BILL ANALYSIS Ó
AJR 7
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Date of Hearing: March 19, 2013
ASSEMBLY COMMITTEE ON AGING AND LONG-TERM CARE
Mariko Yamada, Chair
AJR 7 (Bonta) - As Introduced: January 30, 2013
SUBJECT : Social security, Medicare and Medicaid
SUMMARY : Memorializes the President and the United States
Congress to exclude social security, Medicare, and Medicaid from
being a part of any legislation to reduce the federal deficit.
Specifically, this bill makes the following findings and
declarations :
1) Social Security, Medicare and Medicaid are fundamental
protections against risks that all Californians face.
2) Five million Californians, including 3.4 million retirees
and 700,000 disabled workers, rely upon Social Security and
Medicare as the foundations of their health and financial
security.
3) Social Security is the primary source of life insurance
protection for 370,000 California children.
4) Social Security lifts over 1.1 million Californians out of
poverty; contributes nearly $67 billion in economic
activity; and benefits 9 million veterans nationwide.
5) Social Security funding is independent of the federal
government, does not and by law never will contribute to the
federal deficit.
6) Social Security currently enjoys a surplus which is
expected to grow to $3.1 trillion by 2020, and is currently
projected as solvent through 2032, and that shortfalls
thereafter could be mitigated by restoration of taxes cut in
2001 and 2003.
7) If necessary, various strategies have been identified to
address any potential future shortfall by eliminating the
cap on earnings subject to the payroll tax, raising the
payroll tax rate by 7/10 of 1% each year for twenty years.
8) Social Security is critical to the economic well-being of
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beneficiaries.
9) Losses of pensions, 401(k)'s, home equity, and earnings
have greatly diminished the retirement incomes of
Californians.
10) Social Security has already been cut by up to 25% back in
1983.
11) The physical demands of work differ by industry and
longevity varies by industry according to level of income,
education, race, and access to health care.
12) Social Security belongs to the people who have worked hard
and contributed to the program, and is based on the premise
that those who contribute may also benefit through
retirement, disability, or death.
13) Forty-seven percent of elderly Californians struggle to
meet monthly obligations, and one-half of all working
Californians will not have enough to maintain their current
standard of living in retirement.
14) Medicare insures 4 million older Californians and has
controlled costs better than private insurance, particularly
administrative costs.
15) Increasing the eligibility age for Medicare would save the
federal government funds, though it would add to the overall
amount that the nation spends on healthcare by shifting
costs to other governmental entities, businesses, and many
individuals.
16) Medicaid supports the health care needs of 11 million
low-income children, adults, elders and disabled individuals
in need of long-term services and supports.
FISCAL EFFECT : Unknown
COMMENTS :
1) Author's purpose: According to background provided by the
author, AJR 7 requests the President and the United States
Congress to exclude Social Security, Medicare, and Medicaid
from being a part of any federal legislation to reduce the
federal deficit. The measure expresses the Legislature's
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opposition to cuts to Social Security, Medicare, and
Medicaid (Medi-Cal in California), and calls upon
California's congressional representatives to vote against
cuts to Social Security, Medicare, and Medicaid and to
consider improving those systems in ways that would
strengthen their protections.
2) Medicare: Medicare is a national social insurance
program, administered since 1965, that guarantees access to
health care for Americans ages 65 and older, as well as
younger people with disabilities, or end stage renal
disease. Hospital care is covered under Part A and
outpatient medical services are covered under Part B.
Medicare offers a choice between an open-network single
payer health care plan (traditional Medicare) and a network
plan (Medicare Advantage, or Medicare Part C), where the
federal government pays for private health coverage.
Medicare Part D covers outpatient prescription drugs
exclusively through private plans or through Medicare
Advantage plans that offer prescription drugs. In 2011,
Medicare provided health insurance to 48.7 million -40.4
million people age 65 and older and 8.3 million younger
people with disabilities (roughly 4.2 million older
individuals and 700,000 disabled individuals in California).
On average, Medicare covers about half (48 %) of health
care costs for enrollees. Medicare enrollees must cover the
rest of the cost. They include uncovered services such as
long-term services and supports, dental services, hearing,
and vision care. Medicare is funded through payroll taxes
paid by most employees, employers, and people who are
self-employed. Other sources, like income taxes paid on
Social Security benefits, interest earned on the trust fund
investments, and Medicare Part A premiums from people who
aren't eligible for premium-free Part A also support the
program.
3) Medicaid: Medicaid is the U.S. health insurance program
for certain people and families with low incomes and
resources. Medicaid was enacted in 1965 through amendments
to the Social Security Act. Medicaid is a health and
long-term care coverage program that is jointly financed by
states and the federal government. Each state establishes
and administers its own Medicaid program and determines the
type, amount, duration, and scope of services covered within
broad federal guidelines. In California, this is known as
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Medi-Cal (7,505,841 enrollees as of 1.1.11). States must
cover certain mandatory benefits and may choose to provide
other optional benefits. Federal law also requires states
to cover certain mandatory eligibility groups, including
qualified parents, children, and pregnant women with low
income, as well as older adults and people with disabilities
with low income. States have the flexibility to cover other
optional eligibility groups and set eligibility criteria
within the federal standards. The Affordable Care Act of
2010 creates a new national Medicaid minimum eligibility
level that covers most Americans with household income up to
133 % of the federal poverty level. This new eligibility
requirement is effective January 1, 2014, but states may
choose to expand coverage before this date. Medicaid is
funded through general revenues and other special financing
structures that create revenue to support services and
benefits.
4) Social Security: Social Security, a social insurance
program consisting of retirement, disability, and survivors'
benefits. To qualify for these benefits, most American
workers pay Social Security taxes on their earnings; future
benefits are based on the employees' contributions. Social
Security is the basis of economic security for millions of
Americans-retirees, disabled persons, and families of
retired, disabled or deceased workers. About 157 million
Americans pay Social Security taxes and 56 million collect
monthly benefits in 2012. About one household in four
receives income from Social Security. Social Security is
largely a pay-as-you-go program. This means that today's
workers pay Social Security taxes into the program and money
flows back out as a monthly benefit. As a pay-as-you-go
system, Social Security differs from company pensions, which
are "pre-funded." According to the author, Social Security
lifts 1,148,000 older Californians out of poverty, and about
100,000 children. The author also notes that according to
the Center on Budget and Policy using U.S. Census Bureau
data, between 2006 and 2008, the poverty rate for older
Californians was roughly 8.1%; without Social Security, the
figure would likely have been 37.4%. Social Security is
financed through a dedicated payroll tax. Employers and
employees each pay 6.2 % of wages up to the taxable maximum
of $113,700 (in 2013), while the self-employed pay 12.4
percent.
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The average Social Security benefit in January 2012 was:
a) $1,230 a month for retired workers;
b) $1,185 a month for widows or widowers over the
age of 60;
c) $1,110 a month for disabled workers;
d) $1,878 a month for a disabled worker, spouse and
one or more young children;
e) $2,487 a month for a widowed mother and two
children.
f) The maximum Social Security benefit for a worker
retiring at the 2012 full retirement age (66) is $2,366
a month.
1) U.S. Budget, Debt, and Deficit: According to the
President's Office of Management and Budget, public debt
increases or decreases as a result of the annual unified
budget deficit or surplus. The federal government budget
deficit or surplus is the difference between government
receipts and spending, not including governmental transfers.
Since 1972, the U.S. annual unified budget has been
balanced, or generated a surplus, four times, between 1998
and 2001. Historically, the U.S. public debt as a share of
the Gross Domestic Product (GDP) increased during wars and
recessions, and subsequently declined. For example, debt
held by the public as a share of the GDP peaked just after
World War II (113% of the GDP in 1945), but then fell over
the following 30 years. According to the Government
Accounting Office, in recent decades, large budget deficits
and the resulting increases in debt have led to concern
about the long-term sustainability of the federal
government's fiscal policies. However, according to the
Bureau of Public Debt, except for a short period in the
1830's, the U.S. has held a public debt since the
Constitution legally went into effect on March 4, 1789.
According to the Congressional Budget Office report:
"Historical Data on the Federal Debt" (August 5, 2010), debt
held by the public reached 49.5% of the GDP at the beginning
of President Clinton's first term. It fell to 34.5% of the
GDP by the end of Clinton's presidency due in part to
decreased military spending, increased taxes (in 1990, 1993
and 1997), and increased tax revenue resulting from the
Dot-com bubble.
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In the early 21st century, debt relative to the GDP rose
again due to the Bush tax cuts and increased military
spending caused by the wars in the Middle-East and the new
Medicare Part D program. During the presidency of George W.
Bush, debt held by the public increased from $3.339 trillion
in September 2001 to $6.369 trillion by the end of 2008. In
the aftermath of the Global Financial Crisis and related
significant revenue declines and spending increases, the
debt held by the public increased to $11 trillion by the end
of July 2012.
On March 11, 2013, in an editorial published by the Wall
Street Journal, Congressman Paul Ryan declared the national
debt at $16 trillion, as he introduced a federal budget
proposal which will achieve a 'balanced' budget in 10 years
through various reductions in expenditures in Medicare and
Medicaid, among other things.
2) Support: Proponents argue that the real solution to the
U.S. deficit "problem" is to create the jobs necessary to
grow the economy. Cuts in social insurance program benefits
would have the opposite effect by removing economic
stimulation from the economy.
3) Author's Statement: "I am proud to author AJR 7 and stand
in support of strengthening the three core pillars of our
social services safety net-Social Security, Medicare, and
Medicaid. Congress and our President should exclude these
vital social programs from discussions on reducing the
federal deficit and instead act to strengthen these programs
which provide health care and retirement security for our
most vulnerable populations.
"Despite continuing rhetoric to the contrary, the fact is
Social Security does not contribute to the federal deficit.
Funded by payroll taxes, the trust fund is secure and will
continue to provide full levels of benefits until 2033, at
which point benefits would be reduced to 75%. However, a few
simple fixes with broad public support-such as phasing in an
increase in the earnings taxable under Social Security-can
help strengthen the program and avert this far-off crisis.
"Medicare and Medicaid-known in California as Medi-Cal-are
two more government success stories. These systems
consistently deliver quality care to difficult and expensive
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populations-in effect providing a public subsidy to
insurance companies by taking "loss-leading patients"-with
lower overhead and consistently smaller growth in costs than
their private-sector counterparts.
"We need to make sure that we have a social service system
that protects and serves the most vulnerable in our system
when they need it most, including the sick, the elderly, the
poor, and the children. AJR 7 stands up for the health and
economic security of the more than 15 million Californians
combined who benefit from Social Security, Medicare, and
Medicaid.
REGISTERED SUPPORT / OPPOSITION :
Support
California Alliance for Retired Americans (CARA) - sponsor
American Federation of State, County and Municipal Employees
(AFSCME)
California Commission on Aging
California Labor Federation
California Nurses Association
California School Employees Association
United Domestic Workers of America
Opposition
None on file.
Analysis Prepared by : Robert MacLaughlin / AGING & L.T.C. /
(916) 319-3990