Mike Bloomberg's Plan to Boost Social Security

Mike Bloomberg's Plan to Boost Social Security

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Plus: Medicare for All would save money and lives, study says
Tuesday, February 18, 2020

Mike Bloomberg Unveils Vague Plan to Boost Social Security

Democratic presidential contender Mike Bloomberg rolled out a plan Sunday that calls for shoring up Social Security’s finances, expanding benefits for the poorest and creating a government-backed “public option” retirement savings plans.

Bloomberg’s blueprint is his first campaign proposal addressing the future of Social Security — and while it echoes some other Democratic proposals in calling for expansion of the safety net program, it lacks the level of detail that many of his rivals have laid out in their plans. It doesn’t specify, for example, how Bloomberg would shore up Social Security’s finances or pay for the expanded benefits he proposes. What’s left is a broad statement of general principles with some vague policy proposals attached.

Here are the main points:

“Consider options” for fixing the program: While Bloomberg has in the past called for Congress to adopt bipartisan changes to Social Security that would have, among other things, gradually raised the retirement age, his latest plan strikes a different note. It pointedly starts out by saying that, while Social Security faces demographic pressure and “needs shoring up for the long-term,” the program “faces no imminent crisis.” It notes that Social Security is projected to be able to pay out full benefits until 2035. After that, payroll taxes will still cover 75% of benefits. Bloomberg promises to “explore ways to put the system on sound financial footing for the long-term” and to “consider options” for strengthening Social Security’s finances “while maintaining and enhancing benefits for the neediest recipients.”

Critics on the left say that falls far short of other Democrats’ promises to avoid benefit cuts. “It wouldn’t have been difficult for Bloomberg to release a plan that unequivocally rules out cuts,” Nancy J. Altman and Linda Benesch of Social Security Works, an advocacy group, write at Common Dreams. “To get right on Social Security, Bloomberg must repudiate his past support for cuts. He must pledge that he will never support cutting a single penny of current or future benefits.”

New benefits for low-income retirees: Bloomberg’s plan calls for “a more effective minimum benefit to prevent low-income seniors from falling into poverty” and notes that the new minimum would help about 10% of current beneficiaries. Unlike other candidates, Bloomberg does not specify what the minimum benefit would be. Sanders has proposed increasing benefits by $1,300 a year for seniors with incomes of $16,000 or less, while Warren has called for raising benefits by $200 per month, or $2,400 a year, for all beneficiaries.

A new retirement savings plan: Bloomberg also proposes a “public option” retirement savings plan similar to those floated by Pete Buttigieg and Sen. Amy Klobuchar. Bloomberg’s plan would create “automatic employer and employee contributions for all income earners who do not participate in a defined contribution or benefit plan at work.” It would provide low-income workers with an unspecified government match on their savings, paid for by reducing the tax break for high-income retirement contributions. The new retirement accounts would automatically invest in target-date investment funds, with other options available. Once enrollees reach retirement age, their savings would automatically be switched over to an annuity that provides steady income.

Change the way cost-of-living adjustments are calculated: Social Security’s annual cost-of-living adjustments are currently based on a measure of inflation called the Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W for short. Bloomberg calls for using a different formula, one that reflects the inflation that affects seniors. “The elderly’s living costs – especially for health care – tend to rise faster than overall inflation,” his plan says. “Mike will adjust the COLA to take account of this.” Bloomberg’s plan doesn’t specifically call for using an alternative measure of inflation known as CPI-E, the Consumer Price Index for the Elderly, but other candidates and Social Security advocates have pushed for such a switch. That alternative index is still considered experimental, and some experts say it is seriously flawed. “The trouble is this change tends to reward those seniors with the largest checks, most of whom aren’t at risk of poverty,” writes Brenton Smith at FedSmith.

Read Bloomberg’s “Retirement Security” plan.

Medicare for All Would Save $450 Billion and 68,000 Lives: Study

Bernie Sanders’ Medicare-for-All plan would save the country about $450 billion a year on total health care spending while preventing nearly 70,000 deaths, according to a study published over the weekend in The Lancet.

In the analysis, a team of epidemiologists led by Alison P. Galvani of the Yale School of Public Health applied the provisions of Sanders’ plan to real-world spending in the U.S. in 2017. They concluded that Medicare for All would have cost just over $3 trillion that year, or $458 billion less than the actual total. The analysis found that per capita costs would decline, resulting in lower costs overall, even with millions more people covered. And providing universal coverage would save 68,531 lives per year, the researchers.

Here are some key details and assumptions from the study:

A new analysis: Previous estimates of the cost of Medicare for All have reached significantly different conclusions, ranging from a roughly 16% increase over current national health-care spending levels to a 27% decrease. This latest study relies on a new analytical tool to measure the impact of different provisions within Medicare for All as applied to real-world data (you can review and adjust the parameters of the analysis in the Single-Payer Healthcare Interactive Financing Tool).

Big savings with a single-payer system: The researchers found that the proposed system would reduce total health-care expenditures by about 13% based on 2017 spending levels. Savings would come from a variety of sources. Here are some of the major savings the researchers found with Medicare for All, based on the 2017 total health care expenditure of nearly $3.5 trillion:

  • Reducing pharmaceutical prices via negotiation: $219 billion
  • Improving fraud detection: $191 billion
  • Reducing reimbursement rates for hospitals, physician, and clinical services: $188 billion
  • Reducing overhead: $102 billion
  • Eliminating uncompensated hospitalization fees: $78 billion in savings.

Revenues: The Sanders proposal would impose new taxes while reducing the overall cost burden on both businesses and households. The revenues look like this, according to the analysis:

  • Payroll tax: A 10% tax on employers would raise $436 billion. By comparison, employers currently pay $536 billion on insurance premiums, the equivalent of a 12.3% tax rate.
  • Household income tax: At the individual level, households would pay a 5% income tax above the standard deduction, yielding $375 billion per year. By comparison, households currently pay about $738 billion on premiums and service fees.
  • Wealth tax: A new tax on net worth over $21 million would produce about $109 billion a year.

The bottom line: There are some methodological questions about the analysis, and the politics of transitioning to a single-payer system remain as complicated as ever. You might hear Sanders talk up this study during a debate or on the campaign trail, but it will likely do little to change minds in the debate.

John Oliver Makes a Pitch for ‘Medicare for All’

HBO’s “Last Week Tonight” kicked off its seventh season on Sunday night with an in-depth look at Medicare for All. Host John Oliver explained the differences between a multi-payer and a single-payer system and laid out why he personally prefers the latter, responding to critiques about the costs, wait times and lack of choice involved in a Medicare-for-All system. We’d offer a bit of Oliver’s commentary here, but our favorite punch lines all involved some HBO-appropriate profanity. So just watch the full 20-minute segment here.

Op-Ed of the Day

“What if it were President Barack Obama allowing the national debt to grow by a trillion dollars a year, despite the booming economy? What if other Republican presidents had abandoned the idea of trying to get to a balanced budget over the next 10 years? We would hear howls of protest. But now? Crickets.”

– Mark Sanford, a former candidate challenging President Trump for the 2020 Republican presidential nomination and a former GOP representative from South Carolina, in a New York Times piece calling for members of his party to stop ignoring Trump’s budget deficits.

Hope you enjoyed the long weekend! Send your tips and feedback to yrosenberg@thefiscaltimes.com. Follow us on Twitter: @yuvalrosenberg, @mdrainey and @TheFiscalTimes. And please tell your friends they can sign up here for their own copy of this newsletter.


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