Policies to Promote Economic Security for Families

2010-01-18T12:57:00.002-05:00

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Health Care Should Be Driven by Mission, Not Money

2009-12-18T11:18:00.002-05:00

Philip Caper, M.D.

As health care reform legislation enters a critical phase in Congress, it's important to keep our eye on the ball - elements essential to the success of any reform effort. In order to define those elements, we must have a clear understanding of the nature of the pathology in our dysfunctional health care system.

Modern high-tech health care is a right of the residents of most wealthy countries in the world - except the United States. America is exceptional in this regard. It is also exceptional in being the only wealthy nation where health care is considered to be a business.

To read a PDF of the full article, click here.

The Heart of Power: Health and Politics in the Oval Office

2009-12-18T11:11:00.002-05:00

A Book Review by Philip Caper, M.D.

In many ways, the new book by David Blumenthal and James Morone is a fine dissertation on the role of the presidency and a succession of American presidents, stretching back to FDR, in the formulation of health care policy in the United States. But it does not address a central question. What are the barriers to reform of the American health-care system? Why has it been so difficult for American politicians to create a statutory right to health care for Americans - a right that every other affluent democracy created years ago?

To read a PDF of the full review, click here.

Can the Time Value of Money Save Long Term Care?

2009-10-15T13:51:00.001-04:00

John Cutler
Senior Policy Analyst, United States Office of Personnel Management

Often left behind instead of going to the dance, long term care may finally see its opening in health care reform. Until now, few reform proposals bothered with long term care (LTC) in spite of the fact that a much greater share of the population is at risk compared with the scope of the “uninsured” for general health care. In addition, social insurance advocates and private insurance supporters often were in an uneasy alliance around how to approach any LTC reform, further hindering chances to address it. But with the reform of health care likely this year, LTC supporters have, for the most part, coalesced around Senator Kennedy’s CLASS Act as the most likely ticket to the dance.

More on that later but it would be remiss not to mention the previous ideas that have been out there on the dance floor. For instance, adding an expanded chronic care benefit to health care or to Medicare has been suggested. While this could “medicalize” long term care, it increases the chance of LTC being included in health care reform. In fact even the nomenclature would change, with long-term services and supports (LTSS), the new term of art. Other interesting LTC reform proposals have been advanced by the provider trade groups, most notably AAHSA. And the exercise by Georgetown/RWJ a few years ago generated several innovative proposals, for instance Lambrew and Tumlinson authored a proposal to expand the home health care component of Medicare. And this author (with Shulman and Litow) developed a "Medi-LTC" idea which incorporated both Medicare SNF and home health along with private LTC insurance.

Whatever LTC – or LTSS -- reform looks like, advocates of social insurance and the private market are still talking past each other. Both believe the other is a necessary evil and the debate between them is how best to limit the other in their favored universe. Instead, what should take place is an attempt to find the best features in each others’ approach.

This thought piece suggests one important idea from the private insurance world that has been missing in social insurance -- the time value of money. Most insurance products (public and private) are delivered on annual basis. Money comes in this year and claims get paid. This is true of Medicare and Medicaid as well as private health insurance. Private LTC insurance offers a different option – it takes advantage of the time value of money by pre-funding future risks.

By collecting a premium at the outset which represents the actuarial value of total claims which will need to be paid for the covered cohort, risk is pooled across a diverse population in terms of time as well as age. Absent exogenous events that might lead to a class-wide rate increase, individual insureds will pay the same premium every year even as they age, until they need benefits. This means LTC insurance is actually deflationary: while the product's value keeps up with inflation the premium does not increase with inflation (assuming the insured elected this option, which more and more do).

One means of integrating this aspect of private LTC insurance into social insurance is via a “trade” between the LTC insurance carriers and Medicare where both come out ahead. Under this concept, the LTC insurers would pay for all SNF and home health care instead of providing this via Medicare. The savings to Medicare could result in a lower cost from removing short-term benefits for LTC needs that it now covers. Unlike the government, insurers would recognize additional revenue through investment income. The accumulation of investment income and the time value of money would allow all to "win" if Medicare could be brought into the mix directly. (Currently although one can argue that Medicaid savings accrue when people use LTC insurance, Medicare gains almost nothing from the existence of private insurance.)

Another variant – and the most promising to date -- would be to include private insurance within other vehicles as is done in the CLASS Act. Senator Kennedy’s proposal provides a flat amount for covered individuals that satisfy the cognitive or ADL triggers. Although it might look like a term product because it is financed on an annual basis out of employment, it also anticipates a level premium price that allows for the build up of reserves across time to pay for care in future years. What is exciting about the CLASS Act as a “public” insurance product then is its use of this powerful compounding process.

However, the bare bones of the legislation do not address other issues. For instance, the design of the program provides a claimant essentially half of what the true cost of care will be, hence the authors of the CLASS Act envision gap-filling by private insurers for those that wish it. One should worry that private insurers will attempt to underwrite healthy lives into their product while off-loading those with less health into the CLASS Act. A more integrated product where the private insurance subsumes or explicitly supplements the CLASS Act benefit (ala Medigap) would allow the CLASS Act to more successfully survive what will otherwise become these competitive attacks by private sector products. If not, we will be back where we were at the beginning.

Recent Changes in Dutch Health Insurance

2009-09-22T12:00:00.000-04:00

Kieke Okma
Adjunct Associate Professor of Health Policy and Management, New York University

In 2006 the Netherlands implemented a new health insurance system that requires all citizens to buy health insurance from a regulated insurance company of their choice; insurers must accept all applicants; the government subsidizes children and low-income families. Recent Changes in Dutch Health Insurance analyzes the new Dutch system and considers whether it might serve as a model for the U.S. The working paper emphasizes some of the major differences between the Netherlands and the U.S., including the extensive role of the Dutch government in regulating the health sector and the egalitarian tradition in Dutch social policies.

Click here to download the full working paper, commissioned by a joint study panel of the National Academy of Social Insurance and the National Academy of Public Administration on Administrative Solutions in Health Reform. For a list of other papers and study panel members, click here. The project is funded by the Robert Wood Johnson Foundation.

Designing Administrative Organizations for Health Reform

2009-09-21T12:00:00.000-04:00

Paul N. Van de Water
Senior Fellow, Center on Budget and Policy Priorities

Many proposals for expanding health coverage involve the creation of organizations to produce information on comparative effectiveness, make coverage decisions, manage the marketplace for health insurance, or offer a public health insurance plan. Designing Administrative Organizations for Health Reform describes proposals to create new entities or agencies as part of a reformed health coverage system, catalogs the major types of federal executive agencies and non-governmental entities, and considers some of the issues involved in choosing an appropriate organizational design. It concludes that organizations that use governmental powers and funds and make public policy need to be accountable as well as effective.

Click here to download the full working paper, commissioned by a joint study panel of the National Academy of Social Insurance and the National Academy of Public Administration on Administrative Solutions in Health Reform. For a list of other papers and study panel members, click here. The project is funded by the Robert Wood Johnson Foundation.

Re-Figuring Federalism: Nation and State in Health Reform's Next Round

2009-09-18T12:00:00.000-04:00

Lawrence D. Brown
Professor of Public Health, Columbia University

Health reform must recognize the extensive role of states in U.S. health policy and reconcile national consistency with sub-national diversity. Re-Figuring Federalism: Nation and State in Health Reform's Next Round draws lessons both from federal-state relations in Medicaid and from the experiences of three other federal countries—Canada, Germany and Switzerland. It concludes that universal health coverage is compatible with a federal system, but that the federal government needs to establish central rules of the game.

Click here to download the full working paper, commissioned by a joint study panel of the National Academy of Social Insurance and the National Academy of Public Administration on Administrative Solutions in Health Reform. For a list of other papers and study panel members, click here. The project is funded by the Robert Wood Johnson Foundation.

Designing a Mixed Public and Private System for the Health Insurance Market

2009-09-17T12:00:00.001-04:00

Bryan Dowd
Professor, University of Minnesota

Designing a Mixed Public and Private System for the Health Insurance Market considers design features of a health care reform proposal that would offer a government-run health insurance plan alongside competing private plans in a government-run insurance exchange. The Medicare program provides a practical guide to the problems and opportunities offered by such a mixed public and private system. Since both public and private plans have inherent advantages and disadvantages, both plans can be offered on a relatively level playing field. Among the items to be considered in creating a level playing field are the benefit package, advertising and consumer information, risk selection and risk adjustment, the choice environment, default enrollment, provider payment rates, and the administrative structure.

Click here to download the full working paper, commissioned by a joint study panel of the National Academy of Social Insurance and the National Academy of Public Administration on Administrative Solutions in Health Reform. For a list of other papers and study panel members, click here. The project is funded by the Robert Wood Johnson Foundation.

Cost Containment and Coverage Expansion

2009-09-16T12:00:00.000-04:00

Mark Merlis
Health Policy Consultant

Choices about covering the uninsured have implications for the feasibility of different approaches for controlling health care costs, and vice versa. In practice, some combinations may work together better than others and the interplay of different approaches to coverage expansion and cost containment is the focus of Cost Containment and Coverage Expansion. It begins with a brief review of whether coverage expansion and cost controls must go hand-in-hand. It then lays out the menus of commonly proposed coverage approaches and available cost control measures and considers how the two might go together.

Click here to download the full working paper, commissioned by a joint study panel of the National Academy of Social Insurance and the National Academy of Public Administration on Administrative Solutions in Health Reform. For a list of other papers and study panel members, click here. The project is funded by the Robert Wood Johnson Foundation.

2009-09-15T15:00:00.001-04:00

Timothy Stoltzfus Jos
Robert L. Willett Family Professor of Law and Ethan Allen Faculty Fellow, Washington and Lee University: School of Law

The Regulation of Private Health Insurance examines the current role of health insurance regulation and the role that it could play in a reformed health care system. It begins by exploring the nature of health insurance and alternative approaches to regulation. It next considers the current status of state and federal health insurance regulation, both describing the development of health insurance regulation and examining arguments in support of and in opposition to regulatory interventions. Finally, it considers the kind of insurance regulation that will be needed in a reformed health care system, as well as the question of whether authority for insurance regulation should be placed at the federal or state level. It concludes that the best approach would be to develop national standards for health insurance enforced primarily at the state level.

Click here to download the full working paper, commissioned by a joint study panel of the National Academy of Social Insurance and the National Academy of Public Administration on Administrative Solutions in Health Reform. For a list of other papers and study panel members, click here. The project is funded by the Robert Wood Johnson Foundation.

Simplifying Administration of Health Insurance

2009-07-13T10:00:00.000-04:00

Mark Merlis
Health Policy Consultant

The high administrative costs of the U.S. health insurance system have been a focus of discussion for decades. Simplifying Administration of Health Insurance finds ways to define and classify administrative costs, both of insurers and of other participants in the system, and summarizes the fragmentary estimates of how large these costs are. It discusses current efforts to reduce administrative costs, many of which have focused on standardizing and simplifying transactions among insurers, providers, and employers. Finally, it considers how various reform proposals, whether or not directly targeted at administrative costs, might reduce—or add to—the complexity of the current system.

Click here to download the full working paper, commissioned by a joint study panel of the National Academy of Social Insurance and the National Academy of Public Administration on Administrative Solutions in Health Reform. For a list of other papers and study panel members, click here. The project is funded by the Robert Wood Johnson Foundation.

Restructuring Health Insurance Markets

2009-07-10T10:17:00.004-04:00

Elliot K. Wicks
Senior Economist, Health Management Associates

Restructuring Health Insurance Markets examines six structural changes that could expand health insurance coverage, with special focus on the administrative issues: changes in rating rules, high risk pools, standard benefit plans, reinsurance, Section 125 plans, and insurance exchanges. It considers what benefits these changes might produce, how they can be most effectively structured, and how they can be implemented. From an administrative standpoint, it is critical that any set of policies be considered as a whole, with careful attention to their interactions, both to enhance their chances for success and to avoid unnecessary administrative burdens and duplication.

Click here to download the full working paper, commissioned by a joint study panel of the National Academy of Social Insurance and the National Academy of Public Administration on Administrative Solutions in Health Reform. For a list of other papers and study panel members, click here. The project is funded by the Robert Wood Johnson Foundation.

Business and Retirement Income – What Role in the Future?

2009-06-29T11:07:00.002-04:00

Anna M. Rappaport
President, Anna Rappaport Consulting

I have been very pleased to spend the last few days in Washington, DC and to participate in several meetings about retirement security. On Wednesday, June 17, I joined a group at the National Academy of Social Insurance at “The Quest for Adequate Retirement Income” a symposium focusing on current issues in the retirement system.

On Thursday [July 18th], I had the opportunity to meet with a number of plan sponsors who were discussing challenges in the retirement income system from their perspective. These large organizations were interested in providing retirement security to their employees, and frustrated at what often seems to be a stream of endless roadblocks.

What I heard from the two sets of people presented a very sharp contrast. At NASI, there were no representatives of the business community and none of the presenters had lived through the challenge of operating pension plans. Further, when asked what business thought about the issues and whether the financial crisis reinforced the importance of DB plans, the response was that business was not interested in offering this type of benefit. I was very frustrated to hear this from a researcher has not been a part of the discussions in the business community. The correct answer should have been to talk to someone in the business community and get their views. While this might seem difficult to an academic or policy person not in touch with benefit managers, there are ways to access this information.

There are groups that represent plan sponsors in Washington and provide business perspective to Congress. They include the ERISA Industry Committee and American Benefits Council. There are also groups that represent public sector plan sponsors. Another way to gain insight on business perspectives is to talk with consultants who work with plan sponsors. One of the great values of NASI is that it brings together people with diverse viewpoints.

Employers have long been an important part of retirement security in America. My view is that many employers have worked for a long time to protect employee security, and that they have endured many roadblocks. The success stories are hidden from view while failures are the focus of the news. How many more roadblocks they are willing to face is not clear, but we reduce the chances if we make it more difficult for them. It is vital for other stakeholders to have a dialogue with the employer community, and not to just make assumptions about it.

Administering Health Insurance Mandates

2009-06-26T10:05:00.003-04:00

C. Eugene Steuerle
Vice President, Peter G. Peterson Foundation

Paul N. Van de Water
Senior Fellow, Center on Budget and Policy Priorities

Mandates form an integral part of many proposals to expand health insurance coverage. Often, however, too little attention is paid to how and whether they can be administered. Administering Health Insurance Mandates finds that a mandate will be easier to administer when some or all of the following conditions are met: The mandate emphasizes facilitating compliance rather than penalizing noncompliance; It operates as a simple play-or-pay arrangement; It can accurately take advantage of regular withholding for most workers; It involves penalties that are moderate and collectable; It is coordinated with any subsidies and other public programs, including Medicaid; It is based upon other government payments that can be denied, such as tax benefits; It is applied only to those with more than low incomes, unless the penalty is denial of other benefits; Its size does not vary greatly with fluctuations in income, so any penalty can be collected currently and accurately.

Click here to download the full working paper, commissioned by a joint study panel of the National Academy of Social Insurance and the National Academy of Public Administration on Administrative Solutions in Health Reform. For a list of other papers and study panel members, click here. The project is funded by the Robert Wood Johnson Foundation.

Paying a Fair Share for Health Coverage and Care

2009-06-24T12:02:00.000-04:00

Jill Bernstein
Health Policy Consultant

Expanding health coverage will involve changes in the premiums and taxes people pay for health insurance and the amounts they pay out-of-pocket for specific health care services. Payment arrangements must generate sufficient revenue, promote efficiency in health care delivery, assure access to care for people who have low income or are in poor health, and minimize administrative costs and burden. Paying a Fair Share for Health Coverage and Care evaluates alternative approaches—including social insurance programs, means-tested premium assistance, and income-related cost sharing—according to these criteria.

Click here to download the full working paper, commissioned by a joint study panel of the National Academy of Social Insurance and the National Academy of Public Administration on Administrative Solutions in Health Reform. For a list of other papers and study panel members, click here. The project is funded by the Robert Wood Johnson Foundation.

Don't Worry, Be Happy: Characterization of Social Security Trust Funds

2009-06-19T09:27:00.005-04:00

A. Haeworth Robertson
Former Chief Actuary, Social Security Administration, 1975-78

The nature and significance of Social Security trust funds is sometimes misrepresented to the public. This appears to be the case in Social Security Brief #30 issued on May 12, 2009 by the National Academy of Social Insurance. The section of this brief entitled “Where does the Social Security surplus go?” states essentially the following:

“Some people worry when they hear that Social Security annual cash surpluses are loaned to the U.S. Treasury and the government spends the cash on other activities.” Don’t worry, be happy, because when a Social Security surplus is loaned to the government it reduces the debt owed to the public by the amount of the surplus and thereby makes it “easier to afford Social Security and other activities of the government in the future.” (Emphasis added)

I believe that this conclusion is incorrect and that it is an inappropriate way to characterize the nature and value of the trust funds.

Those who believe the brief’s conclusion is correct appear to rely on the assumption that “intragovernmental debt” is different from “public debt.” Perhaps it is, but no matter how the debt is labeled:

the U.S. government’s responsibility to pay interest and eventually repay the loans is no different.
the amount of future taxes required to pay interest and eventually repay the loans is no different.

Collecting surplus Social Security taxes and loaning the funds to the government and calling it “intragovernmental debt” does not “make it easier to afford Social Security and other activities of the government in the future” than if the government borrowed that same amount from someone else and called it “public debt.”

There are, however, other consequences to collecting surplus Social Security taxes and loaning them to the government:

The government uses Social Security taxpayer money to finance other government programs during the years that surplus Social Security taxes are added to the “trust fund,” and thereafter uses general revenue to finance Social Security benefits. This results in a subtle cost-shifting between one generation of the Social Security taxpaying population and a later generation of the general taxpaying population.
By the time the trust fund is nearly exhausted, say in 2037, Social Security benefits and administrative expenses will be financed 76% by payroll taxes and 24% by general revenue (to redeem Treasury securities). Therefore, this financing procedure is, in effect, an ingenious method of gradual transition from payroll tax financing to significant general revenue financing.
After 2037 when the trust fund has no more Treasury securities to be redeemed, the government could--with a change in the law--finance the deficit between payroll taxes and benefits by simply continuing to use general revenue or by borrowing, just as it will have been doing since 2016 to pay interest on or redeem Treasury securities. The result would be a seamless shift to still more general revenue financing after 2037.
Labeling some of the government’s debt as intragovernmental debt (the part borrowed from the trust funds), and thus reducing the acknowledged public debt, may lead some people to believe the government’s fiscal condition is stronger than it really is. Accordingly, the government may be able to offer lower interest rates than otherwise required to induce the general public to buy Treasury securities. However, this will work only so long as the voluntary purchasers of Treasury securities fail to recognize the true government debt. (It may be relevant to note that at the beginning of 2009, 24 percent of the total national debt was owed to the Social Security trust funds; and another 19 percent was owed to other federal trust funds or accounts.)
By requiring Social Security taxpayers to pay excess taxes that are then used to buy Treasury securities (using the ruse of building up a “trust fund” to finance Social Security benefits), the government may be able to pay a lower interest rate on such securities than if it had to sell them on the open market. (An effective subsidization of government operations—and general taxpayers-- by Social Security taxpayers?)
By requiring Social Security taxpayers to pay excess taxes that are then used to buy Treasury securities, the government takes funds from the hands of such taxpayers that are thus not available for alternative uses. Such taxpayers might well have made more productive use of these funds if they’d had a choice.
For the unsophisticated, all the rhetoric frequently used to describe the “trust funds” tends to bestow on the trust funds an undeserved significance; to obscure the fact that funds purportedly collected to pay Social Security benefits are diverted to other government programs; and to suggest that Social Security is more financially viable, during the period the “trust funds” exist, than it really is.

Acknowledgment of the true nature and significance of the Social Security trust funds will be important as the nation considers alternative ways to make the program viable. It will be of particular significance when considering proposals to increase payroll taxes at a time they are not needed to pay current benefits. Such tax increases might put the system’s income and outgo into “arithmetic balance,” but they would result in a trust fund buildup of questionable value.

Strengthening Social Security Wage Reporting For Farm Workers

2009-04-22T10:00:00.001-04:00

Barbara Robles
Associate Professor, School of Social Work, Arizona State University

Farm workers are at risk of not having their work count toward Social Security benefits because their employers may erroneously classify them as independent contractors or simply fail to pay Social Security taxes and report wages. Strengthening Social Security for Farm Workers: The Fragile Retirement Prospects for Hispanic Farm Worker Families supports legislation introduced in the 110th Congress, along with stronger enforcement of existing laws, to strengthen wage reporting. The proposal also notes that the changes would increase tax receipts and benefit the Latino farm worker population by increasing their Social Security benefits, providing better access to the Earned Income Tax Credit, and easing the burden on adult children of farm workers who have the triple burden of school debt, raising children and supporting aging parents.

Click here to download the full policy proposal developed as part of the project, Strengthening Social Security for Vulnerable Groups.

The project was funded by the Rockefeller Foundation’s Campaign for American Workers.

Increasing Social Security Benefits for Low-Wage Single Retirees

2009-04-20T16:30:00.000-04:00

Patricia E. Dilley
Professor of Law, University of Florida Levin College of Law

Single retirees (that is, never married, divorced or widowed) are at high risk of being poor in old age. The decline in private pensions, rising out-of-pocket health costs, and declining housing values can be expected to make the already precarious financial situation of unmarried retirees even worse. Restoring Old Age Income Security to Low-Wage Single Workers proposes a change to the basic Social Security retired-worker benefit formula that would increase benefits for single retirees with at least 30 years of covered employment and low lifetime earnings. A second change would target single beneficiaries over age 85. Those who had at least 30 years of covered work, and received relatively low benefits (less than 75 percent of the average benefit), would receive a 10 percent benefit increase at age 85.

Click here to download the full policy proposal developed as part of the project, Strengthening Social Security for Vulnerable Groups.

The project was funded by the Rockefeller Foundation’s Campaign for American Workers.

A New Social Security Minimum Benefit For Low Lifetime Earners

2009-04-17T09:30:00.000-04:00

Melissa Favreault
Senior Research Associate, The Urban Institute

Despite a lifetime of hard work, many workers end up poor or near poor in retirement. A New Minimum Benefit for Low Lifetime Earners examines a new minimum benefit that targets workers with long careers and low lifetime earnings, along with a modest credit that compensates for up to three years of low (or no) earnings due to care giving, unemployment, or poor health. The benefit at the full retirement age would pay 60 percent of the poverty threshold for a worker with 20 years of Social Security covered work and increase to 110 percent of the poverty threshold for a worker with 40 years of work. Caregiver credits would be available only in years when a child is under age 4 and only to one parent. The credit would be 60 percent of the average wage in the first such year, 50 percent in the second year and 40 percent in the third year.

Click here to download the full policy proposal developed as part of the project, Strengthening Social Security for Vulnerable Groups.

The project was funded by the Rockefeller Foundation’s Campaign for American Workers.

Why Do We Call Taxes a `Burden'?

2009-04-15T09:33:00.002-04:00

Rashi Fein

This 1996 op-ed, originally published in The Washington Post, is as timely as ever.

******

I learn a lot watching C-SPAN. The other night, one of Washington's leading economists was asked about using the tax system to help reduce environmental damage. The response? It certainly would be difficult, because it would increase the `tax burden.'

`Tax burden' is a phrase with which we are all so familiar that we don't stop to think what it means--nor what it implies. At first blush it seems value-free. But plainly a `burden' is something to be lifted. We don't refer to the monies we spend on movies, popcorn, milk or shoes as `burdens.' We refer to them--and think of them--as expenditures, some (movies and popcorn) optional, others (food, shoes) necessary. We don't speak of our `consumption burden.' Why, then, a `tax burden'?

Is it that our tax payments are not optional but our food expenditures are? That can't be it: We have to buy food. We can choose between steak and hamburger (or yogurt and tofu), but we can't choose between eating and starving. Indeed, the penalty for not eating far exceeds the penalty for nonpayment of taxes. yet we do not speak of the `food burden.'

More likely, we think of taxes as a burden because we're not quite certain what it is we're buying when we pay them. We miss, somehow, the connection between our tax dollars and the fire protection, the highways, the security against foreign powers and the biomedical research that our dollars buy. The problem is that few of the benefits we derive can be seen, touched or smelled. Moreover, the benefits we derive from government expenditures most often accrue to everyone; they do not come packaged in discrete units--this box of defense for me, this piece of highway for you.

And many of us assume that we'd continue to get whatever it is we're getting from government even if we didn't pay our taxes. Without spending our dollars, we'd have no milk on our tables, but we can't really imagine that schools and roads would disappear if you and I didn't buy them with our tax dollars. Clearly, government doesn't determine how many potholes to fill only after it deposits our tax dollars. If I don't buy that book, that restaurant meal, that aspirin--or if I cheat on my taxes--does government really subtract from the pothole-fixing budget or the salaries of judges? That's a tough connection to make--but without that connection, my taxes come to seem irrelevant, hence unnecessary, hence a `burden.'

Of course, no government program would suffer if you or I consumed less (and thus paid less in sales tax) or if I cheated on my return (and thus paid less in income tax). But if you and I both underpaid, everyone else would have to pay more. And it surely stretches language beyond acceptable usage to call not taking advantage of one's neighbors a `burden.'

Burdens are by definition oppressive, and our facile use of the term in connection with our taxes thereby encourages us to do everything we can (within the law) to ease them. Cheating on our taxes comes to seem acceptable (at least understandable), even though tax evasion is precisely analogous to shoplifting. If we take fire protection, guarantees on educational loans, clean air and water but fail to pay for them, we are stealing.

Our language shapes our attitudes. To weigh appropriate tax and expenditure policies in difficult when our language encourages us to think of our taxes as burdens not connected to the benefits we derive from them.

Some weeks ago, I received a brochure encouraging me to open an IRA. In that brochure, a 1040 tax return was labeled `pain,' while the application for an IRA was labeled `pain killer.' By implication, taxes (like pain) are to be avoided. By implication, I can continue to enjoy the benefits of government expenditures without paying for them.

We can debate `value for money,' the wisdom of particular government policies, programs and expenditures. We can argue as to whether we're spending too much here, not enough there. But that debate is distorted if we enter it with the view that any government expenditure--which means my tax dollar--is inherently burdensome.

I feel as I do because I remember what Justice Holmes wrote in 1904: `Taxes are what we pay for a civilized society' and what Franklin Delano Roosevelt said in 1936, `Taxes, after all, are the dues that we pay for the privileges of membership in an organized society.'

Now, at century's end, our economists tell us taxes are a burden, and our pension funds tell us taxes are a pain. Is it any wonder that our leaders vie to reduce the burden and the pain, even if in so doing our society becomes somewhat less organized and less civilized?

Improving Benefits for Widowed Spouses of Low-Earning Couples

2009-04-13T10:00:00.002-04:00

Joan Entmacher
Vice President for Family Economic Security, National Women’s Law Center

Social Security is especially important to older women, particularly widows. Most poor elderly women are widows. Social Security survivor benefits help to bridge the transition to widowhood, but the benefits are less adequate when both the husband and wife had worked at low pay. Strengthening Social Security Benefits for Widow(er) s: The 75 Percent Combined Worker Benefit Alternative proposes to increase benefits for widowed spouses of low-earning dual-earner couples. The new widowed-spouse benefit would be 75 percent of the combined retired-worker benefits of the husband and the wife, but would be capped to not exceed the benefit for one person who had earned the average wage over a career.

Click here to download the full policy proposal developed as part of the project, Strengthening Social Security for Vulnerable Groups.

The project was funded by the Rockefeller Foundation’s Campaign for American Workers.

Increasing Social Security Benefits at Advanced Ages

2009-04-10T11:30:00.000-04:00

John Turner
Director, Pension Policy Center

People who live into their 80s and 90s face a growing risk of becoming poor. They rely more and more on Social Security because their other sources of income decline as they age: private pensions, if received, are eroded by inflation; income from work is very rarely an option; and financial assets may have been spent. Longevity Insurance, Strengthening Social Security at Advanced Ages proposes increasing benefits at age 82 (about the average life expectancy at age 65) for beneficiaries with low Social Security benefits and long work histories. This longevity insurance would improve financial security for individuals who live longer than the average life span.

Click here to download the full policy proposal developed as part of the project, Strengthening Social Security for Vulnerable Groups.

The project was funded by the Rockefeller Foundation’s Campaign for American Workers.

Easing the Impact of Increasing the Retirement Age: Occupational Disability

2009-04-08T14:17:00.003-04:00

Eric Klieber
Director, Retirement Actuary, Buck Consultants

Legislation in 1983 increased from 65 to 67 the age at which Social Security pays full retirement benefits. The change lowers retirement benefits at each age they are claimed. Disabled-worker benefits remain unreduced, but are not available to individuals who fail to meet a strict test – “inability to engage in any gainful activity” – yet are unable to continue in their jobs. Strengthening Social Security for Workers in Physically Demanding Occupations proposes a benefit for such individuals based on an occupational disability test – “inability to perform the essential duties of one’s current occupation.” Making such an occupational disability benefit available at age 62 could protect recipients from retired-worker benefit reductions (or part of such reductions) due to increasing the full benefit age.

Click here to download the full policy proposal developed as part of the project, Strengthening Social Security for Vulnerable Groups.

The project was funded by the Rockefeller Foundation’s Campaign for American Workers.

Increasing Social Security Benefits for Family Elder Caregivers

2009-04-06T11:00:00.000-04:00

Shelley White-Means
Professor of Health Economics, University of Tennessee Health Science Center

Rose Rubin
Professor, Department of Economics, University of Memphis

Informal care provided by family members improves quality of life for frail elders, allows them to remain in the community instead of in nursing homes, and saves Medicaid dollars. Providing the care also imposes opportunity costs on caregivers that weaken their own retirement security. Retirement Security for Family Elder Care Givers with Labor Force Employment proposes to provide up to four years of Social Security credit to individuals who provide care to elders. The elders must be certified to need levels of care that would qualify for Medicaid coverage. The value of the credit would be the caregiver’s average wage in the three years before care giving interrupted earnings. The authors suggest the credit could be financed based on the reduction in public spending for nursing home care.

Click here to download the full policy proposal developed as part of the project, Strengthening Social Security for Vulnerable Groups.

The project was funded by the Rockefeller Foundation’s Campaign for American Workers.

Helping Homeless Individuals with Serious Mental Illness Get Disability Benefits

2009-04-03T13:00:00.001-04:00

Yvonne Perret
Executive Director, Advocacy and Training Center

Deborah Dennis
Vice President, Policy Research Associates, Inc

Margaret Lassiter
Senior Project Associate, Policy Research Associates, Inc

Social Security and SSI disability benefits are often the main sources of stable income for people who have serious mental illness. Individuals who are homeless face particular barriers in navigating the application process. They typically lack a mailing address, transportation, and a treatment history from accepted medical sources (physicians or licensed psychologists). Improving Social Security Disability Programs for Adults Experiencing Long-term Homelessness proposes three strategies to address these barriers: (a) expand the acceptable medical sources to include professions likely to be available in publicly funded health and mental health care systems; (b) use SSA’s presumptive eligibility for SSI disability benefits for people with schizophrenia who are homeless for at least six months; and (c) modify the administrative process to accommodate homeless individuals consistent with SSA’s Homeless Plan of 2002.

Click here to download the full policy proposal developed as part of the project, Strengthening Social Security for Vulnerable Groups.

The project was funded by the Rockefeller Foundation’s Campaign for American Workers.

Increasing the Social Security Special Minimum Benefit and Updating SSI

2009-03-31T14:32:00.000-04:00

Laura Sullivan
Research Assistant, Institute on Assets and Social Policy, Brandeis University

Tatjana Meschede
Research Director, Institute on Assets and Social Policy, Brandeis University

Thomas M. Shapiro
Director, Institute on Assets and Social Policy, Brandeis University

A special minimum benefit was added to the Social Security program in 1974, but few receive it today because it does not keep up with wage growth. Enhancing Social Security for Low-Income Workers: Coordinating an Enhanced Minimum Benefit with Social Safety Net Provisions for Seniors examines ways to update the special minimum benefit so that individuals with 30 years of work covered by Social Security would receive benefits that meet the updated poverty measure of the National Academy of Sciences, which is about 125 percent of the current official poverty threshold. It also proposes to update SSI to reflect inflation since the program began – that is, increase the asset limit for individuals from $2,000 to $6,700 and increase the general income exclusion from $20 to $89.

Click here to download the full policy proposal developed as part of the project, Strengthening Social Security for Vulnerable Groups.

The project was funded by the Rockefeller Foundation’s Campaign for American Workers.

A Social Security Supplement for Low-Income Working Parents

2009-03-27T16:53:00.002-04:00

Pamela Herd
Assistant Professor of Public Affairs and Sociology, La Follette School of Public Affairs, University of Wisconsin

Social Security provides benefits for spouses and widowed spouses, but does not provide credit for raising children. A growing portion of retiring women will not qualify for spousal benefits because they are divorced (with less than 10 years of marriage) or never married, yet will have earnings records that are limited because of time spent caring for their children. Crediting Care in Social Security: A Proposal for an Income-Tested Care Supplement proposes to supplement Social Security benefits for retirees who have raised one or more children. The supplement would be an additional 75 percent of the worker’s benefit (80 percent if two or more children were raised) but would be capped to not push the retiree’s household income above 125 percent of the poverty threshold. The benefit and income testing would be administered through individual tax returns, similar to the Earned Income Tax Credit.

Click here to download the full policy proposal developed as part of the project, Strengthening Social Security for Vulnerable Groups.

The project was funded by the Rockefeller Foundation’s Campaign for American Workers.

Reducing Eligibility Requirements for Retirement Benefits

2009-03-25T14:14:00.008-04:00

Andrew Biggs
Resident Scholar, American Enterprise Institute for Public Policy Research

To qualify for Social Security retired-worker benefits, individuals must have worked at least 40 calendar quarters (ten years) in jobs covered by Social Security. The Effects of Reducing Eligibility Requirements for Social Security Retirement Benefits examines the impact of eliminating the 40-quarters eligibility requirement. A small group of individuals (about 6 percent of those born in 1950) would gain eligibility for Social Security retired-worker benefits. The increases in benefits would often substitute for means-tested SSI benefits. Much of the new benefits would flow to immigrants who are not otherwise eligible for Social Security.

Click here to download the full policy proposal developed as part of the project, Strengthening Social Security for Vulnerable Groups.

The project was funded by the Rockefeller Foundation’s Campaign for American Workers.

Protecting Social Security Benefits from Garnishment

2009-03-24T16:00:00.003-04:00

John Infranca
Judicial Clerk, The Honorable Berle M. Schiller, Federal Judiciary, Eastern District of Pennsylvania

Because Social Security and Supplemental Security Income (SSI) benefits are essential to meet basic needs, the Social Security Act protects the benefits from garnishment or attachment by creditors. Nevertheless, when benefits are deposited in a bank account, beneficiaries may find that their accounts have been temporarily frozen, or worse, permanently garnished at the behest of a creditor under provisions of state law. Because the government encourages direct deposit, over 80 percent of Social Security and SSI recipients receive their benefits electronically. Safer than the Mattress: A Policy to Ensure that Social Security and Other Exempt Federal Benefits Remain Safe From Garnishment, Attachment, and Freezes when Deposited in a Bank Account proposes a five-part legislative and administrative policy solution to ensure that Social Security and other exempt federal benefits remain safe from garnishment, attachment, and freezes when they are deposited in a bank.

Click here to download the full policy proposal developed as a part of the project, Strengthening Social Security for Vulnerable Groups.

The project was funded by the Rockefeller Foundation’s Campaign for American Workers.

Correcting David Broder on Social Security

2009-03-09T15:44:00.005-04:00

Tom Bethell

Dear Mr. Broder,

If Bob Ball were still with us, I'm confident that he would be phoning or writing to you this morning re your Washington Post column of 2/5/09 in which you speak of "the looming bankruptcy" of Social Security, Medicare and Medicaid. He would be pointing out that all of these programs face challenges but none faces actual bankruptcy unless the full faith and credit of the United States is a meaningless phrase. In the case of Social Security in particular he would be dismayed to see you contributing to totally unjustified fears about the program's future. He would be pointing out that an estimated 2-percent-of-payroll shortfall over 75 years is hardly synonymous with bankruptcy and is in fact eminently manageable, and he would also be warning against casual assumptions that bipartisan commissions are panaceas (as he well knew from his experiences on many of them, particularly the Greenspan Commission). Bob is, of course, no longer with us, alas, but having worked with him off and on for 20 years I know he would want me to send you his plan for Social Security (as I know he did himself many times). He was in the process of updating his plan just weeks before his death, a year ago, and I've updated it to 2009 after checking with SSA's chief actuary to be sure that the plan's assumptions and data are valid. The Ball plan is available from the NASI website by clicking here.

Social Security is Shovel-Ready

2009-03-06T12:07:00.003-05:00

Robert Hudson
Professor and Chair, Department of Social Welfare Policy, Boston University

There can be no question that the current economic crisis is emerging as the most dire that we have seen since the 1930s. And, in terms of both employment opportunities and retirement savings, it seems certain to hit older Americans as hard as it will everyone else. Looking for any silver lining in this situation, one finally occurs to me. In recent years, pressures on age-related programs have built as "the scope of conflict" around aging policy has expanded, meaning that programs that were once politically insulated are now under scrutiny and attack from those who see entitlement spending for older adults leading us toward fiscal doom.

Yet, the very challenge we face has allowed the scope of conflict to expand even wider and, in so doing, place aging policy on a side burner if not a back burner. Specifically in the case of Medicare, the issue is being recast, by President Obama and others, as being centrally about a health care financing and delivery system that is largely out of control and not as part of an entitlement crisis centered on older Americans.

Less certain, but possible, is that Social Security is coming to be seen as either a manageable problem or even as en economic stabilizer both meeting needs and protecting income. There is nothing more shovel-ready in America than Old Age, Survivors, and Disability Insurance.

A Bright Light in a Dismal Landscape

2009-03-03T16:48:00.001-05:00

Alicia H. Munnell
Peter F. Drucker Professor of Management Sciences and Director of the Center for Retirement Research, Boston College
Original Published 3/25/09, The Boston Globe

President Barack Obama has said that overhauling Social Security and Medicare would be "a central part" of his administration's efforts to contain federal spending. But amid all the economic calamity, the Social Security program is functioning perfectly, meeting the crucial economic needs for millions of Americans. When older workers are losing their jobs and their 401(k) accounts are down about 30 percent, the ability to claim Social Security benefits serves as a backstop against severe economic hardship. Therefore, policymakers should tread carefully.

Social Security checks are not large, but they are reliable. For workers who claim benefits at age 66, the full retirement age, monthly benefits range from $850 for low-paid workers to about $2,200 for those who have consistently earned the maximum taxable amount. In fact, many workers claim early and receive reduced benefits. But Social Security benefits are increased each year to reflect changes in the cost of living, and they continue for as long as the recipient lives. So, despite the modest amounts, the benefits are predictable and people can count on them.

Are these valuable Social Security benefits endangered by the current economic crisis?

Certainly, a higher-than-predicted unemployment rate means that fewer people will be working and contributing to the system than originally projected. This shortfall could be a problem if Social Security operated on a pure pay-as-you-go basis, where today's contributions were the only source of funds for benefit payments. But the system has always had a contingency reserve to serve as a buffer in the event of economic downturns, and today's trust fund is more than adequate to ensure full benefit payments for decades.

How about Social Security's long-run outlook?

A worse-than-expected short-term economy will have only a tiny impact on Social Security's 75-year projections; the long-run costs of the program are driven mainly by the aging of the population, which has not changed. Over the next 75 years, the Social Security actuaries project a program shortfall equal to 1.70 percent of taxable earnings.

This number equals the size of the tax increase required to maintain solvency for 75 years. That is, if the payroll tax rate were raised immediately by roughly 1.70 percentage points - 0.85 percentage point each for the employee and the employer - the government would be able to pay the current package of benefits for everyone who reaches retirement age at least through 2082.

A lasting fix for Social Security would require a little more attention to the fact that the aging of the population will present an increasing financial challenge over the 75-year period. Thus, a lasting fix for Social Security could have smaller tax increases initially and larger ones later. This pattern would avoid the prospect of suddenly running short of money right after the end of the 75 years, and would achieve "sustainable solvency."

When crafting a solution to Social Security's long-term deficit, the lesson from the current financial crisis is that Social Security benefits are crucially important to older Americans.

This importance has increased with the shift in the private sector from traditional defined benefit pensions, which promised benefits for life, to 401(k) plans, which are exposed to the vagaries of the stock market. Americans, with little else to rely on in retirement, may be willing to pay up to maintain the country's successful Social Security program.

Building on Social Security’s Success

2009-03-03T16:45:00.002-05:00

Virginia P. Reno
Vice President for Income Security, National Academy of Social Insurance

The United States needs a new conversation about how Social Security is part of the solution to the growing economic risks American workers face. The key question is: How can we build on the strengths of Social Security – its fiscally responsible design, its universality, progressivity, efficiency, and it effectiveness – to meet the needs of working families in the 21st century?

As employers’ shift away from traditional pensions to 401(k) plans, workers shoulder more financial risks. Social Security offers employers what they want – freedom from financial risk and fiduciary burdens, and it provides workers what they need – economic security.

Social Security has features of an ideal pension plan. It covers virtually everyone and is fully portable between jobs. Its retirement benefits last for life, keep up with the cost of living, and continue for widowed spouses in old age. Social Security provides family life insurance and disability protection. It has a permanent sponsor (the federal government) that will not go out of business or move its operations overseas. And Social Security is remarkably efficient – spending less than 1 percent of income on administration.

Social Security will continue to be affordable in the future. It is not part of an “entitlement crisis.” Its cost is projected to rise from 4.3 percent of gross domestic product (GDP) today to 6.0 percent by 2030, and then decline slightly and level off for the rest of the next 75 years. The increase in the share of GDP going to Social Security (1.8 percentage points) is smaller than the increase in national security spending in just the last 7 years (2.0 percentage points). It is also smaller than the increase in spending for public education (2.8 percentage points) when boomers were children and showed up in record numbers to enroll in kindergarten.

Social Security provides bedrock security for seniors. But benefits are modest. The case for improving Social Security benefits rests on the facts that:

U.S. seniors have lower replacement rates from Social Security and are more likely to be poor than are seniors in other advanced economies;

Benefit cuts already enacted and rising automatic deductions for Medicare premiums mean that seniors will need higher benefits in the future just to maintain replacement rates that retirees have had for the past 25 years; and

The rest of the retirement system is becoming less adequate and subjecting workers to more risks.

All these findings were true even before 2008 put in jeopardy all other resources that workers hope to have in retirement – home values, pensions, 401(k)s, savings accounts, and jobs.

Policymakers have an excellent tool at hand to strengthen retirement security. Social Security is well designed, secure, and efficient. With its proven track record, it holds the best prospect for using new money effectively to improve retirement security for American workers. Wise policy would first balance Social Security finances without cutting benefits. It would then make benefits more adequate before subsidizing other retirement income tools.

This post is based on a paper presented at an Economic Policy Institute briefing. The views are those of the author. The full paper can be downloaded here.

Longevity Insurance: Strengthening Social Security for People Age 82 and Older

2009-03-03T16:30:00.004-05:00

John A. Turner
Director, Pension Policy Center

People in their 80's with low Social Security benefits are economically vulnerable. Few are able to compensate for a loss of non-Social Security income through work. People in this age group may not have sufficient resources to enjoy the last years of their lives with dignity.

Policymakers should add longevity insurance that targets beneficiaries age 82 or older with low Social Security benefits and long work histories to our current Social Security program. Age 82 is approximately the average life expectancy at age 65. Elderly poverty is high among this age group—a third higher than for people age 65-69. People in this age group are at risk of having fallen into poverty even though they had not been poor earlier in life. They have greater difficulty leaving poverty than people at younger ages. Strengthening Social Security for this group would provide cost effective social insurance.

Longevity insurance is a deferred annuity that starts at an advanced age. Much of the utility value to workers of annuitization comes from insuring against the possibility of running resources down to a very low level if one lives to be older than expected.

The longevity insurance benefit proposed here is a delayed annuity paid in the form of a minimum Social Security benefit or an enhanced Social Security benefit starting at age 82. Qualifying persons receiving a Social Security benefit below a minimum level would have their benefit raised at that age. Recognizing this enhanced insurance protection, Social Security OASI would be renamed Old-Age, Survivors and Longevity Insurance (OASLI). The renaming would inform people about the benefit. This “framing” would help people focus on and better understand the economic risk of living longer than their life expectancy.

In addition to serving as an enhanced insurance benefit, longevity insurance can simplify the problem of planning asset decumulation in old age. Some retirees have difficulty planning the spend down of their financial resources because of the uncertainty of age at death. With a longevity insurance benefit, that problem is simplified. Instead of planning for an uncertain period, they can plan for the fixed period from the date of their retirement to age 82, the date at which they start receiving the longevity insurance benefit.

Longevity insurance can be an important component of a policy package to restore Social Security solvency. Public policy changes likely will reduce the generosity of Social Security old-age benefits as part of a package to restore solvency. Most reform packages that cut benefits raise elderly poverty. To offset that effect, there will be a need to increase the generosity of some benefits to better target benefits to vulnerable groups. That goal could be achieved by providing longevity insurance benefits. This policy shifts Social Security resources toward persons who are both old and have low incomes.

As an alternative, survivors’ benefits could be raised, but that would be less targeted and thus more expensive for achieving the same results for vulnerable persons. Another alternative would be to raise minimum benefits, with the benefits being available at an earlier age, such as age 62. Longevity insurance would be better targeted by age. As life expectancy continues to increase, age 62 has become a relatively younger age compared to expected age at death. Further, providing minimum benefits at an earlier age would more likely affect labor supply.

To read the full proposal, click here.

Social Security and the Vanishing 401(k)

2008-12-29T16:18:00.007-05:00

Eric Kingson
Professor of Social Work and Public Administration, Syracuse University
Originally Published 12/28/08, The New York Times Online

The availability, stability and value of traditional defined benefit pensions are diminished. Americans are experiencing dramatic losses in 401(k) and I.R.A. retirement savings accounts. Home equity is shrinking. Employers have been bailing out of retiree health plans. Unemployment is increasing and now, faced with mounting pressures, some employers are reducing contributions to 401(k) plans.

This unfortunate state of affairs serves to remind the nation of the importance of the core mission of Social Security — to provide widespread and basic protection against loss of income due to death, disability or retirement.

Although this comes as a surprise to some, Social Security is fundamentally sound, backed by the full faith and credit of the United States government. Projected financing problems, though real, are relatively modest, manageable and many years in the future.

For those of us fortunate enough to have retirement savings, we can only wish that the value of the other assets in our portfolios are as well positioned to withstand the current economic uncertainty.

Social Security and the Vanishing 401(k) - The New York Times Online

Challenges and Opportunities for Retirement Security

2008-12-01T15:04:00.006-05:00

Anna M. Rappaport, F.S.A., M.A.A.A.
President, Anna Rappaport Consulting

We are truly at a crossroads with respect to retirement security in America. We have an opportunity to improve and build on what we have in the longer run, but only if we effectively address some short-term challenges. We need to do several things or we will lose our opportunities:

Find a forum where diverse stakeholders will work together effectively – those who represent the public, labor and business must work together to strengthen the system. Repeated failure to work together has led to regulatory instability and chaos that for decades has been a major contributor to the decline of pensions and loss of retirement security.

Address a critical short-term issue – the existing legislative structure (the Pension Protection Act) is designed to strengthen the funding of pension plans. Its requirements are much more stringent than prior laws, and produce very strange (and I believe unintended) impacts in the face of the financial crisis. The business community and hundreds of plan sponsors have petitioned Congress to protect the workers covered by pension plans by relaxing the requirements for faster contributions. This request would not relieve businesses from paying the required contributions, but it would give them more time. We need to remember that this is a voluntary system. If there is no temporary relief, the PPA requirements will lead to the freezing of many more defined benefit plans and to benefit curtailments. For more information on the critical PPA issues, look at http://www.eric.org/.

Maintain and strengthen Social Security – The system should be maintained as an income based system with the fine tuning needed to make it work effectively.

Understand the realities – We need to recognize the realities facing diverse stakeholders:

Risk pooling and sharing are a very important part of a financial security system.

Individuals are far more willing to save in an employer plan, and they are more likely to trust information provided through an employer than in the marketplace.

Regardless of what changes are made for future benefits, people who are age 50 and over today will get their benefits primarily from existing systems, and they will not have adequate time to earn much benefit from a new system. For a very large number of people, these benefits include defined benefit plans.
Choice and individual freedom are highly valued. However, a system that requires individuals to act and make decisions to ensure their long-term security will fail for many people because of lack of knowledge or discipline.

For Americans who want to work longer or who do not have adequate assets, work options that enable work to higher ages are critical.

We need to remember successes and as well as failures as we build on current systems.

We are living longer. Periods of retirement have increased each decade, and we have failed as a society to adjust out benefits to demographic realities.

Americans are retiring gradually. Many have a period between full-time career commitment and total exit from the labor force where they are working at a slower pace, and often partially retiring.

The size of the program and risk pool matters. A large program can access the market on an efficient basis with much lower expense charges and better results than an individual or small employer.

What should the future system look like? As we focus on retirement security for the next generation and look for new options, we should be prepared for a Tier II system that is different from the existing system. But at the same time it is vital not to throw out the baby with the bath water. Many ideas and options are surfacing. It is critical that we find solutions that offer adequate pooling of risk, respond to the realities of how individuals behave, and build on the strength of our employment and market based system. Rather than focusing on a specific solution immediately, we need to think about trade-offs and options as we balance stakeholder issues.

My wish is that first we deal with the immediate critical issues to not further damage the system that will be the bedrock for the next 10-15 years of retirees and that we work together to create a sound future for Americans. Today, I see our priorities as:

Creating the right platform to work together.

Dealing with the short-term crisis so that the long-term situation is not far worse.

A Social Security Fix for 2008

2008-11-19T13:00:00.008-05:00

Robert M. Ball
Founding Chair of the National Academy of Social Insurance
This op-ed piece is the last op-ed written by NASI founder Robert M. Ball, who died in January 2008. It was originally published on October 29, 2007 in The Washington Post.

In the Oct. 19 editorial " Mr. Giuliani's No-Tax Pledge ," The Post stated: "It's no more responsible for Republicans to rule out tax increases [to strengthen Social Security] than it is for Democrats to insist on no benefit cuts." The Post praised, as a "bipartisan blend," President Ronald Reagan 's acceptance of a 1983 fix that included both.

I take exception. It's the essence of responsibility, in my view, to insist on no benefit cuts. In 1983, I served on the National Commission on Social Security Reform (better known as the Greenspan Commission) and represented House Speaker Tip O'Neill in negotiations with the White House . What was right in 1983 -- a balanced package of benefit cuts and tax increases as part, roughly half, of the final agreement -- would be wrong today.

Social Security benefits are modest by any measure and are already being cut -- by raising the age of eligibility for full benefits and by deducting ever-rising Medicare premiums from benefit checks. So the benefits provided for under present law will replace, on average, a lower percentage of prior earnings than in the past. To cut them further would undermine all that Social Security has achieved -- exposing millions of vulnerable people, both elderly and disabled, to needless economic hardship.

Social Security has never been more important to more Americans than it is now. Private pension plans continue to dwindle -- currently covering only about 20 percent of private-sector employees -- and the national rate of savings hovers around zero. We just can't afford to cut Social Security benefits further. There's no way to make up for the loss.

Social Security benefits are vital to nearly all recipients. About a third of the elderly rely on Social Security for 90 percent or more of their income; two-thirds count on it to supply at least half of their income. The program lifts 13 million elderly beneficiaries above poverty.

Without Social Security, 55 percent of the disabled -- and a million children -- would live in poverty. The program is particularly important to women and minorities. It provides 90 percent or more of the incomes of almost half of all unmarried women age 65 and older (including those who are widowed, are divorced or never married), and it is the sole source of income for 40 percent of elderly African Americans and Hispanic Americans.

Social Security is the nation's most effective anti-poverty program. But it's much more than that. For every worker it provides a solid base on which to try to build an adequate level of retirement income. To weaken that foundation would be grossly irresponsible.

The good news is that there's no need to weaken it. We can shore up Social Security for the future without cutting benefits -- or raising contribution rates. The program can be brought into close actuarial balance over the long run with just three revenue-enhancing changes that are desirable in any case:

Gradually increase the maximum amount of earnings covered by Social Security so that the traditional goal -- covering 90 percent of all earnings -- is once again achieved. This change would affect only the 6 percent of earners who make more than the maximum covered amount (now just under $100,000), and implementing the change gradually over the next 20 to 30 years would have only a minimal impact on them.
Allow Social Security to improve earnings by investing some of its assets -- up to 20 percent, say -- in equities, as just about all other public and private pension plans do.
Provide a new source of income by retaining a residual estate tax and dedicating it to Social Security. By 2010, the estate tax will affect only individuals with estates worth more than $3.5 million ($7 million for couples). Dedicating the income from the tax to Social Security would considerably improve the progressivity of Social Security financing as well as increasing revenue.

Presidential candidates should be expected to discuss Social Security financing. But in 2008 they shouldn't be held to a 1983 formula. We're in a different time, with different needs -- and there are much better options available than benefit cuts.

Robert M. Ball was commissioner of Social Security in the Kennedy, Johnson and Nixon administrations. You can see his entire plan at http://www.robertmball.org.

A Prime Target for Health Care Reform: The $300 Billion, Yes Billion, Spent Wastefully on Processing Bills

2008-11-18T15:51:00.010-05:00

Merton C. Bernstein
Coles Professor of Law Emeritus, Washington University; Former Principal Consultant to the 1982-83 National Commission on Social Security Reform; Founding board member of the National Academy of Social Insurance

Over 15% of the medical care dollar gets spent on “processing bills, claims and payments” according to a McKinsey Quarterly analysis.¹ That tots up to some $300 billion a year. In contrast, Medicare spends about 3% of its outlays for administration.

The reason is simple enough: health care providers – doctors, hospitals, laboratories and imaging centers – obtain most of their reimbursement from hundreds of insurers with thousands of insurance programs with different rate schedules. Some large hospitals have a hundred or more rates for the very same procedures depending upon the insurance arrangement for the patient, if any. This balkanized payment system deploys armies of clericals in medical care provider offices to match their billings – roughly a billion a year outside of Medicare – with those nearly countless programs. In addition, insurers often seek to pin the tab on other insurers, as when parents have different coverages from their employers or an injury or illness is allegedly work or accident related.

By contrast, Medicare sets uniform rates within each of its fifteen administrative regions. That makes it much simpler for Medicare to match bills with the appropriate fee. Medicare participants – providers and insurer intermediaries – develop familiarity with Medicare’s procedures and rates. That enables them to process bills more speedily, with fewer mistakes and at lower costs than non-Medicare charges require. Bottom line: Medicare’s system takes less time and much less money.

In addition, analysis of federal data for 2003 (before the Medicare Modernization Act with its subsidies for private insurers and a drug program that prohibits bargaining over charges) shows that the means-tested Medicaid and SCHIP (State Child Health Insurance Program) combined cost four percentage points more to administer than Medicare does. ² Medicaid and SCHIP must repeatedly ascertain whether applicants meet their low-income tests. Doing so runs up the non-benefit costs. Ditto innumerable other federal/state child health programs, such as well-baby services that focus on low-income people.

Further, Medicare intermediaries do not have the conflicts of interest that can spark controversies between insurers and medical care providers and patients. Whether any particular charge is reimbursed does not affect the bottom line of Medicare insurer intermediaries. But a non-Medicare private insurer determination in favor of reimbursement reduces its profits. And where an insurer acts as an employer’s plan administrator, it always wants to show the employer/client that it is holding down costs. That provides a powerful incentive to deny claims; insurers and their employer/customers even come out ahead by delaying payments.

The multi-billion dollar differences in non-benefit costs between Medicare on the one hand and private insurance and public means-tested programs on the other argue for locating insurance where it costs least - in Medicare. Medicare does not own or provide health services any more than private insurers do. Medicare uses private insurers to perform its detailed administrative clerical work. No “socialism” is involved; only practicality and common sense.

¹ Nick A. LeCuyer and Shubham Singhai, “Overhauling the US health care payment system”, The McKinsey Quarterly (June 2007). It used 2005 data from the Center for Medicare and Medicaid Services (CMS). The over 15% includes the more efficient payments for Medicare; hence the non-Medicare component is much higher than 15%.
² Centers for Medicare and Medicaid Services, National Health Expenditures by Type of Service and Source of Funds, CY 1960-2006.

The Economical Way to Assure Medical Care for Children and Young People That Also Reduces Strains on Family, Business and State Budgets: Medicare

2008-11-12T16:10:00.004-05:00

Nancy J. Altman and Merton C. Bernstein
Former senior staff to the 1982-1983 National Commission on Social Security Reform in the United States Senate and Board Members of the National Academy of Social Insurance

President-elect Obama’s proposed health care reform includes a requirement of mandatory, universal, and comprehensive health care coverage for all children. No reform is more urgent, offers greater returns, or is more readily achieved at such low cost.¹

We suggest that Medicare offers the readiest and least expensive platform for this advance,² one already familiar to the nation’s health care providers, insurers, and consumers. A straightforward, universal children’s health plan is extremely efficient. Social Security, which has low administrative costs (less than 1% of outgo), demonstrates how cost effective an objective test like age is. Using Medicare’s simple and low cost machinery, rather than the myriad private and public sector programs, like SCHIP³ and Medicaid,⁴ will assure universal coverage while eliminating a number of costly and time consuming steps, such as processing hundreds of thousands of billings using innumerable differing formulas. Massachusetts alone, for example, has used eight different eligibility/payment formulas for similar populations. Private plans vary in coverage and procedures. Using but one formula saves effort, time, and lots of money.

Funds now applied to SCHIP and Medicaid will go farther by eliminating the costly means testing that must be done repeatedly – every thirteen weeks in the case of Medicaid. Indeed, the Urban Institute has concluded that Medicare’s administrative costs are about 4 percentage points lower than Medicaid’s.

In addition to its efficiency, a unitary, comprehensive program for children will improve health outcomes. When medical attention is needed, no one need first ascertain which program, if any, will foot the bill; patients can proceed directly to the intake nurse, without first stopping at the financial office.

Reducing the per capita cost of children’s medical care and shifting those costs to Medicare will reduce the financial stress upon families and business. Employers will find the costs of employment-based insurance reduced, as will their employees. Inclusion of children in employment-based insurance has always been a matter of convenience; consequently, it can be modified without violating principle.

Such a program will increase the nation’s productivity. By assuring timely and adequate health care to all of our children, we reduce the disruptions to family life and employment that inevitably accompany child sickness, which can be especially disruptive for single parents. Fewer sick kids mean fewer work absences by adults.

By assuming the cost of the state shares of SCHIP, Medicaid coverage for children, and similar state programs, the federal government can deliver effective assistance to state governments where they urgently need it. Expenditures for Medicaid and the health care costs of public employees have become the largest or second largest outlays by states.

We will all be better off by fully meeting the health needs of all the nation’s children in the most effective, least costly way. Providing health care to children is comparable to our national policy of providing education, free of cost, to all children. As a nation we debated and settled that policy in the 19th century. We decided as a nation that we all have a stake in the education of everyone’s children.

We must recognize children’s health and child education are as much a part of the national infrastructure as our ports, roads and bridges. Medicare provides an efficient, time-tested platform for making this goal a reality.

¹In 2006, Medicaid covered more children (29.5 million) than any other beneficiary category and with the lowest per capita cost - $1,070 as compared with $1,310 for adults, $6,630 for aged, and $7,360 for blind and disabled (Congressional Budget Office fact sheet, March 6, 2007). What we propose here would lower per capita cost even further.
²Out-of-control costs are pervasive throughout both public and private health care programs. Controlling all such costs are essential to overall health care reform.
³State Children’s Health Insurance Programs, enacted in 1997, have substantially decreased the numbers of children lacking assured health care. Together, SCHIP and Medicaid have improved coverage of poor children. However, the older the youngster, the less likely such coverage is. Further, both programs are limited by income caps – typically 200% of the federal poverty level. The most dramatic element of the Massachusetts plan is that it raised the cap for subsidized assured health care to 300%. SCHIP and Medicaid coverage keeps changing; a recent study of five states, all with generous standards, found temporary but substantial coverage gaps (How Stable Is Medicaid Coverage for Children?”, Fairbrother, Emerson and Partridge, Health Affairs, March 20, 2007).
⁴Medicaid provides more extensive care than SCHIP. Both use federal and state funds with the federal share the larger. As with several other economic stimulus measures, this proposed shift of the state contributions would require deficit spending.

Pensions for Everyone

2008-11-10T09:20:00.007-05:00

Jonathan B. Forman
Alfred P. Murrah Professor of Law
University of Oklahoma College of Law
Originally Published on 1/11/08

Only half of American workers have a pension plan, and only a fraction of those have traditional pensions that replace a meaningful part of their final pay. Instead, most workers with a pension today have a 401(k) plan or an individual retirement account, and according to a recent report by the U.S. Government Accountability Office, only a fraction of those workers will save enough to get a meaningful monthly benefit.

This month the oldest baby boomers started turning 62, and millions more will follow in the coming decades. Before it is too late, we need to adopt policies to ensure that every worker has adequate retirement savings.

Prior to 1980, many workers had traditional "defined benefit" pension plans that provided monthly benefits based on a percentage of their final pay. Since then, most private-sector employers have shifted to 401(k) plans and other "defined contribution" plans. In these plans, workers accumulate money in individual accounts and withdraw it during retirement.

Unfortunately, many of these workers will end up "arriving at retirement with insufficient savings to support themselves." The title of the GAO report says it all: "Private Pensions: Low Defined Contribution Plan Savings May Pose Challenges to Retirement Security, Especially for Many Low-Income Workers."

The GAO found that the typical worker had just $22,800 set aside in a defined contribution plan in 2004. Worse still, only 8 percent of workers in the poorest 25 percent of households had a defined contribution plan.

Even workers age 55 to 64 in 2004 had a median account balance of just $50,000. At age 65, that would buy a lifetime annuity of that would pay just $367 per month ($4,400 a year).

The GAO also estimates that the current defined contribution system could replace about 22 percent of final pay for a typical worker, but replacement rates would vary widely across income groups. The richest 25 percent of workers would get almost 34 percent of final pay, but the poorest 25 percent would get just 10.3 percent of final pay.

Moreover, 37 percent of workers would have absolutely no savings from defined contribution plans when they retire, and 63 percent of those in the poorest 25 percent of households would have no defined contribution savings.

To be sure, Social Security would still provide a basic benefit for older Americans. The typical retired worker now gets around $1,050 a month. But many retirees get far less, and Social Security will provide lower replacement rates in the long run, even if we somehow come up with the $4.7 trillion in new revenues needed to cover the current shortfall.

On the bright side, since 2004 we have made it easier for employers to automatically enroll employees in 401(k) plans, and we have made the retirement savings tax credit permanent. But these small steps will not avert a retirement income crisis for the baby boomers and beyond.

At the very least, we need to make sure that every worker has an easy way to save for retirement. We might, for example, let state government entities create "State-K" pension plans for employers that do not already have pension plans. Or we could require that those employers offer payroll-deduction IRAs to their workers.

Even with universal access, however, many workers simply will not save for retirement. In the end, we will need a mandatory universal pension system.

For example, we might collect another 3 percent of payroll from every American worker and place that money into individual retirement savings accounts. Those accounts could be held by the government, invested in a broadly diversified portfolio of stocks and bonds, and converted into a monthly annuity at retirement. In a new discussion paper for the Urban-Brookings Tax Policy Center, Adam Carasso of the New America Foundation and I estimate that these 3-percent-of payroll accounts would provide 13.8 percent of final wages at retirement for every worker.

Our paper, "Tax Considerations in a Universal Pension System," also shows how targeted tax subsidies could lead to even larger benefits for low- and moderate-income workers.

Millions of American workers have been left out of the current pension system and have no retirement savings. A system of 3-percent-of- payroll individual accounts would ensure that every worker has at least some retirement savings. Altogether, Social Security and these "add-on" individual accounts would guarantee that every worker has an adequate retirement income.

Another Lesson from Today’s Financial Meltdown

2008-11-06T11:37:00.003-05:00

Henry J. Aaron
Senior Fellow, Economic Studies
The Brookings Institution
Originally Published on 10/02/08

In the midst of the financial chaos enveloping Wall Street and threatening the economy of the nation and world, it is hard to think of much else. But it is worth a moment to recall the quite serious debate about partly privatizing Social Security that absorbed national attention just three years ago.

President Bush had just won a second term as president. He had, he claimed, "political capital." He intended to spend it fighting for ideas in which he believed. One of those ideas was a proposal to divert a portion of payroll taxes into personally owned savings accounts. These accounts were to be invested in privately traded assets, portfolios of stock or bonds. According to the president, privately traded bonds and stocks had earned higher returns for decades than Social Security pensioners received on the payroll taxes they and their employers paid. To be sure, the diversion of payroll taxes from the public system would eventually force large reductions in Social Security benefits. And, of course, financial experts reminded people, higher returns come with increased risk—in finance there is no free lunch. But the president and his advisers assured the public that the personal accounts would support benefits that would more than make up for these reductions.

The proposal went no where. It evoked the unanimous opposition from Democrats and lukewarm support or tepid skepticism from most Republicans. No bill embodying the president's proposal ever made it to the floor of either house of Congress.

As American financial markets are hammered by a financial storm more frightening and more damaging than Hurricane Ike, it is worth imagining what the world would have been like had President Bush’s Social Security proposal been enacted and been effective for a couple of decades. Of one thing, we can be sure. Whatever changes in regulation of banks and financial organizations Congress may yet enact, another financial storm will surely strike. It will differ from the current calamity, as surely as the current mess differs from that of the Great Depression. But regulators, however well intentioned, cannot anticipate the infinite imaginativeness of really smart financial and legal experts at finding new ways to skirt controls put in place to prevent the recurrence of the last crisis. It would be naive to imagine that regulators who have never been able to plug all the ways around previous safeguards will suddenly find the perfect fix that prevents financial crises from ever happening again.

So, picture this imaginary future. President Bush’s partial privatization plan was enacted. People have been socking away funds in individual accounts for years. Social Security benefits have eroded continuously, as was inevitable under President Bush’s plan. People will have adjusted their consumption and savings to leave themselves with savings that they expect to be sufficient for retirement.

Then, bang! After people have retired or become disabled, or just on the eve of claiming benefits, a financial panic they could not possibly have anticipated strikes. Even worse, stock prices collapse as much as they did in 2001 when over-the-counter shares fell roughly 80 percent and the New York Stock exchange fell by more than 40 percent. Those are the assets in which private accounts were invested. Retirement income, once thought adequate, becomes insufficient. To be sure, Social Security benefits would remain, as they are today, rock solid. But under the typical privatization plan, they would provide much less of retirement income than they do today. The financial crisis would become a personal calamity for tens of millions of retired baby-boomers and their successors.

In the midst of today’s well-founded angst about whether current financial turmoil will precipitate serious and sustained economic recession or even depression, it is worth taking a moment to recognize that Social Security has remained what it was intended to be—a solid foundation of financial security for retirees and people with disabilities. It is also worth breathing a sigh of relief that Congress recoiled from the proposal that president Bush put forward to partially privatize Social Security, a measure that would have eroded that foundation as surely as Hurricane Ike washed away homes and businesses on the Texas coast.

Towards Guaranteed Retirement Security

2008-11-05T14:50:00.005-05:00

Teresa Ghilarducci
Bernard L. and Irene Schwartz Chair of Economic Policy Analysis
The New School for Social Research

American workers lack pension security, beyond Social Security, because individual commercial retirement accounts are tied to the volatility of finance markets, are inadequately funded, have poor net-of-fees returns, and do not pay a guaranteed rate of return for the rest of a retiree’s life. Also, employers have conflict of interests between their needs and their workers' needs when choosing 401(k) investment vehicles. Pension coverage is stuck at half of the workforce

I propose a short term and long term solution to inadequate pensions. Short term, workers should be able to swap out their 401(k) assets – if they choose -- (valued mid August) for special issue government bonds paying a guaranteed 3% plus inflation rate of return. Long term, everyone should be able to be in a national “cash-balance” fund where the contributions are a steady percent of pay – at least 5% -- and the returns are guaranteed (3% plus inflation.). Workers’ contributions should be subsidized by a government tax credit of $600 (adjusted for inflation). The short term swap would be voluntary and the participation in the Guaranteed Retirement Accounts would be mandatory if there was no other pension plan available. One way to pay for the $600 subsidy is to turn the tax deduction for 401(k)s into a tax credit.

Welcome

2008-11-04T14:27:00.000-05:00

The historic 2008 election is over and the new administration and Congress are about to begin work. This is an exciting time for our country, and it is crucial that the President and Congress consider thoughtful policy changes to help alleviate the economic insecurity felt by many Americans.

NASI’s membership embodies the brightest policy thinkers in the country, and we have solicited their ideas as to what policies Congress and the White House should focus on. Policy ideas about Social Security, Medicare, unemployment insurance, workers’ compensation, taxes and the economy in general are welcome.

Comments from other NASI members and the general public are welcome.