Medicare Takes a Blow Under GOP’s Major Tax Plan Fix

Published in the Woonsocket Call on December 10, 2017

In early December, the GOP-controlled Senate passed by a partisan vote of 51 to 49 its sweeping tax rewrite (with Republican Senator Bob Corker of Tennessee siding with the Democrats and opposing the measure), sending the $1.4 trillion tax package, detailed in a 492 page bill, to the Conference Committee to iron out the differences between the Senate and House bill, Tax Cuts and Jobs Act (H.R. 1), that was passed by a 227-to-205 vote on November 16, 2017.

While Democrats are technically part of the conference committee, Republicans are yet again hashing out the details behind closed doors on a purely partisan basis. Democrats charge that the GOP lawmakers on the conference committee will look to rubber-stamp whatever their leadership comes up with and do not expect to see any changes to the legislation for the better.

The cores of the House and Senate bills are already very similar: tax cuts for the wealthiest and corporations paid for by middle-class Americans. Republicans are rushing to get legislation to President Donald Trump’s desk for his signature before Christmas. While Trump looks forward to the first major legislative accomplishment of his presidency (once signed into law) as a Christmas gift to the nation, those opposing the massive changes to the nation’s US tax code view it as a stocking stuffed with coal.

Congressional insiders expect to see a finalized tax bill in the coming days, and votes in the House mid-next week at the earliest.

Medicare Takes a Blow

U.S. Senator Sheldon Whitehouse, sitting on the Senate Special Committee on Aging, sees the writing on the wall with the passage of the GOP tax bill. “The Republican tax plan would run up huge deficits, trigger immediate cuts to Medicare, and threaten Social Security and Medicaid down the line,” says the Rhode Island Senator.

Adds, Max Richtman, president and CEO of the National Committee to Preserve Social Security and Medicare (NCPSSM), this forces the “the poor, middle class, and elderly to pick up the tab for trillions of dollars in tax breaks that the super-rich and profitable corporations do not need..” If enacted, the GOP tax fix triggers an automatic $25 billion cut to Medicare,” he warns, noting that “it blows a $1 trillion hole in the deficit, inviting deep cuts to Social Security, Medicare, and Medicaid.”

Richtman says, “adding insult to injury” both the GOP Senate and House tax bills repeal the Obamacare mandate, which will raise ACA premiums for older adults (age 50-64) by an average of $1,500 in 2019. He notes that the Senate tax bill uses the “Chained CPI” inflation index for calculating deductions and tax brackets, this “setting a dangerous precedent that could spill over into cost-of-living adjustments for Social Security.”

In her December 7 correspondence to Congressional leadership, AARP Chief Executive Officer Jo Ann Jenkins, representing millions of members who whose health care depends on Medicare, urged lawmakers to work together in a bipartisan fashion to enact tax code legislation that would meet the needs of the older population and arrive at a tax code that is “more equitable and efficient, promotes growth, and produces sufficient revenue to pay for critical national programs, including Medicare and Medicaid.”

Jenkins urged Congress to prevent $25 billion in automatic cuts to Medicare in 2018 that would result from the enactment of H.R. 1 and its $1.5 trillion deficit increase (according to the Congressional Budget Office) since it “would have an immediate and lasting impact, including fewer providers participating in Medicare and reduced access to care for Medicare beneficiaries.”

“The sudden cut to Medicare provider funding in 2018 would have an immediate and lasting impact, including fewer providers participating in Medicare and reduced access to care for Medicare beneficiaries,” said Jenkins, who warned that health care providers may choose to stop accepting Medicare patients at a time when the Medicare population is growing by 10,000 new beneficiaries each day.

Jenkins also expressed her concern that Medicare Advantage plans and Part D prescription drug plans may charge higher premiums or cost-sharing in future years to make up for the cuts now.

The Devil is in the Details

On the AARP website, Gary Strauss, an AARP staff writer and editor, posted an article on December 6, 2017, “Your 2018 Taxes? Congress Now Deciding,” that identifies specific GOP tax bill provisions that hit older tax payers in their wallets.

According to Strauss, an AARP Public Policy Institute analysis also found that more than one million taxpayers 65 and older would pay higher taxes in 2019, and more than 5 million would see their taxes increase by 2027. More than 5 million seniors would not receive a tax break at all in 2019, and 5.6 million would not see their taxes decrease by 2027.

The House and Senate tax bills also have differing views on the medical expense deduction, used by nearly 75 percent of filers age 50 and older, says Strauss. The Senate plan allows taxpayers to deduct medical expenses exceeding 7.5 percent of their income rather than a current 10 percent — for the next two years. The House tax plan eliminates this deduction. Some 70 percent of filers who use the deduction have incomes below $75,000.

Strauss says that the House bill eliminates the extra standard deduction for those age 65 and up, while the Senate bill retains it. For 2017, that’s $1,250 for individuals, $1,550 for heads of households or $2,500 for couples who are both 65 and older. .

Both Senate and House versions abolish state and local tax deductions, with the exception of up to $10,000 in property taxes. Residents in high-tax states such as California, Connecticut, New Jersey and New York, would pay higher taxes, adds Strauss.

For home owners, Strauss notes that the Senate plan leaves interest deduction limits at $1 million, while the House bill lowers the mortgage interest deduction limit to $500,000 and no longer allows it to be used for second homes, says Strauss.. Individuals would also continue to get up to $250,000 tax-free from the sale of a home (up to $500,000 for couples). But, both bills require sellers to live in the property five of the eight years prior to a sale, up from the current requirement of two of the last five years,” adds Strauss.

At press time, dozens of newspapers are reporting that Americans across the nation are protesting the passage of GOP tax bill that makes the biggest changes to the U.S. tax code in 30 years, calling it a “scam.” AARP and NCPSSM are mobilizing their millions of members to protect Medicare, Social Security and Medicaid.

While Trump told Senators at a lunch meeting held on December 5 at the White House that the Republican tax plan was becoming “more popular,” two recently released polls are telling us a completely different story. According to a Gallup national poll, a majority of independents (56 percent) join 87 percent of Democrats in opposing the tax plan. Only 29 percent of Americans overall approve of the proposed GOP changes to the nation’s tax code. Reflecting Gallup’s finding, the Quinnipiac University national poll found that 53 percent of American voters disapprove of the tax plan, while only 29 approve.

With mid-term Congressional elections less than a year away, Trump and the GOP-controlled Congress continued push to dismantle Obamacare, leaving millions without health care coverage and creating a tax code that would destroy Medicare, may well bring millions of older taxpayers to the polls to clean house. We’ll see.

Advertisements

Critics of Chained CPI Call It a “Flawed Policy”

 Published in the Pawtucket Times, July 5, 2013

            With President Barack Obama’s fiscal blueprint unveiled almost three months ago, on April 10, 2013, that included a chained consumer price index (CPI) for the purpose of calculating Social Security cost-of-living adjustments (COLAs), Rhode Island aging advocates go on the offensive opposing the suggested way as to how the federal government would calculate inflation.

             In June 12, 2013, Rhode Island AARP State Director, Kathleen S. Connell, a former secretary of state and one-time teacher, and State President Alan Neville, of Cumberland, along with AARP staff and volunteers from every other state in the nation, traveled to Inside the Beltway to Capitol Hill, on June 12, 2013, to urge Congress to just say “No” to a tying a chained CPI to Social Security.

             Continuing to protest, early this week Connell, Senator Whitehouse and Congressman Langevin and Cicilline, joined over 150 people who voiced strong concerns over Congress’s consideration of a chained CPI.  The Rhode Island Alliance of Retired Americans, the organizer of Tuesday’s protest, called it a “flawed policy,” charged that “switching to a chained CPI would compound benefit reductions dramatically over time, resulting in an annual benefit cuts.” 

            AARP Rhode Island is also planning to host “You’ve Earned a Say” discussions at seniors centers across the state this summer and into the fall to get its membership to rally against changing how Social Security cost of living adjustments are calculated.

 

Critics Take Aim at Chained CPIs

             President Obama’s push in his proposed budget request to rein in Social Security costs (a concession to GOP leadership), through the use of the chained CPI, pushed liberal Democratic lawmakers, including Rep. David Cicilline, representing Rhode Island’s 1st Congressional District and Senator Sheldon Whitehouse, to strongly oppose President Obama or any Congressional efforts to put Social Security on the chopping block to lower the nation’s federal deficit, through changing the way COLAs are calculated.

            Rather than tinkering with the CPI linked to Social Security to rein in the nation’s huge federal deficient, Rep. Cicilline called for reforming the nation’s tax code by ending subsidies for “Big Oil,” along with “making responsible target spending cuts,” to slash the nation’s huge federal deficit

 

            Referring to the Social Security’s 2012 Annual Report in April (see my June 1, 2012 Commentary in the Pawtucket Times) , Sen. Whitehouse stated that Social Security is fully solvent for the next 20 years and has not contributed to the nation’s budget deficit and has no place in the debate over federal spending. 

             Senator Whitehouse called it “a [Social Security] benefit cut disguised behind technical jargon.”  The Senator and other critics argue that the current CPI shortchanges older persons by placing too much emphasis on products that these individuals are less likely to buy, like “smart phones” and “computers.”  He noted that in 2010 and 2011, Social Security beneficiaries did not receive a COLA, even though prices for food and beverages, medical care, gasoline and fuel oil increased.

             According to the Washington, D.C.-based, National Committee to Preserve Social Security and Medicare (NCPSSM), the Obama Administration sees this [chained CPI] switch as just “a technical adjustment.” Aging group warn that using the chained CPI will substantially reduce the Social Security benefits of current and future beneficiaries.  “If it is adopted, a typical 65 year-old would see an immediate decrease of about $130 per year in Social Security benefits.  At age 95, the same senior would face a 9.2 percent reduction—almost $1,400 per year,” notes NCPSSM.

             While all beneficiaries will feel the impact of this change, its effect will be greatest on those who draw benefits at earlier ages (e.g., military retirees, disabled veterans and workers) and those who live the longest, says NCPSSM, especially “women who have outlived their other sources of income, have depleted their assets, and rely on Social Security as their only lifeline to financial stability.”

 What’s the Impact???

             Washington-DC-based, AARP, representing 40 million members, has rolled out an educational campaign, to put the face who loses most if changes are made in how COLAs are calculated. 

 

              Fact Sheets, placed on AARP’s heavily traveled website (http://www.aarp.org/politics-society/advocacy/info-04-2012/youve-earned-a-say.html), tells how a federal policy shift would impact specific demographic groups in their pocketbook.

             Retired women can least afford using the chained CPI calculation because they earn less on average than men (that is $4,000), are more likely to have a part-time job and have gaps in their employment due to leaving the workforce to take care of their children.  With women living longer the chained CPI would slash their benefits more with every year they live.  Older women also rely on their Social Security Pension checks because they are less likely to have other sources of retirement income, this check even keeping 38 percent of them out of poverty compared to 32 percent of older men, the says the AARP fact sheets.

             AARP’s fact sheets, also details the impact on older disabled Americans, noting that 37 percent are dependent on Social Security benefits for nearly all their family income, that is around $13,560 annually.  Many begin getting Social Security checks at a young age.  For instance, a 35-year-old disabled worker who receives average disability benefits would see his or her benefits reduced each year by $886 at 65 and $1,301 at 80.   Finally, Social Security keeps about 40 percent of people with disabilities age 18 and over and their families out of poverty.  Cutbacks in benefits due to tying the chained CPI to the Social Security program would force the persons already living on a very tight budget impacted by rising drug costs, increased utilities and health care expenses to cut back on vital needs.

             Finally, one of AARP’s fact sheets charge that older veterans would be financially slammed, sort of a double whammy.  With almost 1.5 million veterans living below the poverty level, each dollar cut, like older person’s who are disabled, will get hit hard in their pocket book as the years roll by.  Because a chained CPI would cut both Social Security and Veterans’ benefits, this group gets the budget ax thrown at them twice. “A veteran who’s 65 today would have veterans benefits reduced annually by $1,029 and Social Security benefits by $1,422 at 95, when benefits are needed the most,” states the fact sheet.

 Congressional Fight Looming

             Rhode Island’s Senator’s Jack Reed and Sheldon Whitehouse have signed on as co-sponsors of SR 15, with over a dozen Senators, a Resolution Rejecting the chained CPI expressing “the sense of Congress that the chained CPI should not be used to calculate cost of living adjustments for Social Security and Veterans benefits.”

             Meanwhile, in the House of Representatives, a resolution, HR 34, was introduced by Rep. Cicilline, cosponsored by Rep. James Langevin along with 111 other Democrats, also opposing President Obama and GOP attempts to rein in the Social Security budget through the use of a chained CPI calculation.

             With nonbinding resolutions expressing opposition to the use of a chained CPI index now introduced in both chambers of Congress, union and aging groups are urging rallying support for passage.

            AARP’s Kathleen S. Connell and her colleagues around the nation are gearing up to send a message loud and clear, once and for all to Congress.  Simply put, Connell says:  “Chained CPI is not only harmful and illogical; it is also out-of-place in the discussion of deficit reduction.  As a self-financed program providing earned benefits, Social Security has not caused the deficit—and it should not be turned into an ATM for politicians trying to address it.  We deserve a separate national conversation about how to protect Social Security for today’s seniors and responsibly strengthen it for our children and grandchildren.”

            Congress might well choose to tread lightly on giving the thumbs up to using a chained CPI in calculating Social Security Colas. The anticipated fiscal impact (detailed by AARP and aging group critics, along with the Rhode Island Congressional delegation) resulting from this federal policy change will hit the nation’s elderly right where it hurts, the most, in their wallets.  Increased bipartisan efforts can find better solutions to trimming the nation’s huge federal deficit and improving the fiscal viability of the nation’s Social Security Program.

             Herb Weiss, LRI ’12, is a Pawtucket-based freelance writer covering aging, health care and medical issues.  He can be reached at hweissri@aol.com