Envisioned as supplemental income for impoverished retirees, Social Security and Medicare have now become the lifeline for most seniors — accounting for 80 percent of retirement income and providing health care for 97 percent of seniors, according to the American Association of Retired Persons (AARP).
AARP representatives spent the day in Payson Thursday talking to about 80 seniors regarding proposals to change Social Security and Medicare. There was a session in both the morning and afternoon at the Payson Elks Lodge.
The program is part of a national AARP education effort, You’ve Earned A Say (YEAS). Former Payson resident Ginny Creager was part of the AARP team making the presentation along with Ritch Steven.
They opened the program by highlighting the importance of both Social Security and Medicare to Arizona seniors.
A total of 85 percent of Arizonans 65 and older received Social Security in 2011. The average annual benefit was only $14,300. Social Security accounted for 62 percent of the typical older Arizonan’s income.
Low- and middle-income Arizona seniors are even more dependent on Social Security, which typically accounts for 80 percent of their individual income.
An estimated 11 percent of older Arizonans live in poverty, but without Social Security income, an additional 31 percent of the state’s older population would fall into poverty.
With more people living longer, Social Security faces increasing financial challenges. Estimates indicate that without changes, the program can pay full benefits for only the next 20 years. Unless Congress makes changes in the system now, after 2033 payments will drop to 75 percent of promised benefits — then down to 73 percent by 2086.
Nearly 97 percent of older Arizona seniors were enrolled in Medicare in 2011 and on average they spent an estimated $3,800 on out-of-pocket health care costs, which works out to roughly 9 percent of their income.
As with Social Security, increasing life spans threaten the long-term health of the system.
Those challenges include:
• Half the work force has no employer-provided retirement plan; almost a third of working households, age 21 to 64, have no savings specifically for retirement; even older workers (50 to 59) with retirement savings don’t have enough to continue their standard of living — a quarter have less than $27,000, half have less than $80,000.
• Health care costs are higher than inflation.
• Within just 12 years, Medicare will not be able to pay the full amount of hospital costs.
• The number of people in Medicare is expected to double between 2000 and 2030.
• With lower birthrates the number of workers per beneficiary is declining.
Addressing the challenges
Summaries of some of the proposals being discussed in Washington, D.C. to address the challenges were presented at the AARP program Aug. 16. Each was followed by a snapshot of the pros and cons from experts AARP asked to participate in the YEAS program.
Social Security solutions include raising the full retirement age to 68 or 70 in increments. David John of the Heritage Foundation favors this proposal, stating, people are living longer than ever before and the system cannot afford to support longer lives spent in retirement.
When Congress enacted Social Security in 1935, men on average lived only 13 years in retirement, but that has now risen to 20 years. As for women, the number of years they live beyond age 65 has risen from 15 to 22.
However, Virginia Reno of the National Academy of Social Insurance wrote in opposition to increasing the retirement age. She said raising the full retirement age is a benefit cut no matter what age an individual begins taking benefits. The current age hike to 67 has effectively cut benefits 13 percent.
Rim residents at the programs were asked to vote to show the positions with they most identified.
The organizers asked the audience to vote on their priorities. Some 47 percent voted to wait before making any major changes, while 44 percent favored immediate changes.
Other proposals to address the challenges Social Security faces include:
— Recalculating the cost-of-living adjustment;
— Increasing the payroll tax cap or eliminating it altogether;
— Reducing benefits for higher earners; improve benefits.
The questions put to program participants:
— Some people have proposed benefit changes in Social Security to protect vulnerable seniors and widows and assist caregivers. The majority in both the morning and afternoon groups said benefits should be improved, but not before Social Security is put on more stable financial ground.
— Social Security is the largest source of income for most current retirees, for others it’s one source of income. What should be done on behalf of future retirees? Again, both the morning and afternoon participants agreed: a balanced approach is needed for changes in the program’s benefits and revenues.
— Regarding the program and benefits to higher paid individuals, a majority of the participants agreed with the statement, “Higher paid workers aren’t paying enough into the program.” However, they also agreed with the statement, “Everyone should get the benefits they’ve earned.”
Proposals to address the challenges to Medicare: raise the eligibility age; raise Medicare premiums for higher-income beneficiaries; change the program to a premium-support plan (vouchers sent to participants to buy their own health care insurance); increase the participants share for home health care, skilled nursing facility care and laboratory services.
Some 54 percent of the participants in the morning session agreed with the statement: Some changes should be made now in Medicare, but we should wait before making any major changes.
Both groups agreed that rising health care costs pose the biggest challenge to Medicare.
The majority of people in both sessions also agreed with the statement, “All future retirees should continue to get guaranteed coverage and care as seniors do now.”
The majority felt Medicare funding should primarily come from dedicated Medicare taxes.
More information about the discussions regarding changes in both Social Security and Medicare, visit the Web site earnedasay.org. AARP will also have an upcoming voter information publication on its Web site, aarp.org.