As a great, prosperous and compassionate nation, we must ensure access to health care and retirement income security for our seniors.
Seniors rely on Medicare to provide access to critical health care and for financial security following their working years. Since 1935, Social Security has played an important role in ensuring workers have a base of retirement income, reducing poverty among seniors in retirement and protecting Americans against the risks of disability and premature death. Workers contribute to the programs during their working years and see a return on those contributions during their retirement years.
Unfortunately, too many Washington politicians have been unwilling to engage in an honest conversation with voters about maintaining a social contract with seniors and the next generation. In 1965, health care programs and Social Security spending were less than a sixth of Washington's budget, but today they consume almost half of all federal spending and crowd out other national priorities. Without action, the problem will only get worse: spending will more than double as a share of our economy by 2040, growing from $1.8 trillion to $4.5 trillion. Unless we make changes to preserve and protect Medicare and Social Security, the trust funds will be exhausted and benefits will be cut. In Medicare, hospital benefits will be cut by nearly 15 percent in 2030. In Social Security, benefits will be cut by more than 20 percent in 2034.
Improving security for current seniors and prosperity for the next generation will require experienced leadership.
Strengthen and Secure Medicare
Too many politicians in Washington have not been honest about the unsustainability of the Medicare program. Governor Bush believes that everyone deserves the truth and that seniors deserve better quality care. He also believes that care providers should not be saddled with heavy-handed regulations. Governor Bush will approach these challenges with the following strategy:
Be honest about the problem
Implement bipartisan Medicare premium support
Stabilize Medicare's finances
Be honest about the problem: Medicare's current path is unsustainable
There is bipartisan concern about Medicare's fiscal sustainability. Serious and thoughtful Democrats and Republicans have had the courage to acknowledge that Medicare needs to be strengthened, if it is to be preserved long-term.
Here are the fiscal facts about Medicare:
Medicare spending is crowding out other national priorities. On the current path, the country will spend more on Medicare than it will on national defense by 2019.
While workers do contribute to Medicare through payroll taxes, much of Medicare's budget comes from general revenues or adds to the national debt. $260 billion of the program's more than $600 billion annual budget has no dedicated funding source, so it adds to the national deficit and debt each year.
Longer-term, it gets worse. Over the next decade, spending will go from more than $600 billion to $1.2 trillion. Over the next 75 years, the program will exceed dedicated financing sources by $28 trillion. To put this in perspective, the nation has accumulated $18 trillion in debt over its entire history.
Without leadership and action, the benefits of current enrollees are in jeopardy. Without action to secure the program, seniors' hospital benefits could be cut across the board by nearly 15 percent in 2030. Benefits could be in jeopardy as soon as 2022, if health care spending rises more quickly than expected.
Implement bipartisan Medicare premium support
Medicare needs to be strengthened to make it work better for current seniors and preserve it for the next generation. Rather than doubling down on bureaucratic boondoggles or increasing taxes, Governor Bush will enable a more innovative Medicare to achieve better outcomes with more efficient spending.
Governor Bush will give seniors access to care that is:
Portable -- Their health care records should travel with them so providers can provide appropriate care without duplicating tests or prescription drugs.
Modern -- Remote monitoring technology could be used to detect and prevent complications from chronic conditions like congestive heart failure or diabetes.
Value-based -- If seniors choose to receive their care in less expensive settings that demonstrate equal or higher quality, seniors should be able to benefit from that choice.
Convenient -- If seniors are traveling or cannot physically get to their physician, they should have access to their primary physician via inexpensive video applications on their smart phones or other remote communication tools.
Governor Bush will achieve these goals through premium support, a bipartisan idea supported by leaders such as Representative Paul Ryan (R-WI), Senator Ron Wyden (D-OR), former Budget Director Alice Rivlin, former Senator John Breaux (D-LA), former Senator Bill Frist (R-TN), former Senator Bob Kerrey (D-NE) and former Senator Judd Gregg (R-NH).
Under current law, seniors in Medicare can choose the traditional option (called fee-for-service) or private health plan options (called Medicare Advantage).
However, politicians, bureaucrats and lobbyists -- not doctors, patients and innovators -- decide how much government pays for those benefits. Under this proposal, private health care plans, like Humana and Kaiser, other innovators and traditional Medicare will compete on the best price to offer Medicare benefits to seniors. Seniors' premium support level will be based on the average of those prices. If a senior chooses a plan cheaper than the average price, they will realize the savings. If a senior chooses a more expensive plan, they will pay the difference in the form of a higher premium. Competition will make spending more efficient, and seniors could pay less and have more options.
As part of this structure, participants could offer innovative benefit designs. Instead of delivering benefits almost exactly like traditional Medicare does, private plans could offer "actuarially equivalent" benefits. The value of the benefits will be the same, but participants could design a plan that better meets patient needs. For example, a private health plan may offer a plan that covers fewer days in the hospital each year but reduces the need for hospitalization because the senior can talk to their doctor with a free video communication tool whenever they have a medical question. A different private health plan may offer a high-deductible plan that covers fewer physician visits but gives seniors money to pay for a physician visit through a fully-funded Health Savings Account (HSA) (Payments to participants will continue to be adjusted based on the health risks of patients in order to minimize insurers covering only healthy individuals).
In addition, this proposal will create opportunities for innovation in care delivery for seniors. Competition need not be limited to insurers and traditional Medicare in a premium support model. The level of consolidation in the health care industry is at an all-time high, and the need for additional, innovative options for seniors has never been greater. Governor Bush will encourage new entrants to compete for seniors' business.
This proposal will lower premiums for enrollees by approximately six percent, on average, relative to current law projections. According to non-partisan estimates, this proposal could achieve hundreds of billions of dollars in savings over the next two decades. The experience with Medicare Part D -- which is now 40 percent under its original budget -- demonstrates that this competitive structure can achieve even greater cost savings and high quality care over the long term.
Stabilize Medicare's finances with common-sense reforms
Increase means-testing for Medicare premiums: Today, wealthier seniors receive lower premium subsidies from the federal government. This proposal will further reduce the level of government subsidies for wealthier seniors, as consistent with bipartisan proposals. For example, a senior making $160,000 will receive only a 35 percent subsidy from the government under this proposal (compared with 50 percent under current law).
Improve Medicare management practices: Ten percent of Medicare's annual budget is now subject to waste, fraud and abuse. The Government Accountability Office has made common-sense recommendations to reduce the level of improper payments, which Governor Bush will review and implement as appropriate. For example, Governor Bush will increase transparency about providers who have been fined or suspended from a federal health care program so they do not take advantage of other programs.
Ensure fee-for-service providers are appropriately reimbursed: Payments should balance access to services with efficiency from providers. Updates should be implemented with a particular focus on reimbursement innovation, instead of simply blunt cuts.
Provide financial security through HSAs: Seniors may be responsible for co-pays, deductibles and premiums, which can be difficult to meet on a fixed income. Currently, seniors who enroll in Medicare cannot save money in tax-free HSAs. Governor Bush will allow seniors to keep their HSAs to help save for out-of-pocket health care spending. In addition, a senior's health plan or provider could contribute money to an HSA. (This proposal will build on HSA reforms Governor Bush proposed in his Conservative Plan for 21st Century Health.)
Redirect ObamaCare's Medicare cuts to Medicare solvency: ObamaCare raided Medicare by more than $800 billion to create a new entitlement. Instead, Governor Bush will ensure that Medicare savings in current law go toward improving Medicare solvency and securing it for the next generation.
These reforms will secure and strengthen Medicare, enabling us to move closer to the goal of improving Medicare for seniors and guaranteeing the next generation a more prosperous future.
Strengthen American Retirement Income Security
Washington's over-promising has resulted in an impending Social Security crisis. Ten years ago the Social Security program ran annual budget surpluses, and today it is running major deficits. Because Congress never acted to secure the program, the problems are now more difficult to solve. Strengthening retirement income security will require a three-part strategy:
Encourage private saving
Stabilize Social Security's finances
Encourage private saving to reduce government dependency
The majority of American workers have access to a private retirement plan. Seventy-four percent of full-time workers have access to some type of retirement plan through their employers. Among workers at medium and large companies, the rate is 84 percent. Americans have accrued over $25 trillion in personal and employer-sponsored retirement plans and another $26 trillion in Social Security benefits (which the government does not have a plan to pay for). Current American retirees have among the highest incomes across westernized countries, both in dollar terms and relative to the incomes of working-age residents.
Workers with access to plans are saving nearly 10 percent of their salaries each year. Workers contribute five to seven percent of their salaries to retirement accounts. Adding employer contributions, total savings are 10 percent. These savings will be an important part of complementing Social Security income during retirement.
While access to retirement accounts is at an all-time high, more can be done to make these savings vehicles a reality for small-business and part-time employees. Only 51 percent of small-business employees have access to an employer-sponsored retirement plan, and the majority of low-wage workers lack access to an employer-sponsored savings plan.
To build on progress toward private saving and offer more options to employers and individuals, Governor Bush will:
Increase access by reducing complexity: Fiduciary liabilities, annual reporting, audit requirements, compliance rules and other onerous regulations simply make retirement plans too complex for many small businesses to offer. Reducing unnecessary burdens could make it easier for employers, especially small businesses, to offer retirement plans. This will go a long way toward helping the 49 percent of small business employees who do not have access to employer retirement plans.
Increase retirement plan options for workers: Workers in most large- and medium-sized businesses have access to 401(k) retirement savings plans, but many small businesses cannot afford to pay toward retirement plans for their workers. Governor Bush will help small-business employees by allowing them to automatically save part of their salary in a "starter 401(k)" plan, even if their employer cannot afford to contribute a matching amount.
Make it possible for small businesses to pool together: Multiple small businesses should be able to access a single retirement savings plan for all their employees, which will save administrative costs and complexity.
Make it easier for employees to enroll in their own retirement savings plans: Governor Bush will encourage employers to automatically enroll their employees in a retirement savings plan. This makes it easier for workers to save their own money for retirement because their employer handles the sign-up process and automatically helps them save part of their paychecks.
Make it easier for employees to save more money from each paycheck: Employers can help their employees save more by automatically diverting up to 10 percent of their employees' paychecks into private savings accounts. Governor Bush will eliminate the 10 percent arbitrary limit on this savings tool.
Make it easier for individuals to save: Earlier this year, the Obama Administration rewrote the rules for who is qualified to give investment advice for retirement plans. These sweeping proposed regulations will limit consumer choice of financial advisors, hurt low-income Americans and drive up the costs of private saving. Governor Bush will not let that happen. Instead, Governor Bush will review and streamline existing regulations that add unnecessary costs and make it difficult for individuals to save.
Recognize that Americans are living longer, healthier lives and make it easier for those who choose to work longer
Life expectancy has increased substantially since Social Security was created in 1935. Yet Social Security's structure still discourages work past early retirement ages. Individuals, who delay retirement under current law, must continue to pay payroll taxes, but the additional benefits they earn are rarely enough to compensate for more than a fraction of these additional taxes. Reforms should update Social Security to respect seniors' desires and abilities to continue to work later in their lives. Governor Bush will encourage work through the following reforms:
Adjust benefits for seniors who choose to retire early or work past the retirement age: Under current law, seniors who choose to retire before the normal retirement age (66) get smaller Social Security checks, while seniors that choose to work longer get bigger checks when they retire. Half of workers retire as soon as possible and most workers retire before reaching the full retirement age. Governor Bush will give even smaller checks to those who choose to retire early and even bigger checks to seniors who choose to wait to claim Social Security benefits.
Eliminate the retirement earnings test: Under current law, the government reduces the amount of Social Security benefits for seniors who choose to continue working and make more than $15,720 a year. Governor Bush will eliminate that provision, so seniors can enjoy a full private-sector paycheck and their full Social Security benefit check.
Eliminate the payroll tax for seniors at age 67: This will eliminate a 6.2 percent tax on work for seniors who choose to work in retirement (This proposal was included in Governor Bush's plan to grow and strengthen the economy).
Increase the Social Security retirement age: Workers are now eligible for full Social Security benefits at age 66 (gradually increasing under current law to age 67). Workers can choose to retire as early as age 62, if they agree to a lower Social Security check each month. This proposal will very gradually change these eligibility ages by a month every year starting in 2022. In the year 2058, when life expectancy will likely be even longer than it is today, workers will become eligible for Social Security at age 70 (or age 65, if they agree to a lower Social Security check each month). By continuing to allow early retirement as early as age 65, Americans will still be able to withdraw benefits as early as they could in President Roosevelt's time. Additionally, disability benefits will continue to be available for individuals with health conditions that prevent them from working.
Stabilize Social Security's finances by implementing bipartisan proposals
Without action to stabilize Social Security, current law will result in benefits being cut by more than 20 percent when the program's trust fund runs out. These drastic cuts will hit people both rich and poor -- and at any age during retirement. Bipartisan problem-solvers know what needs to be done and, with strong leadership, Americans can avoid sudden benefit reductions and have a smoother and more sustainable rate of growth going forward. Modest changes now can prevent even more painful cuts down the road.
Based on bipartisan proposals in the National Commission on Fiscal Responsibility and Reform (Simpson-Bowles), Governor Bush will ensure that Social Security remains stable over the next 75 years. Over the long-term, the money coming into Social Security will match the benefits paid. This was a goal supported by President Roosevelt at the program's creation.
Provide a minimum retirement benefit for low-income workers: Social Security was intended to reduce the rate of poverty among the elderly, but it does a poor job of protecting the most vulnerable. While there is a "special minimum benefit" for retirees today, the value is approximately 80 percent of the poverty level and only an estimated 75,000 qualify. Seniors who have worked for 30 years will be guaranteed a minimum benefit that is approximately $15,000 a year (125 percent of the federal poverty level for an individual). This will guarantee that seniors do not live in poverty.
Slow the growth of costs over time by adjusting benefits for wealthier seniors: Under current law, the government determines the amount of a worker's Social Security check through a complicated formula based on a worker's average earnings. This proposal will change that formula so that wealthier workers, who can afford to save more for retirement on their own during their careers, get smaller checks from Social Security during retirement. This change will be phased in gradually over decades to give workers time to plan.
Change how Social Security checks are updated each year: Each year, the government updates the amount of the Social Security checks they send to each senior. The annual adjustment is based on growth in the overall American economy, but the government currently uses inaccurate data to calculate the change. This proposal will use a more accurate measure of inflation called the chained consumer price index (Governor Bush will implement this more accurate measure of inflation across federal programs, with the exception of military and veterans spending).