Among the sacrifices Congressional representatives placed on the altar of deficit negotiations is an “inflation adjustment” that will shave “only” a few hundred dollars from an average, newly retired Social Security beneficiary’s income each year. But the cruel hoax is that the reduction will amount to as much as $1600 when the beneficiary is older, poorer, and sicker. Many seniors already have a tough time paying for food, rent, and medical care.
Even worse, reductions in beneficiaries’ incomes may well cost government more for potentially preventable hospital and long-term care. Senator Elizabeth Warren and other New England lawmakers should be lauded for splitting from Democratic representatives and the Administration regarding this ill-conceived proposal.
Many senior citizens are already vulnerable to economic hardship. A recent US Census analysis that counts rising medical expenses found that over 1 in 6 elderly people live in poverty, unable to meet basic living expenses, and almost 20% more are living just above the poverty line. Social Security is the only or largest source of income for about 70% of seniors; the average monthly check is only about $1200.
The typical retirement savings of seniors is a paltry $50,000 — barely enough to get through several years’ living expenses, let alone 20-30 years of retirement. This is not the result of cavalier actions by the older generation; these are the Americans whose home values have plummeted, whose defined-benefit pension plans have been decimated or disappeared, and whose retirement accounts were eviscerated by the Wall Street meltdown of the last decade. Yet the current proposal punishes these Americans as if they were at fault for their poverty.
Fidelity Investments has estimated that the average retired couple will need more than $200,000 to pay their out-of-pocket medical expenses during retirement, and that figure is probably conservative.
The arithmetic of Social Security benefit reductions just doesn’t fit with this reality.
What are the consequences of having to rely on Social Security alone? High out-of-pocket health care costs can be “catastrophic” because they cause people to go without essential medical care. Our studies published in the New England Journal of Medicine show that a 50% reduction in drug benefits in New Hampshire for low income, chronically ill seniors backfired.
The NH policy reduced the use of essential medicines (e.g., for diabetes and heart disease), worsened chronic illness, increased acute care, and doubled the rate of permanent institutionalization in expensive nursing homes. These increased admissions raised government costs several times more than the drug “savings,” not even counting increased pain and suffering of patients and their families.
Dr. Nicole Lurie, the current US Assistant Secretary for Preparedness and Response, showed that about 15% of people (many seniors) who are admitted to hospital emergency departments experience significant hunger before admission. Frequently, seniors skimp on medicines to pay for food, and this leads to illness and further hospital care.
Similarly, our studies show that almost 30% of disabled Medicare recipients in poor health skip or split pills to make them last longer because they can’t afford their prescription drugs, even in the era of the Part D drug benefit. One study indicates that splitting pills increases hospitalization of heart disease patients by 21%.
The current debate in Washington encapsulates the growing political and ideological divide as to how the costs of deficit reduction should be allocated across various parts of the population. No single proposal more starkly embodies that issue than efforts to trim and chip away from recipients of an earned, contributory entitlement at precisely that time in their lives when they can least afford reduced incomes, and have the least capacity to compensate for them.
As a result, governments at all levels will be left mitigating the harm those income reductions produce. Reducing the Social Security cost-of-living adjustment, in other words, is not only morally unacceptable, but substantively counterproductive.
Stephen Soumerai, ScD is Professor of Population Medicine and Director of the Drug Policy Research Group at Harvard Medical School and Harvard Pilgrim Health Care Institute.