Medicare, Social Security Safe for Now

Seniors who were worried about their next Social Security checks or Medicare benefits can rest easy, for now.  The debt ceiling is raised, and the Treasury Department will be able to pay the nation’s bills at least to the end of 2012. Americans in their retirement years, which include most of the nation’s mesothelioma patients, will continue to receive benefits for the foreseeable future.

Many lawmakers had refused to vote for the debt ceiling increase without a package of spending cuts attached to it. Will Social Security and Medicare be affected by those cuts? Maybe.

The deal spells out $1 trillion in spending cuts, but none of these cuts are to Medicare or Social Security.

In addition, the deal provides for a special commission to identify another $1.5 trillion in spending cuts. This commission must report to Congress by November 23. Congress will not be allowed to change the recommendations and must give this package of cuts an up-or-down vote by December 23. Obviously, there is no way to know what the commission will recommend.

The deal includes a “trigger” in case Congress cannot agree to pass the recommended cuts. If the cut package fails, $1.2 trillion in spending cuts automatically go into effect. Half of these cuts would come from the defense budget. The non-defense cuts come from several parts of government. Social Security, Medicaid, unemployment insurance, military retirement pay, and some other programs are off the table and will not be cut.

However, the “trigger” includes significant cuts to Medicare. These cuts are not supposed to reduce benefits. However, Medicare providers would see their payments reduced 2 percent across the board. Some health care experts fear that such cuts could cause health care providers to cut back Medicare services or even eliminate Medicare patients entirely.

The “trigger” was set up to cause politicians of both parties to think hard before voting no on the commission’s recommended spending cuts. The theory is that Republicans will not want to cut defense spending and Democrats will not want to cut Medicare. Of course, it’s possible that politicians will decide whatever the commission wants to cut would be worse.

The debt ceiling deal as signed leaves a lot of details to be worked out. There could be many unintended consequences. But Social Security and Medicare won’t disappear just yet.

This entry was posted on Tuesday, August 2nd, 2011 at 9:39 pm and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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How Would Default Affect Social Security and Medicare?

The word from Washington is that the U.S. is hours away from defaulting on its public debt, because Congress is unwilling to raise the debt ceiling. If the debt ceiling is not raised, the Treasury Department will be unable to raise money to pay all of the government’s current obligations.

By some estimations, if the debt ceiling is not raised on August 2, the Treasury Department will have $306.7 billion in expenses in August but will receive only about $172.4 billion in revenue. The government will be forced to slash spending by as much as 40 percent.

America’s seniors must be especially worried. Will Social Security checks arrive next week? Will the Medicare program still pay for health care? Since most mesothelioma patients are in their seniors years, many must worry whether they will be able to continue mesothelioma treatment.

We do not yet know what might happen. But here is what some experts say might happen:

Social Security. The Social Security Administration appears to have enough funds to pay Social Security checks through August. The SSA also is still receiving money from payroll (FICA) taxes. As long as revenue from FICA is at least enough to cover current expenses, seniors should still receive their Social Security checks.

That said, it is possible that the government will be forced to divert some of the FICA revenue to pay for other needs, such as national security. That would probably be a last-resort move, but it is not out of the question. If that happens, Social Security checks would stop much sooner.

Assuming the Social Security Administration is still receiving its usual share of FICA taxes, what might happen when FICA income isn’t enough? When there is a shortfall, as there was for a time last year, the Social Security Administration normally would turn to the Social Security Trust Fund.

And what is the trust fund? When Social Security receives more money in revenue than it needs to meet current obligations, the “extra” money is invested in U.S. Treasury interest-bearing securities, such as bonds. These securities are the trust fund. When Social Security has a shortfall, it can redeem some bonds to make up the difference.

However, some experts warn that default could affect the value of those securities. In particular, the Treasury Department might stop paying interest on the bonds. If that happens, the Social Security Administration could be short the money it needs to issue checks. And if playing politics with the national debt brings the value of U.S. securities into question, the health of Social Security could be permanently impaired.

And if you are about to become eligible for Social Security, your application may have to wait on someone’s desk for a long time. The Social Security Administration may be forced to lay off employees or even shut down.

Medicare. Medicare appears to be a bigger question mark than Social Security. The Medicare programs also is funded by FICA taxes, and as long as those taxes are not diverted elsewhere, it ought to be able to continue for a time. But Medicare is in a bigger danger of future shortfalls than is Social Security.

In a worst-case situation, rising interest rates caused by default could drive companies out of business and increase unemployment, which would also mean a serious reduction in the amount of payroll taxes the government is receiving. Even if the programs do not shut down immediately, a default could cause both programs to be less secure in the future.

This entry was posted on Saturday, July 30th, 2011 at 10:22 am and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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