Business Roundtable offers pragmatism on Social Security and Medicare

Business leaders tend to be pragmatic and non-ideological, so their influence is much needed at a time when Congress is so dysfunctional. Today’s release of Social Security Reform and Medicare Modernization Proposals by the Business Roundtable and accompanying Wall Street Journal op-ed piece by Roundtable chairman Gary Loveman are welcome inputs.

The white paper wisely starts with Social Security. It was once known as the Third Rail of American Politics, but Social Security fixes are actually much easier to make than Medicare. A few simple steps: gradually raising the retirement age, means testing benefits, using a conservative measure for inflation, and adding new state and local government workers to the system are all that it will take to keep the system solvent for a long, long time.

Then the topic turns to Medicare, which is a lot more out of control. The proposals from the Roundtable are almost as simple sounding as those for Social Security, but alas they are more complex to implement and unlikely to bring about a real solution. The Medicare proposals include:

  • Raising the eligibility age  over time to 70 (but exempting anyone 55 or older)
  • Expanding private plans’ involvement in Medicare to compete with fee-for-service Medicare
  • Provide more means testing for Medicare beneficiaries

Raising the eligibility age just shifts costs onto employers and individuals, who will probably spend more than Medicare does since they don’t get rates that are as low.

The Roundtable report cites savings from private competition in Medicare Part D (the drug benefit),  but it’s unclear that such savings can be translated across the whole Medicare program. Experience with Medicare Advantage would suggest that costs are higher rather than lower under such a scenario.

Providing more means testing is a reasonable idea, but it’s unclear how much savings can realistically be obtained.

As an aside, the Business Roundtable says it represents “leading U.S. companies with more than $7.3 trillion in annual revenues and nearly 16 million employees.” If so, that translates to roughly $500,000 per employee, which seems high. I’ve asked the folks who run the numbers for the Roundtable to explain this information to me. I will let you know what they come back with.

January 16, 2013

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