Seniors strongly supported Republican presidential candidate Mitt Romney in the 2012 election (56 percent) over President Barack Obama. In his most recent budget proposal, Obama attempts to get his revenge.
There are several ways seniors take a hit in Obama’s budget, including tax hikes and cuts in Social Security and Medicare benefits. The result is that if Congress were to pass the president’s budget, seniors would have less money and worse health care, and pay more for the “privilege.”
Social Security Cuts:
One of the president’s main “concessions” to the need to slow the growth of federal spending is his proposal for what’s known as the “chained CPI.”
Since 1975 the Social Security administration has given seniors an annual “cost of living adjustment” (COLA) based on the Consumer Price Index (CPI), an increase that reflects inflation.
However, many economists argue that the CPI—which in this case is based on wage increases—is too generous. Reducing seniors’ annual COLA, which the chained CPI would do, would save the government billions of dollars.
The chained CPI would not be an actual benefit cut, just a slowing in the rate of growth—although Washington has come to call such reductions a “cut.” Implementing Obama’s chained CPI would save the federal government an estimated $130 billion over 10 years—a “savings” that would otherwise have gone into seniors’ pockets.
Medicare Cuts:
ObamaCare cuts Medicare spending by $716 billion over 10 years, largely by cutting more than $300 billion that would have gone to Medicare Advantage plans, which provide comprehensive coverage to more than 25 percent of seniors.
Republicans complained bitterly about the cuts at the time, but now we learn that the ObamaCare cuts were just the beginning.
In his budget, the president proposes to force high-income seniors to pay an additional $57 billion in higher premiums and cut $306 billion (both over 10 years) from reimbursements to Medicare providers. If the president is trying to ensure that every senior has a family nurse, instead of a family doctor, that last proposal is the way to do it.
For more than a decade physicians’ Medicare reimbursements have remained essentially flat, due to a provision known as the Sustainable Growth Rate (SGR), or “Doc Fix,” which was supposed to control the growth of Medicare spending but never did. As part of the “Fiscal Cliff deal” in January, Congress postponed a 26.5 percent cut in doctor reimbursements—but until the end of this year.
Low reimbursements—that could get much lower—and new regulations and controls imposed by ObamaCare are encouraging even more physicians to hang up their white coats for good or change their practices, in part by seeing fewer Medicare patients. If we continue down this path cutting doctors’ reimbursements—and all indications are that we will—seniors will have little choice but to turn to nurse practitioners and physician assistants in order to get their care.
Death Tax Hike:
And then there’s an increase in the estate, or death, tax. The president hopes to get an extra $79 billion from this one.
Republicans and conservatives have been trying to kill this tax for decades because they don’t believe that death should be a taxable event. As part of the (George W.) Bush tax cuts, the death tax was gradually phased out by 2010. But because the law was implemented for only 10 years—a parliamentary procedure in order to get it through the Senate—it returned in 2011.
In the Fiscal Cliff agreement, Republicans got the president to agree to lower the tax to 40 percent with a per-person exemption of $5.35 million, but Obama’s new budget increases the rate to 45 percent and lowers the threshold to $3.5 million. And that figure doesn’t grow with inflation, which means it will take a bigger bite every year.
401(k) Tax Hikes:
And if taxing seniors more in retirement and giving them less wasn’t enough, Obama also goes after their savings, first by putting a $3 million cap on how much workers can set aside tax free for their retirement.
And then he requires non-spouse beneficiaries of the accounts to withdraw all of it within five years, rather than over a lifetime. The only purpose for this demand is to force retirees to pay this tax earlier rather than later—to offset some of the president’s big-spending schemes. Both proposals are supposed to bring in an estimated $14 billion over 10 years.
To be fair, some Republicans support some of the president’s proposals, like the chained CPI and increased Medicare premiums. But as House Budget Committee Chairman Paul Ryan has made clear, Republicans have not passed such measures—and Ryan doesn’t think they should.
Instead, Ryan argues that Congress should be looking for ways to reform the programs, rather than cutting benefits and raising taxes. And he is absolutely right.
Ryan has proposed a comprehensive Medicare reform plan that would address the program’s long-term financial unsustainability. And Republicans have long-supported transitioning Social Security to a system of prefunded personal accounts, though many of them seem to have forgotten that fact.
But while it is very unlikely Obama’s budget will go anywhere—his last two budgets got ZERO votes, even from his own party—it lets Congress know what he is willing to accept. And tax hikes and benefits cuts for seniors are at the top of his list.