Budget deal previews more tests for retirees | McClatchy Washington Bureau

A two-year budget deal in the nation’s capital foreshadows the uncertain future for retirees as lawmakers face choosing between benefits promised to the elderly and a shortfall in funding.

If approved by the Congress, the deal hammered out between the White House and departing House Speaker John Boehner, R-Ohio, would raise federal government spending by $80 billion over the next two years. It would offset some of that spending with tweaks to Social Security, Medicare and the Affordable Care Act.

While the deal would avert a showdown over the federal debt ceiling by raising it enough to last past the 2016 elections, it punts on long-term fixes for the biggest drivers of government spending, the entitlement programs such as Medicare and Social Security. Consequently, tens of millions of current workers face an uncertain retirement.

A key part of the deal involved Medicare and the Social Security Disability Insurance program, which provides income to workers who have suffered injury or illness before the official retirement age of 65.

The deal on Medicare and Social Security Disability Insurance, potentially controversial in its own right, also offers a glimpse into the future.

Absent a deal now, roughly 11 million current recipients of disability benefits face a 20 percent reduction next year in what they have been getting.

Similarly, roughly 8 million elderly Americans receiving Medicare Part B benefits – which cover doctors and hospital visits – also face an increase up to 50 percent in their premiums next year if Congress does nothing. Those kinds of shortfalls are forecast for Medicare’s future, too.

It’s just what analysts warn is coming for broader retirement funding if changes aren’t made. Social Security and Medicare could run short of money, threatening across-the-board cuts to promised benefits, leaving elderly Americans vulnerable.

The budget deal provides temporary fixes.

It temporarily diverts 0.57 percentage points of payroll taxes away from the broader Social Security program to the disability program. Doing so keeps the disability program solvent through 2022, a patch sought by the Obama administration that does not collect additional payroll taxes.

Over 10 years, the deal also reduces total Social Security spending by $4.3 billion, according to a Tuesday analysis by the nonpartisan Congressional Budget Office. The deal includes several new efforts to combat disability fraud. They would include higher penalties, more income reporting from recipients and creation of a new felony category – conspiracy to commit Social Security fraud. All 50 states would have special fraud investigation units that must give the OK before new applicants can qualify for benefits.

A report earlier this year from Social Security’s inspector general found widespread problems with fraud and policing of disability benefits.

To avoid steep Medicare premium increases, Congress will keep in place for another year a 2 percent cut in Medicare reimbursement payments made to doctors, labs and hospitals. There’s also additional means-testing to ensure that wealthier Americans get smaller Medicare benefits.

“What we see is . . . an appetizer before you get to the real meal of having to reform these programs,” said Steve Ellis, vice president of the budget watchdog group Taxpayers for Common Sense. “Nothing has really changed the long-term trajectory. . . . It bought them a little time.”

Social Security and Medicare threaten to swamp the federal budget over the next 25 years, in large part because of the pending retirement of 75 million baby boomers born between 1946 and 1964.

With so many boomers soon entering retirement, there won’t be enough coming in from the current workers and employers whose taxes finance the system to pay for retirees. Social Security won’t have enough to pay all promised benefits somewhere between 2025 and 2035, the CBO said in July.

The deal’s retirement provisions anger liberals and conservatives alike.

“The White House needs to know that any budget deal that cuts Social Security, Medicare or Medicaid benefits or eligibility for those benefits is . . . roughly equivalent to declaring a holy war,” said Jim Dean, head of the liberal group Democracy for America.

The conservative Heritage Foundation think tank slammed the deal for bailing out the disability program by “robbing” the broader program “without putting in any meaningful reforms.”

Also Tuesday, GOP presidential candidate Jeb Bush unveiled his plan to fix Social Security and Medicare. The former Florida governor wants to raise the retirement age, reduce some benefits and change the way cost-of-living adjustments are calculated. On Medicare, he’d have the wealthier pay more and increase competition by allowing private insurers to compete with it.

His plan won rare praise from Campaign to Fix the Debt, which lobbies for lower debt and smaller deficits. The group’s leader, Maya MacGuineas, said that while other candidates skirt the issue “as too hard and politically toxic, Governor Bush has embraced it.”