BILL ANALYSIS Ó
SENATE HUMAN
SERVICES COMMITTEE
Senator Leland Y. Yee, Chair
BILL NO: AJR 7
A
AUTHOR: Bonta
J
VERSION: January 30, 2013
R
HEARING DATE: April 23, 2013
FISCAL: No
7
CONSULTANT: Tepring Piquado
SUBJECT
Social security, Medicare, and Medicaid
SUMMARY
This resolution requests 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, expresses the Legislature's opposition to
cuts to those programs, and call on California's
representatives to the United States Congress to vote
against cuts to these programs and instead consider
improving those systems in ways that would strengthen their
protections.
ABSTRACT
Existing federal law:
1) Establishes the Social Security Act, a system of
federal benefits for aged and low-income people. (42
USC 7 et seq.)
2) Provides Social Security income for aged and
disabled persons. (42 USC 7 et seq.)
3) Establishes Medicare, a federal health insurance
Continued---
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program for aged and disabled people. (42 USC 1395 et
seq.)
4) Provides grants to states for medical assistance
programs to low income families and individuals
(Medi-Cal, in California). (42 USC 1396 et seq.)
This bill makes the following findings and declarations:
1) Social security and Medicare are the foundations of
income and health security for older Californians and
those with severe work disabilities, providing monthly
cash benefits and health insurance to over 5 million
Californians, including 3.4 million retirees and
nearly 700,000 disabled workers.
2) Social security is the single most important source
of life insurance protection for California's children
and provides a vital guaranteed income to 370,000
children throughout the state.
3) Social security prevents more than 1.1 million
Californians from living in poverty.
4) Social security provides benefits to more than 9
million veterans nationwide, which is roughly four out
of 10 veterans.
5) Social security annually contributes nearly $67
billion dollars to California's economy by paying
benefits to over 5.1 million residents in the state.
6) Social security's funding is independent of that of
the rest of the federal government, and has never
contributed to, and by law can never contribute to,
the federal deficit.
7) Social security, in fact, has a surplus of $2.7
trillion today that is expected to grow to $3.1
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trillion by 2020.
8) Social security is not in crisis and has sufficient
resources to meet all of its obligations through 2032
and has dedicated revenues that would - even in the
absence of Congressional reforms - meet three-quarters
of promised benefits thereafter.
9) Social security's funding shortfall after 2032 is
modest: about one-half of the cost of the Bush tax
cuts of 2001 and 2003.
10) There are many policy options available to close
social security's funding shortfall without cutting
benefits, including eliminating the cap on earnings
subject to the payroll tax, which would eliminate
about 80 percent of the 75-year shortfall, or raising
the payroll tax rate from 6.2 to 7.2 percent gradually
over 20 years, which would eliminate one-half of the
shortfall.
11) Americans prefer raising payroll taxes to cutting
social security benefits by a margin of 53 percent to
36 percent.
12) Social security's modest but vital benefits,
averaging just $12,930 per year in California, are
critical to the economic security of those who receive
those benefits.
13) Losses of pensions, 401(k) balances, home equity,
and earnings have greatly diminished the retirement
income prospects of Californians.
14) The social security benefit cuts imposed in 1983
will, when fully phased in, cut benefits by roughly 25
percent.
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15) Forty-seven percent of elderly Californians are
struggling just to make ends meet and more than
one-half of working Californians will not have saved
enough to be able to maintain their standard of living
in retirement.
16) Proposals to increase the social security
retirement age to 69 would cut benefits by an
additional 13 percent on top of the 13 percent cut
that occurred when the retirement age increased from
65 to 67.
17) The physical demands of a job differ from industry
to industry and, on average, the longevity of the
lives of individuals differ significantly according to
their level of income, education, race, and access to
health care.
18) Social security belongs to the people who have
worked hard all their lives and contributed to the
program, and it is based on a promise that if you pay
in, you and your family can collect your money when
you retire, experience a severe disability, or die.
19) Medicare insures almost 4 million California
seniors for health care at a fraction of the
administrative costs of private plans.
20) Medicare has controlled its costs better than
private insurance plans.
21) Although increasing the eligibility age for
Medicare would save the federal government some money,
it would add billions of dollars to what we, as a
country, spend on health care and shift costs onto
other governmental entities, businesses, and many
individuals who cannot afford those costs.
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22) Medicaid is a critical source of protection for
over 11 million low-income children, adults, and
elderly Californians, many of whom have severe
disabilities or are in need of long-term care.
23) Our social security, Medicare, and Medicaid systems
are fundamental to protecting against risks to which
all Californians are subject.
24) Our social security, Medicare, and Medicaid systems
give expression to widely held values, including
caring for our families, our neighbors, and ourselves,
personal responsibility, hard work, and dignity.
This resolution takes the following actions :
1) Urges the President and the Congress of the United
States to exclude social security, Medicare, and
Medicaid from being a part of any legislation to
reduce the federal deficit.
2) Resolves that the California State Legislature
opposes cuts to social security, Medicare and
Medicaid, and calls on our state's representatives in
Washington, D.C. to vote against any cuts and consider
improving those systems in ways that will strengthen
their protections.
3) Resolves that the Chief Clerk of the Assembly
transmit copies of this resolution to the President
and Vice President of the United States, to the
Speaker of the House of Representatives, to the
Majority Leader of the Senate, and to each Senator and
Representative from California in the Congress of the
United States.
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FISCAL IMPACT
This bill has not been analyzed by a fiscal committee.
BACKGROUND AND DISCUSSION
Purpose
According to author, AJR 7 expresses the Legislature's
opposition to cuts to social security, Medicare, and
Medicaid, and calls on California's representatives to the
United States Congress to vote against cuts to social
security, Medicare, and Medicaid and to consider improving
those systems in ways that would strengthen their
protections.
Medicare
Medicare is the federal health insurance program that
guarantees access to health care for people who are 65 or
older, certain younger people with disabilities, and people
with End-Stage Renal Disease (permanent kidney failure
requiring dialysis or a transplant).
In 2012, Medicare provided health insurance to nearly 50
million people nationwide (roughly 4.2 million older
individuals and 700,000 disabled individuals in
California). On average, Medicare covers about half (48
percent) 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.
Medicaid
Medicaid is the U.S. health insurance program for certain
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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, the Medi-Cal program includes 7,505,841
enrollees as of January 2011. 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. Medicaid is funded through federal
general revenues and other special financing structures
that create revenue to support services and benefits.
Social Security
Social Security is a social insurance program consisting of
retirement, disability, and survivors' benefits. 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 that money is then distributed as a monthly
benefit to individuals who previously paid into the program
and have since retired. Taxes currently being collected are
not contributing to an individual's own Social Security
savings; and individual's future benefits are paid by the
contributions made by a younger generation. As a
pay-as-you-go system, Social Security differs from company
pensions, which are "pre-funded."
Social Security is financed through a dedicated payroll
tax. Employers and employees each pay 6.2 percent of wages
up to the taxable maximum of $113,700 in 2013, while the
self-employed pay 12.4 percent.
The maximum Social Security benefit for a worker retiring
at the 2012 full retirement age of 66 is $2,366 per month.
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Senate and Assembly Joint Hearing
Senate and Assembly Human Service Committees held an
informational hearing on March 23, 2013, to discuss
questions surrounding poverty and its impact on
Californians.
The hearing was prompted by two reports published in
November 2011 and 2012 by researcher Kathleen Short of the
U.S. Census Bureau on the Supplemental Poverty Measure
(SPM).
Under the SPM, in 2011, the change in the national poverty
rate, when compared to the official poverty measure, edged
upward by 1 percentage point - from 15.1 to 16.1 percent
among all Americans. However, some demographic groups saw
more significant changes. The percentage of seniors living
in poverty under the SPM grew from 8.7 percent to 15.1
percent of the population in 2011, in part because of the
inclusion of out-of-pocket medical expenses in the
calculation of available cash.
Release of Short's paper on the SPM drew considerable
interest in California, where the poverty rate under the
SPM jumped by more than 7 percent - from 16.3 percent to
23.5 percent. Additionally, according to the SPM, the
poverty rate for older adults was roughly 15 percent;
without Social Security, the figure would likely have been
54.1 percent, or almost half of people 65 and older.
PRIOR VOTES
Assembly Floor: 42 - 17
Assembly Aging & LTC: 5 - 2
POSITIONS
Support: AARP
California Alliance for Retired Americans
(CARA)
California Labor Federation
California Federation of Teachers (CFT)
California School Employees Association,
AFL-CIO (CSEA)
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County Welfare Directors Association of
California (CWDA)
Western Center on Law and Poverty (WCLP)
Oppose: None.
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