AARP Response to Progressive Press Report on Older Jobless Workers
AARP’s statement in response to our feature titled “Older Jobless Workers Face Unhealthy Bias.”
Dear Ms. Dilek:
Thank you for contacting AARP about the nation’s fiscal crisis and deficit reduction. We appreciate feedback such as yours and have taken note of your views. It is my pleasure to respond.
Congress passed legislation on January 1, 2013 to avert the so-called “fiscal cliff,” a series of spending cuts and tax increases that would have taken effect at the end of 2012 without the adoption of some changes. AARP is pleased that the agreement included several elements that AARP strongly supports. For example, the deal ensures that Medicare patients can continue to see their doctors by delaying an automatic and drastic pay cut for Medicare doctors for another year; it strengthens the economic security of people struggling in this economy by extending benefits for the long-term unemployed; it restores Social Security’s dedicated funding stream; and it protects funding for key Medicaid programs, which will help millions of Americans who rely on Medicaid for their health and long-term care. While we are disappointed in the repeal of the Community Living Assistance Services and Supports (CLASS) Program, we are hopeful that the new Commission on Long-Term Care will work toward meaningful solutions to help individuals live in their homes and communities and support family caregivers.
AARP and our members recognize the urgent need for and the daunting task of putting our nation’s finances on a more secure path. We are fighting for common sense solutions that protect the vulnerable, promote growth in the American economy, and improve the health and economic security of current and future generations. Policymakers must find a way to reduce the federal deficit to a manageable level while ensuring an adequate revenue stream to support important programs and services. Controlling rising health care costs will be an important part of any solution. Given the erosion in retirement savings and home equity during the recent financial crisis, continuing high unemployment, the decline of defined-benefit pension plans, and the rising out-of-pocket health care costs faced by many seniors, the strength of the Social Security and Medicare programs is more important than ever.
The legislation passed on January 1 postponed planned spending cuts for two months, and our country still needs to find ways to get our fiscal house in order. Thus, discussions about deficit reduction will continue. AARP believes in a balanced approach to our budget problems to include both spending cuts and increased revenue. However, as legislation is developed to address our nation’s deficit, AARP urges Congress to reject proposals that would cut guaranteed Medicare benefits, unfairly shift costs to seniors or future retirees, or reduce Social Security benefits for current retirees and the most vulnerable seniors.
AARP strongly opposes proposals that would increase the Medicare eligibility age from 65 to 67 because not only would this benefit cut increase younger retirees’ costs by about $2,000 per year, it actually increases costs for the health care system generally. If implemented in 2014, about 7 million beneficiaries would lose eligibility they would otherwise have had. Forcing these 65 and 66 year olds into the private insurance market will cause premiums to rise for workers. Employer costs of providing health care coverage for this group were estimated to increase by $4.5 billion in one year. The overall remaining Medicare population would be an older, less healthy, and more costly population, leading to higher premiums for those remaining in Medicare. In short, raising the Medicare eligibility age, rather than reducing costs, will increase health costs for everyone.
Rather than targeting Medicare and increasing costs for many, AARP believes Congress should look for ways to reduce costs and improve the health care system. These might include reducing the exclusivity period for biologic drugs, allowing for the safe and legal importation of prescription drugs, and enabling the Secretary of HHS to negotiate for lower prescription drug prices. With some estimates putting waste and fraud in the health care system at ten cents on the dollar, we stand by our call for Congress to fight fraud and target wasteful spending instead of simply cutting Medicare and Social Security.
AARP also opposes proposals to change the way Social Security’s annual cost of living adjustment (COLA) is calculated. Some argue that the current measure overstates inflation because it does not fully account for the fact that consumers often change purchasing patterns when prices change. Therefore, some propose calculating the COLA using a “chained” consumer price index (CPI) to account for this substitution in purchasing resulting in a lower COLA. However, in the case of many products and services, such as health care (in which costs are rapidly rising), older consumers do not have the opportunity to substitute their purchasing, so the chained CPI will not accurately keep up with seniors’ rising costs. This proposal would affect current retirees and reduce the value of Social Security benefits over their lifetimes.
The effects of a lower COLA will compound benefit reductions dramatically over time, resulting in an annual benefit that is roughly $1,000 (2012 dollars) lower by the time a beneficiary reaches age 85. Using the “chained” CPI will produce the largest benefit cuts during the time when older Americans need more resources to pay for increasing out-of-pocket medical costs, are most dependent on Social Security benefits, and are at the greatest risk of poverty.
Simply, our policy reflects what the majority of our members have told us they believe: Congress should find ways to solve our nation’s budget problems without making damaging cuts to Medicare and Social Security for seniors. Any changes to Social Security and Medicare should be discussed as part of a broader conversation for how to strengthen retirement security. AARP was founded more than 50 years ago to ensure that older Americans have affordable health care and financial security in retirement. While much has changed since those early years, our commitments have not. AARP will continue to raise the voices of millions of Americans who rely on their Social Security and Medicare benefits and we will continue to fight for a balanced approach to solving our nation’s deficit. For more information, or to get involved, visit www.aarp.org.
Thank you again for writing. We always welcome your input. Please feel free to continue sharing your comments and questions.