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Opinion: The link between more seniors filing for bankruptcy and the unraveling social safety net

Editor’s Note: Journalist Philip Moeller is here to provide the answers you need on aging and retirement. His weekly column, “Ask Phil,” aims to help older Americans and their families by answering their health care and financial questions. Phil is the author of “Get What’s Yours for Medicare,” and co-author of “Get What’s Yours: The Revised Secrets to Maxing Out Your Social Security.” Send your questions to Phil; and he will answer as many as he can.

New research shows an enormous increase in bankruptcy filings among older Americans. “Older Americans are more likely than ever to find themselves in bankruptcy court, seeking protection from creditors,” according to the study titled “Graying of U.S. Bankruptcy: Fallout from Life in a Risk Society.”

“The percent of bankrupt filers age 65-74 has increased almost 500 percent since 1991, growing from 2.1 percent of the bankrupt population to 12.2 percent in 2016. Even adjusting for increased numbers of older Americans, older people are still more likely to seek protection in bankruptcy courts than in prior decades.”

The U.S. social safety net – built over decades by Social Security, Medicare, employer pensions, and other programs – has been seriously weakened over the last 20 or so years, the paper’s four academic authors contend, driving record numbers of older citizens into bankruptcy. The causes primarily are the failure of Social Security to keep up with inflation, soaring medical costs, the disappearance of company pensions, and the inability of people to set aside retirement funds, either because they lack the funds, don’t have access to private retirement plans, or both.

The findings of this paper have been anticipated by folks who pay attention to retirement issues, especially supporters of strong safety-net programs. In particular, earlier research by the Kaiser Family Foundation presents an alarming moving picture of rising Medicare expenses that have outpaced Social Security and other senior income sources. Here’s my take on the Kaiser work.

I urge you to read the research before loading your social-media cannons to complain about what’s wrong with society these days. That’s certainly not what happened when New York Times reporter Tara Siegel Bernard broke the story. Readers of the paper wasted little time in generating more than 1,300 comments on the story.

Many were thoughtful and most supported stronger programs to protect older Americans. Still, the ensuing online conversation also powerfully illustrated one of the major ideological divides of our times: How much should government-support programs protect older Americans, and how much should they be responsible for paying their own bills in their later lives?

Put another way, how much social conscience can the United States afford? Even as current support programs fall short of meeting retiree needs, Social Security, Medicare and Medicaid spending for older Americans is projected to take an ever-larger bite of total federal spending.

This trend, of course, fuels much of the disagreement between Republicans and Democrats about the kind of government we want and are willing to fund.

“We appear to be in the midst of an old-fashioned game of tug-of-war,” the bankruptcy researchers noted. “On the one hand, many Americans believe that providing a strong social safety net for our older citizens, a net that reduces their individual financial risks, is part of our collective responsibility. On the other hand, there are those who insist on policies that continue to unravel that safety net, leaving older Americans to fend for themselves.”

Were it not for Republican support of massive tax cuts and other policies sharply weighted in favor of the wealthy, I’d have more respect for their conservative point of view. Government transfer payments represented 17 percent of personal income by 2014, according to one recent analysis. That’s up from 11 percent in 1979 and 7 percent in 1969. Isn’t it a legitimate question to ask how much larger this percentage can or should become?

Further, even accepting that seniors are facing increasingly tenuous economic times, there were fewer than 100,000 personal bankruptcies filed in 2016 by households headed by someone aged 65 or older. This is barely a sliver of our more than 50 million seniors, who account for more than 15 percent of the nation’s 325 million residents.

Still, those forced into bankruptcy are not a small group, and one that clearly is getting larger. Further, they are the canary in the coal mine here. Many more times this number face increasingly tough economic times, even if they never reach the point of filing for bankruptcy.

Another telling reality of what older Americans face was revealed in detailed follow-up questionnaires with more than 900 households that filed for bankruptcy between 2013 and 2016.

“Respondents were asked to list the single most important thing that they or their family members were unable to afford in the year before their bankruptcies,” the research paper said. “Over half of older filers (52 percent) who responded indicated that the single most important thing they had to forego was related to medical care—surgeries, doctor visits, prescriptions, dental care, and health/supplemental insurance.”

“Despite the widespread belief that Medicare meets health needs of older Americans,” the researchers concluded, “for so many retirees, it is utterly inadequate.”