Overture 04-67. On Reaffirming the Importance of Our Nation’s Social Insurance System (Social Security and Medicare)—From the Presbytery of Hudson River.

The Presbytery of the Hudson River respectfully overtures the 216th General Assembly (2004) of the Presbyterian Church (U.S.A.) to do the following:

1. Reaffirm the importance of our nation’s social insurance system, specifically Social Security and Medicare that were enacted to promote the general welfare, and to assure a guaranteed income and health care for the workers of the United States.

2. Urge our nation’s leaders to support and maintain the fundamental structure and intent of Social Security, expressly that it continue to be

a. universal, covering all persons in paid employment and their families,

b. compulsory, requiring all working Americans to contribute to our future security,

c. an earned right, based on contributions out of past earnings rather than charity,

d. contributory and self-financed, out of dedicated taxes, e.g. wage-related rather than means tested,

f. protected against inflation, by periodic, guaranteed, cost-of-living adjustments, and

g. backed by the full faith and credit of the United States, rather than depending on the erratic performance of the stock market or the unpredictable financial stability and profit interests of a private company.

3. Request the Advisory Committee on Social Witness Policy, in concert with the Office of Health Ministries USA, to review the PC(USA) position paper, “Economic Security for Older Persons,” approved by the 195th General Assembly (1983), in order to update the changes in laws affecting mandatory retirement, Social Security, and pension policies; and to reexamine the interpretations of some of these policies. Request that the Advisory Committee on Social Witness Policy, in concert with Office of Health Ministries USA, make a report of this review to the 217th General Assembly (2006).

4. Disseminate this overture immediately to members of Congress, to the president’s administration, and to the media, synods, presbyteries, church congregations, and individual Presbyterians.

5. Instruct the Office of the General Assembly to communicate immediately with the National Council of Churches of Christ and with other ecumenical partners to express concern of the Presbyterian Church (U.S.A.) on issues surrounding our national insurance system; and inviting them to participate in developing a shared position and action strategy to affect public policy. Request that a report of these actions be made to the 217th General Assembly (2006).

Rationale

1. Theological Considerations

The Gospel knows no laws, whether economic, social, or political, which are not subordinate to moral and spiritual laws and principles” (Minutes, PCUSA, 1936, Part I, p.150).

Rooted deep in the doctrines of grace and covenant is the concept of social responsibility which underlies the participation of Presbyterians in programs such as Social Security. … The ancients also understood the extended family as a basic unit for which everyone shared responsibility. Care of the fatherless, the widow, the poor, the sick and the aged was everybody’s concern. Many provisions of the Deuteronomic Code helped people live in community in ways that allowed everyone a measure of dignity, even when they had special needs. …

These elements of mandated community were based on more than sociological need. From early times, the Hebrews confessed a God by whose grace they lived in covenant. “I will be your God,” said Yahweh, “and you shall be my people.” The old suzerain treaties provided a pattern for understanding how God provided protection in return for service and loyalty. This was a covenant with the community, made first with a patriarch but always with national implications. The clear understanding was that if God was caring for the people, they must care for each other. That was part of the covenant. (Minutes, 1986, Part I, p. 675, “A Pastoral Letter to Candidates Regarding Social Security,” paragraphs 41.019 and 41.020)

Jesus’ words in Luke, that “of them that have much, much will be required,” are the root of progressive taxation and the priority of fair distribution over excessive consumption. John Calvin and the other early Reformers denounced luxury, waste, and inequality, and honored frugality, rational planning, and equal accountability before God, laying the ground for both democracy and economic progress.

The 211th General Assembly (1999) approved a resolution that affirms the Reformed biblical and theological heritage that health is God’s intention for God’s people, and therefore, a right for each person (Minutes, 1999, Part I, p. 345). The resolution urged the church, the government, and the health-care industry to support and work to maintain affordable, quality managed care (a phrase now used by HMO’s) for all persons and especially for the vulnerable, the elderly, the disabled, and the low-income families in particular. (For text of this resolution, see Minutes, 1999, Part I, pp. 341-53.)

2. Rationale: Social Security

At a time when the nation should be bracing for the retirement of the baby boomers, radical ideas are being promoted that would severely damage Social Security, the most successful government program in American history. The poverty rate among people over age sixty-five is about 10 percent. Without their Social Security income, about 48 percent of beneficiaries would be living in poverty, and dependent on charity.

Social Security needs adjustments so it can accommodate the boomers, the largest generation in American history. The ranks of those Americans over age sixty-five, now about 35 million, will swell to 70 million by the year 2030. The diversion of Social Security tax revenues to create personal accounts for investment in stocks and bonds would weaken the system and make it more difficult to meet the challenge.

An essential feature of Social Security is shared or collective risks. Some workers will prosper, live prudently, and save for a comfortable retirement. Others will be hard-pressed and have no savings at all when they reach the age when they are unable to work. Still others may be forced to stop working because they become permanently disabled, and others die before reaching retirement age, leaving their survivors vulnerable. Social Security is the foundation, always there if needed, to cover the vicissitudes of life in a modern industrial society. Social Security continues to be a successful, universal system: there are an estimated 155 million workers in the United States and 96 percent are covered under Social Security. About 91 percent of elderly Americans are now receiving benefits. Being man-made, the system is not perfect. But it assures that checks flow every month from the Treasury to millions of retirees—many of whom depend on this return of their Social Security contribution to meet their basic needs.

Now the president has proposed partial “privatization” of Social Security, to allow workers to keep a portion of the taxes they pay to Social Security and invest these funds in individual accounts of stocks and bonds. The amount of money they would receive at retirement would depend on the success of the investment accounts. Costs of private brokers managing the investments would be accrued or paid along the way, which would reduce the income available at retirement.

The risk of investment success or investment failure would become an individual one, rather than a risk shared by other members of society. Many would drop back into poverty. This would radically change the philosophy of Social Security. Currently, the risk is shared by all members of society through the federal government. It is a collective risk, with the assurance that future presidents and Congresses will see that the checks keep coming—in the words of the United States Constitution—that our government will promote the general welfare.

By contrast, the proposal for substituting individual accounts would shift the burden and the risk from society to the individual. The amount a person could collect under these accounts could be linked to the uncertain volatility of the securities markets. One needs only look at the devastation of privately invested pension accounts during the recent economic downturn. A staggering $5 trillion in invested value was lost. The human cost can hardly be fathomed, let alone measured.

In addition to changing the basic nature of Social Security, the proposal for individual accounts would create financial strains on the Social Security system. The revenues collected from workers are paid out as benefits to retirees and family members, to workers who have disabilities and dependents, and to survivors. If a portion of these revenues are diverted to individual accounts to help finance future retirements, the money must be replaced so current benefits can be paid. Transition cost (i.e., paying current and future benefits at the same time) are estimated to cost more than $1 trillion.

By diverting money away from Social Security, the privatization plans could place the non-retirement benefits (disability, family, and survivor benefits) in jeopardy. To keep those benefits intact, Social Security would need vast new revenues.

The church has an opportunity now to speak out about Social Security, this successful social contract that our government has with its people. It is a contract that should not be weakened. Arguing technical issues about our social insurance system is important, but the “Presbyterian Church has an obligation to speak from the ethical and theological values of Christ’s community” (Health Ministries USA, 2002, Presbyterian Church (U.S.A.)). As children of God, we are called to protect the dignity and well-being of our families and our neighbors. Social Security and Medicare are consistent with our Judeo/Christian heritage of caring for the young, the old, and those who are sick and have permanent disabilities.

As an add-on to Social Security, individual accounts are alright. It is a worthy goal to encourage people to save and invest. But that money should not come from the flow of revenues that make Social Security the great financial safety net for millions of people.

3. Rationale: Medicare

Medicare is the federal health insurance program covering 35 million Americans age sixty-five and older, and more than five million disabled persons of all ages. It provides access to health care regardless of an individual’s income or health status. It is a universal system of care for older and disabled Americans.

Medicare has contributed to the dramatic increases in well-being and longevity of the older population. In 1960, before Medicare was created, women who reached age 65 had a life expectancy of 15.8 more years. Men could expect to live an additional 13 years. Today, women at 65 have a life expectancy of 19.2 years, while men can look forward to another 16.3 years.

Less than 3 percent of Medicare beneficiaries report having any difficulty getting medical care, and less than 5 percent reported they delayed getting treatment because of costs, although a substantial number reported delaying or forgoing drug treatment because they did not have drug coverage. This is a testimony to the effectiveness of the program in delivering quality care at an affordable price. This is a program that works well, but it is now under threats that would reduce the freedoms and the choices of its beneficiaries in return for a new and elusive panacea, prescription drug coverage.

Medicare gives its beneficiaries a great degree of freedom in selecting health-care providers. They may choose any doctor or hospital that has agreed to participate in the Medicare program. The vast majority of beneficiaries have chosen this traditional approach. About 4.6 million of the 41 million Medicare beneficiaries have chosen to join managed-care organizations, such as health maintenance organizations (HMOs). They agree to stay within the network of doctors and hospitals provided by the HMO.

This freedom is now threatened by the legislation just passed by Congress to provide prescription drug coverage for the first time under Medicare. The drugs will be available through HMOs or through new, stand-alone drug programs offered by insurance companies. However, none of these proposed stand-along programs currently exists, even in pilot form. In 2006, when the drug benefit takes effect, seniors may find they are unable to get drug coverage unless they join an HMO, which will restrict their ability to select any doctor or hospital of their choosing. Seniors should have the continued freedom to join an HMO if they feel it would benefit them. But no senior should be coerced into joining an HMO as a condition for receiving the prescription drug benefit.

The legislation also marks a major departure from the tradition of universality, with all participants sharing in the benefits for an equal price, with no differentiation according to income. Currently, all beneficiaries pay the same premium, $66.60 a month, for the Part B coverage that helps pay for doctor bills. Part B is subsidized by general revenues, which provide about 75 percent of the total costs of Part B operations.

Starting in 2007, however, the tradition of equal payment by all beneficiaries will be shattered. Those individuals with incomes above $80,000 a year will pay a higher Part B premium. They will pay a greater share of the cost of the Part B program than their fellow beneficiaries without an increase in benefits. This division by income raises the threat of eroding support for Medicare among more affluent Americans.

Although Medicare will become the biggest buyer of prescription drugs, it is not allowed to negotiate for the best possible price to save the taxpayers money. Instead, the law explicitly forbids Medicare to seek the best deal. At the same time, the Veteran’s Administration is required by law to seek the best prices when it buys pharmaceutical products. It does not make sense that one agency of government is ordered by law to negotiate for the best price, while another agency, the biggest of all drug customers, is forbidden from negotiating with drug manufacturers for the cheapest price it can get.

4. Background

Created out of the Great Depression, Social Security is a safety net for almost all working Americans and members of their families. It is an earned benefit for all who labor in the United States. Benefits go to retired workers, their spouses, and their survivors. Disabled workers and members of their families are eligible for monthly payments. And for those who die before reaching retirement age, such as the victims of the September 11 terrorist attacks, there are survivor benefits for family members.

Social Security is largely a pay-as-you-go system, with today’s workers paying taxes to provide funds for current retirees and other beneficiaries. About 155 million Americans paid Social Security taxes and 46.7 million people collected benefits in 2003. Social Security is the major source of income for most people age sixty-five and over. For 64 percent of Social Security beneficiaries, the program provides 50 percent or more of all income. About 20 percent of beneficiaries have no income other than their Social Security benefits.

Benefits are a matter of right, rather than charity, earned by working or being a family member of a worker. Workers can begin collecting reduced retirement benefits at age 62. Full benefits are available at age 65. However, the age for full benefits is being gradually raised to 67. The beneficiaries include: 32.5 million retired workers and their families; and 7.4 million workers with disabilities and their dependents; and 6.8 million survivors of deceased workers or deceased retirees.

Social Security benefits are adjusted automatically each year to keep pace with inflation. This has enabled millions of older Americans to escape poverty because they receive Social Security benefits. Poverty among Social Security recipients age sixty-five and over was just 8 percent in 1999. Without their Social Security income, about 48 percent of people in this group would have been living in poverty.

Because Social Security has been a success, it should be maintained for future generations of workers. The baby boom generation, the largest generation in American history, will swell the ranks of the beneficiaries age sixty-five and over to 70 million by the year 2030.

Social Security will continue to be the key source of income for most retired Americans. While Social Security is virtually universal, about 55 percent of the American workforce does not have any private pension or 401(k) coverage.

Though Social Security must find new sources of revenue to meet the needs caused by the increase in the number of beneficiaries when the boomers reach retirement age, adopting individual accounts will make the problem even more difficult.

Social Security has worked well since it began disbursing benefits in 1940. It will continue to work well for future generations of retirees and should not be subject to drastic changes that would undermine the social compact that has stood the test of time.

Medicare serves all eligible beneficiaries without regard to income or medical history. Today it provides health insurance coverage to one in seven Americans. Part A of Medicare, the hospital insurance trust fund, pays for hospital services, limited skilled nursing facilities, home health care, and hospice care. It is financed by a payroll tax on salary earnings. The worker and employer each pay an amount equal to 1.45 percent of the worker’s earnings. Part B, which helps pay for doctor services, and outpatient hospital care, has two sources of funding. A monthly premium paid by all beneficiaries provides about 25 percent of the funding, and the rest comes from general tax revenues.

Medicare spending is highly variable. Outlays averaged about $6,000 per beneficiary in 2001, but the spending was concentrated among a relative handful of people with severe health problems. Just 6 percent of the beneficiaries, those who used more than $25,000 a year in medical services, accounted for almost half of total spending.

The Medicare population is one of modest financial means: Some 51 percent have incomes below $25,000 a year. The Medicare population is demographically diverse and includes significant numbers of individuals who are financially and/or medically vulnerable. More than half (57 percent) of those enrolled in the program are female, reflecting women’s longer life expectancy. The fastest growing group of Medicare beneficiaries includes those over age eighty-five who are more likely than younger beneficiaries to need medical care. The growth in the racial ethnic beneficiaries raises particular challenges for the program as African American and Latino beneficiaries tend to have had lesser access to health care resulting in greater health needs and lower incomes than their white counterparts. Medicare beneficiaries generally have modest incomes and depend heavily on Social Security as a primary source of income.

One of Medicare’s major achievements has been helping to ensure mainstream medical care for most elderly and many disabled Americans, especially racial and ethnic minority beneficiaries.