6 Fixes to America's Fiscal Crisis | Proposed U.S. Debt Fixes | Scoop.it

by AMY PAYNE (Heritage/Foundry)


1. Raise the Social Security eligibility age to match increases in longevity. People are living longer, and entitlement programs need to be updated to reflect that fact. According to the Social Security actuaries, continuing to increase the eligibility age to 69 by the year 2034 and allowing it to rise more slowly thereafter to reflect gains in longevity could go a long way toward reducing Social Security’s funding shortfall. While this would not reduce today’s budget deficit, it would strengthen Social Security’s finances and put it on a path toward sticking around in the future.


2. Correct the cost-of-living adjustment (COLA) in Social Security. The annual COLA benefit adjustment is determined today by the Bureau of Labor Statistics’ Consumer Price Index (CPI). However, the CPI, an antiquated measure, generally overstates inflation, meaning that benefits are increased a bit too much each year to offset inflation. Again, according to the Social Security actuaries, using a more modern inflation measure would substantially reduce Social Security’s shortfall over time.


3. Raise the Medicare eligibility age to agree with Social Security. Medicare has an eligibility age problem, but unlike Social Security, the Medicare eligibility age remains stuck at 65. An obvious solution is to wait five years and then slowly raise the eligibility age to align eventually with the Social Security eligibility age. While the short-term budgetary savings would be negligible, the long-term savings in Medicare would be profound.


4. Reduce the Medicare subsidy for upper-income beneficiaries. In 2012, the average Medicare beneficiary received a subsidy of about $5,000. Subsidizing Medicare benefits for low-income seniors—and perhaps for some middle-income seniors—makes sense, but upper-income seniors do not need and should not receive a $5,000 subsidy to buy Medicare health insurance.

In addition to those reforms, Foster and Fraser list two bonus proposals that have not been considered as closely by lawmakers, but would be simple and effective:


5. Phase out Social Security benefits for upper-income retirees. As a nation, we need to ask whether today’s working families should pay payroll taxes so that upper-income retirees can continue to receive their checks. In short, Social Security should be social insurance against poverty rather than a government-run pension scheme.

6. Consolidate Medicare’s elements and collect a single higher premium. Medicare is actually three distinct components, referred to generally as Parts A, B, and D, reflecting the fact that Medicare was built up over many years. This antiquated structure is confusing and inefficient. An obvious reform is to consolidate the three distinct parts into a unified Medicare program, with a single premium, and then raise the premium to cover 35 percent of related program costs.


Via Michael Charney