Protect Social Security and Medicare

“We should privatize Medicare and Social Security and cut Medicaid.”

Man, not this drum again! The attack on Medicare began in the 1970s with a proposal to turn the nation’s BEST public health program over to for-profit corporations and privatize Medicare. The false premise was that the free market would create competition that could drive down healthcare costs and turn a profit for investors. That strategy works in many parts of the economy, but not in healthcare.

Healthcare by its very nature cannot be a free market good. It isn’t like purchasing a cell phone where you can identify prices, compare specs of different models, read reviews and ultimately choose to walk away if you don’t like the options.

Patients don’t wake up in the morning and choose to take medications because they want to, but because they need to.

Healthcare emergencies like heart attacks and strokes don’t allow patients or their families the luxury to price shop, compare facilities, or reviews. Healthcare can only turn a profit at the expense of the quality of care.

This is exactly what Medicare Advantage (“MA”) plans have demonstrated every year since their creation in 2003. It turns out the Advantage part is the benefits to the insurance companies and not the patients.

The experiment of privatization of Medicare is a failed one. In addition to actual physical patient harms from privatized Medicare, MA plans are inefficient, have high administrative burdens, and cost taxpayers significantly more. If you have ever wondered if there is money to be made by selling Medicare Advantage plans, think about all the advertising cluttering the airwaves and mailboxes from September through December, not to mention, the endless phone calls every year. All those advertising funds come from somewhere, and it turns out it is from the US taxpayers. The government pays more per person in MA plans than in Traditional Medicare (“TM”) plans, at a conservative estimate of 140 billion dollars a year in excess payments.

If you wanted to fix Medicare, you would get rid of the privatization portion of the program, Medicare Advantage, and instead use that money to improve traditional Medicare. If that was done, we could eliminate the need for people in traditional Medicare to purchase Medigap insurance. Additionally, we could include hearing, dental, and vision for everyone in Medicare and Medicaid ($84 billion), or free people from having to pay a premium for Medicare Part B ($131 billion).

Privatization outcomes for Medicare are even worse for Medicaid, because physician/provider reimbursements are greatly reduced, and the cost-cutting efforts of privatization would severely limit care options. The reality of privatization of Medicaid limit healthcare options, making the poor sicker, which in turn cost the taxpayers more. This subject is complex enough that it requires another post focused specifically on Medicaid.

Let’s move on to Social Security, THE most effective program, lifting 22 million Americans (as of 2023) out of poverty.

Following the start of the Great Depression poverty among the elderly dramatically grew. It is estimated that in 1934 over half of all American’s elderly lacked sufficient income to be self-supporting.

Why the changes from previous generations? Four things contributed to undermining institutions/families.

• The Industrial Revolution – transformed the majority of Americans from self-employed agricultural workers to employed wage earners.

• Urbanization of America – In 1890 28% of Americans lived in cities, by 1930 it was 56%. Americans moved from farms and rural communities to large cities – where the factory jobs were.

• The disappearance of the extended family – For most of human history we have lived in extended families. When a family member became too old or sick to work, the other family members assumed the responsibility for their support. However, when able-bodied people left the farm to seek employment in cities, parents and grandparents often stayed behind.

• A marked increase in life expectancy – Americans began living significantly longer. From 1900-1930 the average life expectancy increased by 10 years.

There were various “Welfare” programs in states before Social Security, but they were just that, welfare, and many older Americans were too ashamed to be on a welfare system, or too proud.

When President Roosevelt took office he submitted to congress a plan for Social Insurance which would address the problem of economic security for the elderly by creating a work-related system that would allow workers to provide for their own future.

The Social Security Act was signed into law by President Roosevelt on August 14, 1935. The act created a social insurance program designed to pay retired workers 65 or older an income after retirement. Social Security is the most effective program in preventing poverty among older adults, lifting millions of seniors above the poverty line and providing crucial income for many retirees, especially those with lower incomes.

This reliable income provides a way for older adults to spend money on goods and services which helps support local businesses and spurs economic development. Additionally, knowing they have a guaranteed income source can provide peace of mind for seniors, helping reduce stress and anxiety.

Social Security (“SS”) benefits account for approximately half of all income received by adults over 62. Social Security makes up 2/3 of the income for the poorest receiving payments.

Currently, SS pays about $100B more annually than it takes in, and that shortfall is paid by dipping into a trust fund that was created when baby boomers were in the workforce and contributing more than what SS was paying out in benefits. But now that Boomers are retiring and withdrawing, there is a shortfall.

So we have to do something right? Well, we could make one change immediately that would have a positive effect on SS, and help keep it solvent for years to come. Raise the cap! The cap is the amount of earnings that are subject to FICA. Right now the cap is $176,100 and we pay 6.2% on all wages into the fund, as do employers. One of the reasons you often hear, “lower payroll taxes”, is because employers do not want to pay the matching 6.2%. (Side note, if you are self-employed, like I am, you pay the full 12.4%)

If we removed the cap for Social Security (Medicare already does not have a cap) then 6% of US workers who earn more than the maximum would contribute more than $388 Billion, yes with a “B”. That would certainly cover the shortfall and secure Social Security’s future.

The solution, however, is NOT to privatize SS or allow people to withdraw and invest the funds themselves. If most people could save and/or invest, they would have been doing it already.

Forty percent of seniors ONLY have social security. Additionally, all we have to do is look at the greed and abuse on Wall Street to realize that the free market is not the best basket we want to put all of our elderly eggs in.

When I think of SS, I think of my grandmother, who lived with us when I was a teenager. She relied on her monthly check. She had never worked but drew on her ex-husband’s SS, one of the WONDERFUL features of the program. She would not have been able to make it without SS.

Who are we if we do not provide for the weakest, poorest, frailest, and oldest among us?

I hope this outlines why I WILL NOT WORK TOGETHER TO destroy the safety net that is so needed by our seniors, orphaned, and disabled.

Working together requires that we all accept a set of facts, we may disagree about how to tackle the solutions, but facts are facts.