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Will the “Debt Panel” Harm Seniors?

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Congressional leaders named the final members of the “debt panel” Thursday, and now the hard work begins: The panel must find at least $1.2 trillion in savings over the next decade. For seniors, their decisions on where to save could mean cuts to programs like Medicare and Social Security, but will they?

The so-called supercommittee is made up of six Republicans and six Democrats, who have until Nov. 23 to cut the deficit by $1.2 trillion or risk automatic spending cuts — including an up to 2% cut on Medicare provider payments and further defense spending cuts — that neither party wants.

Representing the Republicans: Reps. Jeb Hensarling (Tex.), Dave Camp and Fred Upton (both of Mich.), and Sens. Jon Kyl (Ariz.), Pat Toomey (Penn.), Rob Portman (Ohio).

For the Dems: Reps. Xavier Becerra (Calif.), Chris Van Hollen (Md.), and James Clyburn (SC), and Sens. Patty Murray (Wash.), John Kerry (Mass.) and Max Baucus (Mont.)

There’s no certainty around what’s on the table, and no guarantee the committee will even reach an agreement. Even so, Social Security and Medicare are among the bigger elephants in the room, and several members of the committee have expressed willingness to compromise in order to create changes to the programs. According to the Wall Street Journal, Camp might agree to ending some tax breaks to reach a deal and Toomey said on Wednesday that while he is “not interested in some kind of big tax increase,” he does see “a lot of opportunities in the tax code to make it much more sensible.”  And there’s also indication that Democrats are willing to compromise.  Clyburn has mentioned raising the retirement age as a possible compromise point, and Murray said she would work to find “common values.”

Who knows how long this cooperative spirit will last? For the roughly 60% of seniors who depend on Social Security for a least half of their retirement income, and the millions who are enrolled in Medicare, it’s worth a quick look at what might happen with regards to Social Security and Medicare if a compromise is reached.

The Social Security compromise idea that could gain a lot of traction is a change to how the consumer price index is measured, which would result in smaller Social Security increases for seniors, says Max Richtman, the president and CEO of the National Center for the Preservation of Social Security and Medicare. If Social Security were to use the new measurement to determine cost-of-living adjustments, the average retiree would receive about $18,000 less in benefits over 25 years, according to The Senior Citizens League.

In terms of Medicare, Richtman says a popular proposal is raising the age when Americans are eligible for benefits from 65 to about 67.  But according to a study by the Congressional Budget Office, that plan would not generate that much in savings since older recipients usually spend a lot more.  And it’s possible, that cutting payments to Medicare beneficiaries will be on the table, though most Democrats are opposed to this idea.

It’s important to remember that while Social Security is spared if the committee can’t reach an agreement, Medicare is not.  In fact, if the debt panel doesn’t agree on anything, payments to Medicare providers will be cut by up to 2%, which may indirectly impact beneficiaries via an increasing number of doctors refusing Medicare or cuts to hospital programs, says Mary Johnson, a senior policy analyst for the Senior Citizen’s League, a non-profit seniors rights advocate.

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    • Why do we continue to coarpme economical models when most of them are not viable? It is like comparing two cars, one of which may look attractive but does not run. The decline in Europe’s standard of living in the last 20+ years is totally self-inflicted. To say that Europeans ‘vote’ for more leisure is a very strange way to say that they have structurally bankrupted their economies. Without serious reform, Greece represents the future for each country in the EU, including France and Germany.Any discussion of government must begin with that unalterable fact. The ONLY question is whether the USA has now chosen to follow them over the fiscal cliff.

    • It is the ONE TRILLION underground/black market economy STUPID .. that doesn’t get taxed.. IRS ADMITS to not collecting ~ 350 BILLION a year in taxes from this “economy”. The only solution is a flat sales tax… you earn it (legal or illegal).. you spend it .. it is taxed… no forms.. no loop holes… no deductions… no April 15th ! It is not regressive.. because .. the more you make the more you spend… and the more taxes you paid.

    • I’m sick of hearing all these whining liberals wanting to crush me because I’m filthy rich. They want to tax me down from being filthy rich to just rich. I’m paying less in taxes because my accountants can find every possible loop hole that exists, and I want it to stay that way. If in the future things become more proportionate and the wealthy have to pay higher taxes, then I’ll have less to spend on second homes, private jets, and luxury automobiles. I don’t think I could tolerate living just as an ordinary millionaire. I need to stay filthy rich so I can create more jobs for all those unemployed people, because being just rich won’t allow me to do that. Being filthy rich allows me to have access to the best medical care on the planet, if I were reduced to just being rich through paying higher income taxes then my medical care could suffer. Congress should reduce Social Security and Medicare benefits first, before deciding to increase taxes on the wealthy, which would force us into scaling back from decadent lifestyles to just luxurious lifestyles. It seems the ultra-wealthy just can’t get a break.

    • Re: “Social Security Cuts Are Wron at this time”… How correct your assessment is, the true and simple answer for those who are willing to see it. “The government took the $3 trillion and now doesn’t want to pay it back”. They were SUPPOSED to be designated funds, not the community bank account.

    • Debt panel; Why is it called a debt panel when it ONLY is charged with reducing the rate of increase in the DEFICIT.
      Not a cent is cut from the National Debt.

About Encore

  • Encore examines the changing nature of retirement, from new rules and guidelines for financial security to the shifting identities and priorities of today’s retirees. The blog also explores news that affects retirement, from the Wall Street Journal Digital Network and around the web. Lead bloggers are reporter Catey Hill and senior editor Jeremy Olshan. Other contributors include The Wall Street Journal’s retirement columnists Glenn Ruffenach and Anne Tergesen; the Director for the Center for Retirement Research at Boston College, Alicia Munnell; and the Director of Research for Pinnacle Advisory Group, Michael Kitces, CFP.

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