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Dude, where’s my retirement? Social Security & Medicare

Dude, where’s my retirement? Social Security & Medicare. Steven P. Wallace, Ph.D. Professor, UCLA School of Public Health Assoc. Dir., UCLA Center for Health Policy Research swallace@ucla.edu. Concentration of death in old age In 1900, 41% live to old age, in 2003 83% do.

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Dude, where’s my retirement? Social Security & Medicare

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  1. Dude, where’s my retirement? Social Security & Medicare Steven P. Wallace, Ph.D. Professor, UCLA School of Public Health Assoc. Dir., UCLA Center for Health Policy Research swallace@ucla.edu

  2. Concentration of death in old ageIn 1900, 41% live to old age, in 2003 83% do http://www.cdc.gov/nchs/data/nvsr/nvsr54/nvsr54_14.pdf

  3. Life expectancy at age 65 >50% increase in last century Source: http://www.agingstats.gov

  4. Key Questions • Why does Social Security exist? • Will it be there for me? • Aren’t private accounts better? • At least I don’t have to worry about health care costs, right? • Why do I need to organize?

  5. US lags in social welfare • 1889 Germany • Bismark – Industrial unrest & growth of socialist movement leads him to create first public pension • 1891 Denmark • 1908 England • 1910 France • 1927 Canada • 36 countries total by early 1930s http://www.socialsecurity.gov/history/briefhistory3.html

  6. The Great Depression • 17 states w/ pensions, mostly in CA, MA, NY • 50% of older adults w/o sufficient income by 1932 • Local aid overwhelmed

  7. New Federal Role • I see one-third of a nation ill-housed, ill-clad, and ill-nourished • … The test of our progress is not whether we add more to the abundance of those who have much; it is whether we provide enough for those who have too little Franklin D. Roosevelt

  8. Social Security - 1935 • “Universal”, compulsory=socializes risk • Work-related, but portable • Defined benefits • Age 65 chosen for benefits based on actuarial calculations • Only covered industrial workers @ first, then expanded

  9. Assumptions • Male worker, stay at home mother • Primary worker works full-time, continuously until retirement • Three legged-stool of retirement • Social Security • Private Pension • Savings

  10. Elder Economic Security Standard™ index – LA 2007

  11. More Info on Elder Index • UCLA Center for Health Policy Research Reports, county data http://www.healthpolicy.ucla.edu/elder_index08feb.html • Insight Center for Community Economic Development, CA policy info http://www.insightcced.org/index.php?page=california-elder-economic-security-initiative • Wider Opportunities for Women, national http://www.wowonline.org/ourprograms/eesi/index.asp

  12. More Social Security principles Replacement Rate • Income adequacy • Low-wage workers get higher replacement rate • If spouse has no independent earnings, gets 50% spouse benefit • Indexed for inflation http://www.socialsecurity.gov/finance/2007/Overview_of_SSA.pdf

  13. Lifetime benefits • Early retirement (age 62) and normal retirement (age 65-67) provide, on average, the same lifetime benefits • Early retirement benefits are reduced to account for extra years benefits received • Full retirement age goes to 67 (for those born 1962 & later)

  14. Who gets Social Security? • Family protection • Retiree • Widow(er)s • Survivors • Disability • 55 million total Source: http://www.ssa.gov/policy/docs/quickfacts/stat_snapshot

  15. Will it be there when YOU retire? • Politicians and media continually talk of Social Security going “bankrupt”

  16. Follow the money

  17. Social Security Trust Fund -Today Source: http://www.socialsecurity.gov/OACT/TRSUM/trsummary.html

  18. Social Security Trust Fund -Tomorrow Source: http://www.socialsecurity.gov/OACT/TR/TR08/lr4b3.html

  19. Then what? If NO changes are made to Social Security, in 2042 • Benefits are reduced to 78% promised -- And/or -- • Taxes go up http://www.nasi.org/publications2763/publications_show.htm?doc_id=263184

  20. How to balance budget • Increase revenues • E.g. Tax earnings above $102,000 (2008 amount) • Gap is about 2% GDP • Decrease spending • E.g. Encourage people to work longer

  21. How not to “fix” problemPrivatization • Higher administrative costs • U.S. Social Security = 0.6% vs. 15% in UK private plans • Investment risk is held by individual • Poor decisions (e.g. invest in Enron, invest in low yield savings account) hurt individuals • No inflation guarantee • You can “outlive” some plans

  22. How not to “fix” problem • Most privatization plans are worse for • Widows & women (who live longer than men) • Nonelderly Survivors • Disabled • Transition costs (paying current recipients plus putting money in new accounts) are huge

  23. Who wins with private accounts? • Major financial firm backers of privatization would see profits zoom via underwriting charges and commissions. http://www.flickr.com/photos/photo_secessionist/1907265921/

  24. What about medical care costs at age 65? • Medicare • Medi-gap (supplemental health insurance) • Medicaid (for those with incomes below poverty) • Out of pocket

  25. Per capita spending = $15,000 for those age 65 & over in 2004 Health Affairs, 27, no. 1 (2008): w1-w12. doi: 10.1377/hlthaff.27.1.w1

  26. Dude, where’s my health insurance? • Averages are influenced by those with large expenses • Premiums & copays for Medicare • Uncovered expenses http://www.flickr.com/photos/wrayne/367717274/

  27. Medicare’s costs • Premiums • Part B (MD=$96.40+) & Part D (drugs=$27.93+) • Deductibles • Hospital ($1024), doctor ($135), drugs ($275 + coverage gap up to $3,216) • Co-payments • Doctor (20%), drugs (varies) http://www.medicare.gov/Publications/Pubs/pdf/10050.pdf

  28. Medicare’s gaps – services not covered • Eyeglasses, hearing aids • Dental care • Annual physical exams (after “welcome to Medicare” exam) • Long-term care • Medicare only pays for post-hospital recovery, up to 100 days in nursing home, “reasonable” home health days

  29. Solutions? • Employer provided Medi-gap is the best • HMOs often provide good gap coverage • Beware of plans to “save” Medicare!

  30. Best way to protect your retirement?

  31. Organize! For example: • Alliance for Retired Americans www.retiredamericans.org • National Committee to Preserve Social Security & Medicare www.ncpssm.org

  32. So where IS my retirement?Conclusions • In Social Security as one pillar of income security in retirement, as long as it remains • Universal – risks shared by all, (almost) everyone has a stake in it, predictable • Public – low administrative costs • “Adequate” – higher returns for poorest, indexed for inflation, benefits for widows/ survivors/ disabled

  33. So where IS my retirement?Conclusions • Social Security WILL be there for you, even if nothing is done to improve financing • Privatization will benefit Wall Street, not Main Street • Medicare is the key pillar of retirement health care • But you also need to fill in the gaps

  34. So where IS my retirement?Conclusions • The best investment for economic and health security in retirement is in working together with others in this room & elsewhere to protect Social Security and Medicare.

  35. Thank youswallace.bol.ucla.edu

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