Ryan’s Assault on Medicare Would Unravel the Value of Social Security Benefits

Amidst the furor over Rep. Paul Ryan’s new budget proposal [1], advocates for strong retirement programs appear to be in a bind. On one hand, Ryan subjects Medicare and Medicaid to scathing cuts and a restructuring agenda so radical that they could no longer be called real insurance for America’s workers. On the other hand, on a welcome note for Social Security advocates, the budget largely bypassed direct cuts to Social Security (though it did propose some dangerous fast-track procedures [2] for ramming through future cuts). So, is it time for at least half a well-earned Hurrah?

As it turns out, not so much. To see why the Republican plan not only violates the promise of Medicare but also of Social Security, we have to zoom out and consider the overarching goal of both these programs. Though passed in different eras, each aims to provide a certain level of economic security for seniors. And they have been wildly successful: Social Security keeps 20 million Americans out of poverty [3], while Medicare has improved life expectancy and access to life-saving medications across-the-board. Both of these programs are designed to avoid the horror stories of seniors having to choose between food and prescription drugs, skip family visits, or forego things that make for a decent life.

The Ryan plan’s omission of direct cuts to Social Security is no doubt a victory for the program’s advocates, whether it was due to sober electoral considerations (polling shows the vast majority of Americans strongly oppose benefit cuts [4]) or the messaging efforts of progressive coalitions like the Strengthen Social Security Campaign [5]. But that progress would be instantly negated if Ryan’s cuts to Medicare are enacted, since people would be forced to reallocate their Social Security income (the part that isn’t already dedicated to fixed expenses – food, mortgage payments, etc.) towards medical expenses, which can’t exactly be skimped on. Grandma, can’t that knee replacement wait until next month?

These cuts amount to a direct assault on the purchasing power of Social Security – as well as any other source of retirement savings a person has amassed. The government may as well send seniors their Social Security checks with a forwarding envelope to send right along to the private insurance companies waiting to collect! In the zero-sum world of retirement security programs, cuts in one program necessarily damage the goals of another. The Ryan plan threatens the entire foundation of programs we have established to care for our elderly for three important reasons:

1. We are already experiencing an environment of decreased retirement security on all fronts. Defined benefit pension plans are becoming scarce, while personal savings like 401(k)s and Individual Retirement Accounts are subject to the whims of the stock market. These declines were exacerbated by the recession, but they started long before that. And there’s no reason to think that during the long recovery to come, the inevitable fits and spurts of growth won’t shock another wave of seniors just as they are retiring and have no time left to recover their savings. In this economic climate of insecurity and fear about the future, Social Security remains a steady stream of income that is protected from inflation and is more reliable than the market’s promise, while Medicare provides a similar degree of certainty for health care. Cutting these programs in this climate signals a supreme lack of concern about the plight of retirees.
2. Seniors spend a disproportionate amount of their income on health care, and the Republican plan expects them to pay even more. Currently, elderly persons pay on average 1 in 5 dollars out-of-pocket [6] for health care that is not covered by Medicare, Medicaid or any other insurance. That’s 20% of all disposable income in retirement – on top of the thousands of dollars they’ve already contributed to Medicare over their lifetime.
   
   Make no mistake: Ryan’s plan does nothing to contain the cost of health care itself, and so it will make no real savings over time: it simply increases the amount seniors will have to pay out-of-pocket for whatever is not covered by the voucher amount. Even the voucher will cover increasingly less over time as health care costs continue to increase – especially since people’s health care needs increase as they age. The White House reports that in the first year the Republican plan goes into effect, a typical 65-year-old who becomes eligible for Medicare would pay an extra $6,400 [7] for health care, more than doubling what he or she would pay if the plan were not adopted. The sad truth is that this doesn’t even help total costs: excess payments to for-profit providers go through the roof [8] under Ryan’s plan, expected to rise five-fold by 2030 from what they are today.
3. Social Security COLA payments are far too small to keep up with these rising costs. Most years, Social Security benefits are boosted with a Cost of Living Adjustment that is supposed to keep pace with inflation. The purpose of the COLA is to retain the purchasing power of the benefit by countering inflation, making sure it stays at a neutral level. Some might believe that the yearly COLA increase could (at least partially) compensate for the increasing medical costs. But the math just doesn’t hold up. As Richard Eskow writes [9]:
   

   According to the Congressional Budget Office (CBO), seniors entering [Medicare] in 2030 can expect to pay $20,000 out of their own pockets [10] for health care. If Social Security payments continue to be adjusted at the same rate they were over the last decade, the average person on Social Security will receive a little over $21,000 that year…. Even if we take [the CBO’s] more conservative estimate, the new Republican proposal will use up the average person's entire Social Security benefit within ten years of its taking effect.

   COLA or not, the pace of growth of health care will eventually swallow Social Security – but maybe this is Ryan’s plan all along.

The moral of the story is that demolishing Medicare is, in addition to being terrible policy on its own, is just another way of taking a crack at Social Security. They are two sides of the same coin, and the foundation of reliable retirement security is fundamentally damaged if either of these two programs is cut.

There are also political lessons for Ryan’s budget plan, which will be voted on this week. The every-man-for-himself strategy of some groups on the left trying to prevent cuts for their particular program-of-choice has failed, and it will fail again. This is a time for progressive coalitions that revolve around the same sets of values – economic security, prosperity, fairness to our seniors – to come together and articulate a vision of these programs that goes beyond dollars and cents. More than the defensive rationale offered thus far by the White House for opposing Social Security cuts, a vision like this could remind Americans what these programs mean in a way that goes beyond statistics or graphs. Only such a vision can generate the political support we’ll need to carry us through the coming battles.