social Security benefit formula more progressive than it already is to favor low-earners even more; expanding employment services and training and expanding unemployment insurance for older workers.

But he concedes all of these would be challenging policies to achieve from a political standpoint.  Most programs for desperate people don’t get a lot of funding, so the prospects are not great,  he said. There is a real risk that we could raise the early Social Security filing age and not offer enough protections to the people most at risk.

(The opinions expressed here are those of the author, a columnist for Reuters)

(Reporting and writing by Mark Miller in Chicago; Editing by Matthew Lewis)

Author delves into U.S. Social Security’s origins to debunk myths

A sign is seen on the entrance to a Social Security office in New York City, U.S., July 16, 2018. REUTERS/Brendan McDermid

By Mark Miller

CHICAGO (Reuters) – Social Security is unaffordable due to our aging population.

Social Security is a driver of our national debt.

Social Security is built on a house of cards – its assets are just IOUs.

No doubt you have heard some or all of these statements from politicians and pundits debating how to “fix” our most important retirement program. The combined trust funds for the retirement and disability programs will be depleted in 2034, a problem that would require a draconian 23 percent across-the-board benefit cut if left unaddressed. (https://reut.rs/2K8VASy)

But Nancy Altman argues that these claims are not just wrong, but part of a purposeful campaign to undermine and dismantle Social Security that has been underway since the program’s creation in the 1930s.

Altman makes her case in a provocative new book, “The Truth About Social Security: The Founders’ Words Refute Revisionist History, Zombie Lies, and Common Misunderstandings” (Strong Arm Press).

Altman is a well-known progressive advocate for defending and expanding Social Security. She also is an expert on the program’s history, having served as a staff member of the bipartisan 1983 commission that developed the most recent set of important reforms to Social Security. Altman also serves on the Social Security Advisory Board, an independent, bipartisan agency that advises the White House, Congress and Social Security Administration.

Her new book debunks a number of prevalent myths about Social Security, relying on the historical record left by President Franklin Roosevelt and the other founders of the program.

Below is an edited version of my recent interview with Altman, where I asked her to discuss some common misperceptions about Social Security’s origins.

Q: Why is it so important to pay attention to the vision of the founders of Social Security? As you note, the program has always evolved and changed over time.

A: Opponents of Social Security mischaracterize the founders’ vision and then use the mischaracterization as a shield against improvements which the founders, I believe, would have applauded. In response to proposals to expand benefits, for example, opponents argue that the founders never intended Social Security to be more than a foundation on which to build.  So, it is important to set the record straight.

Q: You’re referring to the often-heard comment that Social Security is part of a “three-legged stool” of retirement security. Not true?

A.  It is historically inaccurate. The metaphor of a three-legged stool was first used in 1949 by an insurance executive whose company sold supplemental annuities. There is no evidence whatsoever that Roosevelt and his colleagues intentionally designed Social Security simply to be part of what is needed in retirement. In fact, there is substantial legislative history that the exact opposite was true.

Q: What is the role of Social Security in the federal government’s debt problems?

A: Social Security does not and, by law, cannot add even a penny to the federal deficit. It can only pay benefits if it has sufficient revenue not only to cover all benefit costs but also the administrative costs associated with the payment of those benefits. And it has no borrowing authority to make up any shortfall.

The federal government issues Treasury bonds to finance its own debt, and some of those bonds are purchased by Social Security. Though Treasuries held in reserve by Social Security are sometimes derisively called “IOUs,” they are not casual promises. They are legal arrangements, which have the same legal status as bonds bought by you, me, a foreign government, or any other person or entity that invests in U.S. Treasuries.

Q: We hear often that Social Security is becoming unaffordable because our population is aging so fast. You argue this is incorrect. Why?

A: People are living somewhat longer, on average. It is not the cause of our aging population, however. Rather, it is due to the decline in our fertility rates, and a resulting shift in the ratio of beneficiaries to workers. Social Security is extremely affordable – at the end of the 21st century, Social Security will cost, as a percentage of GDP, around what it costs today. That assumes that life expectancies continue to improve.

Q: Why should Social Security not be means-tested? After all, Warren Buffett and Bill Gates don’t need their Social Security benefits, right?

A: Social Security is a benefit that is earned; it is not based on need. No one would argue that Buffett or Gates should not collect on their fire insurance, if their home burned down, just because they didn’t “need” the proceeds. The same is true with Social Security. No one has to claim their Social Security benefits, but everyone should know that they have earned them.

Q: What should be done to fix Social Security’s financial problems, and should we be doing something beyond that?

A. The only problem that I believe Social Security has is that its benefits are too low. They should be increased. Expanding Social Security and restoring it to balance by requiring the wealthiest to pay their fair share is a solution to a number of challenges. In addition to addressing our looming retirement income crisis, it would slow our rising income and wealth inequality and the decline of our middle class.

(Editing by Matthew Lewis)

The facts about Social Security, Medicare may surprise you

An elderly lady walks in Copacabana in Rio de Janeiro

y Mark Miller

WASHINGTON (Reuters) – While the era of “alternative facts” dawned in Washington last week, experts from across the ideological spectrum gathered in the capital for a review of real facts about our two most important retirement programs: Social Security and Medicare.

The annual policy research conference of the National Academy of Social Insurance (NASI) focused on the group’s new report to the Donald Trump administration and Congress on the future of all our social insurance programs – those that cover retirement, but also those that protect the disabled, jobless, impoverished poverty and frail.

NASI is a consortium of many of the nation’s top social insurance researchers. The new report includes input from 80 experts in the field with a wide array of ideological and political perspectives. It describes the challenges facing these programs and provides a menu of solutions reflecting a variety of ideological perspectives.

As such, it reflects a set of consensus facts that should inform the looming debates about the future of social insurance at a time when these programs certainly will be under assault from budget cutters.

Here are a few facts on Social Security and Medicare that caught my eye:

FACT: Social Security benefits already have been cut. Raising the retirement program’s full retirement age to 70 is mentioned often as a way to solve the program’s long-term imbalance between costs and revenue. But did you know that Social Security benefits already are scheduled to be cut 24 percent? That is the average cumulative reduction in enrollee benefits by 2050 due to reforms passed by Congress in 1983, driven mainly by a gradual increase in full retirement ages from 65 to 67.

Since Social Security cannot deficit-spend as a matter of law, legislative reform will be needed by 2034 in order to avoid an immediate 21 percent cut in benefits. The reforms could include new revenue to the system, benefit cuts or a combination of both. Raising the retirement age to 70 would effectively cut benefit payouts by raising the bar on the age an enrollee must reach to receive her full benefit.

Raising the retirement age would whack benefits further, and we have much better options, including lifting the cap on wages subject to property taxes, or raising payroll tax rates very gradually.

FACT: Social Security matters to high-income households. We will hear calls to transform it into a means-tested program for the poor. But Social Security is the largest source of income for a majority of retired workers and their surviving spouses.

Eighty-four percent of all people over 65 and about 90 percent of surviving spouses over 65 receive income from Social Security, and for three-fifths of them, Social Security makes up at least 50 percent of their income. “Many upper middle class people assume that it’s mostly important for poor people, but that’s not the case,” said Benjamin Veghte, NASI’s vice president for Policy.

Proposals to restore solvency by means-testing Social Security would tear at a core design feature – its universality. At a time when a majority of households have not been able to save adequately for retirement, Social Security will remain critical.

MEDICARE: NO CAUSE FOR ALARM

FACT: Medicare is not facing a financial crisis. Politicians pushing Medicare reforms often claim that the program is teetering on the brink, but the NASI researchers conclude otherwise.

Let us start with the basics on how Medicare’s various “parts” are funded. Part A (hospitalization) is funded mainly by a 2.9 percent payroll tax split by employers and workers. For Parts B (outpatient services) and D (prescription drugs), 75 percent of funding comes from general federal revenue, with the remainder funded by enrollee premiums.

The Hospital Insurance trust fund that finances Part A can meet all its obligations through 2028, according to the program’s trustees. At that point, incoming revenue would cover 87 percent of expected costs, so there is a need to close the shortfall with additional revenue, less spending or a combination of the two.

But the NASI experts note that historical trustee projections regarding how soon the trust fund will become insolvent have varied widely – as little as two years, and as much as 28. “There’s no big cause for alarm in the current projection,” said Veghte.

Parts B and D cannot run out of money because they have permanent appropriations to cover whatever premiums do not. The cost of those programs will grow in the years ahead as the population ages, and as healthcare costs rise – especially prescription drugs. But that trend is not driven by Medicare itself, but by the cost of healthcare.

Overall Medicare spending is not out of control – per-enrollee outlays rose at an average annual rate of 5.5 percent, somewhat slower than the 6.3 percent average annual growth rate in private insurance spending per enrollee between 1989 and 2014. In addition, cost containment measures within the Affordable Care Act improved the outlook substantially, pushing the insolvency date out by 11 years.

“The problem really is healthcare cost, and how to control it,” said Veghte.

The 200-page report is exhaustive, thorough and authoritative. I encourage anyone interested in the facts on any of our social insurance programs to download it and read. You can find it here: (http://bit.ly/2kpgtNy)

(Editing by Matthew Lewis)

The Sandwich Generation

I’ve talked quite a bit about being a Baby Boomer and the phenomenon surrounding that mega-group of people born between 1946 and 1964. Baby Boomers have a unique set of challenges, some brought on by choice, and others a result of chance.

One of the challenges of a country with so many Baby Boomers is how to provide health care for this aging demographic because the generation before and the generations after were simply not as large. We thought we had the problem figured out with Social Security and Medicare but now we are finding that these social programs will have trouble keeping up with the demand for caring for an aging mega-group such as the Baby Boomers, particularly as this group lives longer.

But the problem of health care for the Boomers is only one issue they (we) are facing. Since many of the Boomers were encouraged by society to wait longer for marriage and family, or it just happened that way, some are still raising children and sometimes grandchildren while they also care for aging parents, a.k.a The Sandwich Generation. They are the ones in the middle with all the pressure! Continue reading

Over 100 Arrested In Social Security Scam

Arrests are being carried out in over 10 states as part of an investigation into a massive Social Security fraud scheme.

The joint federal and state investigation alleges that over $24 million has been dispersed in fraudulent disability payments. At least 102 of the people being arrested are beneficiaries that claimed to be unable to work a job or leave their home but were witnessed leading very active lives.

In addition, lawyers, disability consultants, and recruiters are facing multiple charges for their parts in the scheme including coaching people to defraud the government.

A source told the Wall Street Journal a number of former NYPD and NYFD members will be arrested as part of the fraud.

The Social Security Administration has been focusing on fraud under pressure from Congress to tighten up the disability process. Six months ago, investigators arrested 70 people from Puerto Rico on similar charges.