The rapidly aging population of the United States is putting a financial burden on the country’s two primary retirement programs, Social Security and Medicare. Now that the Republicans are close to regaining control of the House in the November elections, some members are supporting measures to revamp the programs, including raising the eligibility age for seniors to 70.
Under a plan devised by the Republican Study Committee, a group of conservatives in the House, senior folks would face a five-year delay before they could enroll in Medicare, the federal health care program for seniors, which is currently accessible at age 65. In addition, the Social Security retirement age would raise to 70 from the current range of 66 to 67.
What prompted the push? According to Republican Study Committee materials, higher life expectancies are a “miracle.” Gallup reports that while Americans are living longer than previous generations, the average age of retirement is 61 – five years earlier than workers expected to leave the labor. In other words, people may anticipate they would work longer, yet the average American retires five to six years before the present full retirement age for Social Security.
According to experts, increasing the eligibility age for benefits would undoubtedly exacerbate hardship and poverty for older Americans, particularly those with low incomes, those living in rural areas, and those who are unable to work due to health concerns or caring for family members.
This implies either missing out on three years of benefits relative to existing retirees, or deciding to claim benefits earlier in exchange for a permanent cut in benefits, which Social Security allows. According to the Social Security Administration, retiring three years prematurely than the full retirement age results in a 20% decrease in monthly income.
“This implies that even if you work until age 70, you will never make up for the reduction in benefits,” said Nancy Altman, president of Social Security Works, a program advocate.
She added, “It disproportionately affects individuals with low incomes and physically demanding employment,” who are more likely to leave the workforce owing to health problems.
Delaying Medicare eligibility “would leave the majority of older Americans aged 65 to 70 underinsured and endanger their finances and health,” according to Mary Johnson, Social Security and Medicare policy analyst at The Senior Citizens League, an advocacy organization for older Americans.
She emphasized that Americans between the ages of 65 and 70 would need to work longer to maintain health coverage through their employers, or they would have to purchase insurance through the Healthcare.gov marketplace. Even insurance for those under 64 can be expensive, with annual premiums exceeding $10,000.
“The financial burden would be significantly greater for people aged 65 to 70, given the necessity to use more care and spend more out of pocket,” she observed. Where will they obtain the funds to cover these unforeseen increased healthcare costs?
Social Security’s trust fund is predicted to be drained by 2035, according to the Republicans, who argue that reforms must be made to Social Security and Medicare. At that point, recipients would continue to receive monthly payments, but the benefits would be reduced to between 75% and 80% of their original level. Medicare has funding deficits as the number of senior citizens in the United States increases.
According to the Republican viewpoint, the most effective method for resetting the program would be to reduce costs by limiting the number of years seniors can get these benefits. They also wish to link the retirement age to future increases in life expectancy, which could result in a Social Security eligibility age that is much higher than 70.
Rising life expectancy is used to justify raising the eligibility age for both Social Security and Medicare. 3/ image: http://twitter.com/hclCHbZrC1
— Paul Krugman (@paulkrugman) November 2, 2022
“The majority of people don’t even work until their full retirement age, let alone 70,” said Altman. This would increase both insecurity and the retirement income crisis.
Experts predict that if Republicans obtain control of Congress, these and other measures, such as transforming Social Security into a discretionary spending program, will likely come forward. As of Wednesday morning, it remained unknown which party would hold control of the Senate, but the Republicans were expected to regain the House.
President Biden opposes the measures, but the Democrats face headwinds as voters assess the biggest inflation in four decades and other economic concerns.
At a recent November engagement, Biden stated, “From the age of 16, you have money deducted to pay for Social Security.” “However, guess what? Someone is breaking their neck, or you just lost your spouse, you’re 66 or 68 years old, and they want to take away your Medicare and Social Security.”
State-level life expectancy
According to analysts, Americans living in areas with a Republican lean are more likely to be negatively affected by the retirement age hike than those residing in so-called blue states.
This is because, depending on a person’s place of domicile, life expectancies for 65-year-olds vary significantly. The life expectancy of 65-year-olds in states where Republicans are elected largely is often lower than in areas where Democrats are elected predominantly.
According to government data, Mississippi, Alabama, and Oklahoma have the lowest life expectancies in the US for 65-year-olds, with citizens anticipated to live approximately 16 years longer. In contrast, 65-year-olds in Hawaii live an average of 21 years longer than their counterparts in California and Vermont.
Raising the retirement age “would be devastating to rural communities, which tend to be older, have lower incomes, and are predominantly Republican supporters,” said Altman.
Many of these voters would also be harmed by raising the Medicare eligibility age to 70, as low-income employees may be unable to continue working in their 60s owing to disability or other challenges, and may struggle to pay for health insurance until age 70, she added.
Deferring Medicare eligibility might also increase the program’s health care expenses in the long run, according to Altman, because more people would enter the program not only at an older age but also potentially sicker after delaying health care treatments for several years.
Other Social Security reforms
According to experts, there are alternatives to raising the retirement age and reducing benefits for restoring Social Security and Medicare’s financial health.
Among them is increasing the maximum wages subject to Social Security taxation. Currently, incomes over $147,000 are exempt from payroll tax, but that threshold will increase to $160,200 in 2023. Another suggestion is to boost the program’s tax rate.
According to a June assessment by the Congressional Research Service, both strategies would increase revenue for the program; however, the first method would only affect around 6% of individuals who make above $147,000 annually, while the second would affect all workers. (In 2023, the cap on earnings will increase to $160,200, with the increase being indexed for inflation.)
The CRS research highlighted that “from a political standpoint, public sentiment regarding alternative options can vary among constituencies.”
However, according to the report, lawmakers must move swiftly to prevent a reduction in benefits for the roughly 70 million individuals who receive Social Security benefits, including retirees, handicapped employees, and survivors of Social Security users.
Altman warned that increasing the retirement age and making Medicare inaccessible until age 70 could deepen income disparity and increase elder poverty.
She stated, “This is an extremely grave threat right now.”