What do you think? Leave a respectful comment.

What Clinton and Trump propose for Social Security and Medicare

Editor’s Note: Journalist Philip Moeller, who writes widely on aging and retirement, is here to provide the answers you need in “Ask Phil.” Send your questions to Phil.

It’s not clear how much facts will matter in this year’s White House race. But with both major party conventions over, here are the details of what might be in store for the nation’s two important benefit programs that serve older Americans, plus millions of children and disabled folks: Social Security and Medicare.

Everything you read here is, as we nonfiction scribes like to say, a true fact. In the fine tradition of “trust, but verify,” I am including web links to source documents. Of course, these sources themselves may be suspect. And there are lots of “true” facts out there, so my selections likewise may be biased or incomplete. If you feel they are, please provide me with your own data points and sources, and I’ll share them in a future Ask Phil. We need not be in a rush here; Election Day is still more than three months away.

Looking at the overall impact on the federal budget and deficits, Trump’s pledge of lower taxes would take our current lake of red ink and turn it into an ocean, according to an assessment by the nonpartisan Committee for a Responsible Federal Budget.

READ MORE: Column: Trump’s policies would massively increase the national debt

After 10 years of their respective policies, the national debt under Trump would have risen from $19 trillion today to more than $39 trillion by the year 2026. It would become a smaller sea under Clinton, but still would soar by more than $10 tillion to more than $29 trillion.

The Tax Policy center took a narrower look at just the candidates’ planned tax changes. Clinton’s planned tax increases would trim $1.2 trillion off the national debt over 10 years, while Trump’s deep cuts would increase the deficit by $11.2 trillion.

In terms of senior benefit programs, there is much more detail in the Democratic Party Platform than in its Republican counterpart. Ditto for the specifics in Hillary Clinton’s nomination acceptance speech, as contrasted with Donald Trump’s. I am not going to play the false equivalency game here of a point-counterpoint assessment of the two candidates’ views. There is no equivalency. Clinton has presented many specific proposals. Trump has not. This discussion thus will focus on her proposals.

Trying to find nonpartisan data sources here can also be difficult. While numbers may look impartial, we all know they can be spun as artfully as words. The Congressional Budget Office, a nonpartisan research arm of Congress, is a good place to start, although even its work gets questioned as being suspect. Nonetheless, it is instructive to see the fiscal realities that will greet any proposals involving Social Security and Medicare. The most recent snapshot is the CBO’s “2016 Long-Term Budget Outlook.”

READ MORE: Your Medicare tax dollars at work

It provides little cause for optimism that we would be able to afford expanded senior benefits. Right now, federal deficits are running at about 3 percent of our gross domestic product, which is a commonly accepted way of viewing our fiscal condition. Government spending totals 21 percent of GDP, with Social Security (4.9 percent) and health care (5.5 percent) accounting for half of all spending. Their share of future spending is, however, trending higher due to the aging of society and the prospect for above-trend future increases in health care expenses.

Social Security

While Social Security spending and revenues are included in overall federal budget reports, the program historically has been self-sufficient. All Social Security benefits are funded from payroll taxes and the interest income from the investment of surplus tax revenues in a special series of federal bonds.

Program reforms enacted in 1983 created big surpluses that are now being reduced. They will disappear in the next 14 to 18 years, depending on whose projection is being used. A recent study found that investing some of these surpluses in private stocks and bonds could have substantially raised trust fund reserves. But Clinton and many other Democrats have resisted privatization for many years.

There is no shortage of studies of ways to reduce the growing gap between program benefits and payroll taxes. The Social Security Administration maintains a comprehensive list of reform proposals and web links to related reports and research. Significantly, none of these earlier proposals were enacted, and this legislative gridlock has turned a manageable course correction into a full-blown crisis. The Social Security Administration also provides its own estimates of how specific proposals would affect the program’s financial viability.

Most past proposals have centered on finding an acceptable mix of cuts to benefits. But Clinton has adopted the mantra of the Bernie Sanders-Elizabeth Warren wing of her party and now embraces an expansion of benefits. The 2016 Democratic Platform says:

We will fight every effort to cut, privatize, or weaken Social Security, including attempts to raise the retirement age, diminish benefits by cutting cost-of-living adjustments, or reducing earned benefits. Democrats will expand Social Security so that every American can retire with dignity and respect, including women who are widowed or took time out of the workforce to care for their children, aging parents, or ailing family members.

Giving spouses credit for caregiving work would, of course, raise Social Security spending. As things stand already, the program would need to sharply increase its revenues just to continue paying all benefits through payroll taxes. The low-hanging fruit here, according to Clinton, would be to sharply raise the annual wages subject to payroll taxes.

This ceiling is $118,500 in 2016, meaning that people who earn up to this amount pay 12.4 percent of their wages to Social Security (actually, they pay 6.2 percent, and their employers pay the same percentage). The ceiling is adjusted each year to reflect wage inflation. Historically, it was high enough to capture about 90 percent of all wage income. This means that 10 percent of wage income exceeded that annual ceiling.

In recent years, wage gains have been skewed toward wealthier Americans. As a result, this year’s wage ceiling will capture only about 83 percent of national income. This shift may seem minor, but restoring the ratio to 90 percent would require the ceiling to more than double to $250,000. At that level, payroll taxes would bring in significantly more revenues to Social Security.

This is a nonstarter in today’s Congress. But in terms of addressing Social Security’s long-range financial problems, taxing all wage income would eliminate a lot of the shortfall. Taxing all wage income and reducing the benefit formula for high-earners could close even more of the gap all by itself.

However, to raise benefits and still close the gap would likely require other program reforms, not to mention the likelihood of strong opposition from even many Democrats to simply making all wages subject to payroll taxes. When Clinton talks about the need to forge political compromises and her skills at doing so, Social Security would be the ultimate test.

READ MORE: How to get what’s yours from Medicare and Social Security

Most likely, she would not get all the payroll tax increases she wants. And those she does achieve would come at the expense of program changes that the left wing of the party does not want, including higher retirement ages and less generous annual cost of living adjustments. The stronger the Republicans’ hand in the next Congress, the more concessions Democrats would have to make to improve Social Security benefits and finances.


The challenge for Medicare is not to expand benefits, but to figure out a way to control future cost increases and avoid benefit cuts. Unlike Social Security, Medicare spending is not fully funded by Medicare taxes. True, it does have a trust fund. But this covers only Part A covered expenses for hospitals and nursing homes.

There are big subsidies to help cover expenses for Medicare Part B (doctors, outpatient and durable medical equipment) and Part D (prescription drugs). In calendar year 2015, according to the 2016 annual Medicare trustees’ report, this support totaled nearly $275 billion, or more than 40 percent of all Medicare spending.

With older Americans projected to make ever-heavier use of Medicare, the trustees projected Part B and D expenses to rise by 7.8 percent a year from 2016 to 2025. This compares with projected GDP growth of 4.9 percent, which many forecasters believe is unrealistically high. By the year 2025, according to the trustees’ intermediate estimates, it would take more than $560 billion in general federal revenues to pay for unmet Part B and D expenses.

The point here is to emphasize that Medicare is not a self-funded program like Social Security. Arguing for expanded Medicare benefits is fine and dandy. But such arguments should be paired with fiscally responsible funding strategies. To date, many liberal supporters of expanded benefits don’t seem to either understand or acknowledge the heavy financial consequences of expanding the program.

There already is a high-earner surcharge for Medicare Part B and Part D premiums, and it’s already set to be expanded in the near future. Wealthier taxpayers also must fork over another Medicare tax created by the Affordable Care Act. And unlike Social Security, there is no annual wage ceiling for the Medicare payroll tax, which is 2.9 percent of all wage income (again, half from individuals and half from employers). In short, soaking the rich was long ago adopted as a Medicare funding strategy.

Recognizing these pressures, the Centers for Medicare & Medicaid Services is embarked on a Don Quixote quest to improve the quality of medical care to Medicare beneficiaries while at the same time lowering costs, at least on a per capita basis.

Its weapon of choice is a massive shift in the financial incentives for caregivers under Medicare, moving from a current emphasis on fee-for-service health care to a world in which health care providers instead are paid not for the tests, procedures and even drugs they provide, but for the effectiveness of that care.

Aided by a 2015 law — the Medicare Access and CHIP Reauthorization Act — the agency has moved with increasing speed to introduce large-scale tests of new ways of structuring care and compensating caregivers.

READ MORE: Lower drug prices: Does any candidate have an Rx?

Over time, Medicare beneficiaries will be treated by groups of caregivers, who will be jointly responsible for achieving better health outcomes. Two major tests of so-called bundled payments programs are or will soon be underway — one for common joint replacements and the second involving cardiac care.

Standardized payments that are in most cases lower than current charges will be made to participating caregiver groups who accept these terms. More broadly, accountable care organizations will be encouraged and paid to provide tailored health plans to individual Medicare patients.

In addition, the Centers for Medicare & Medicaid Services just announced details of its Comprehensive Primary Care Plus, a massive five-year test program that will begin offering outcomes-based payments to primary care practices in all or parts of 16 states beginning next year.

Already, Medicare Advantage and Part D Medicare prescription drug insurers are awarded quality bonuses and, increasingly, will face penalties or even the loss of their insurance plans for substandard performance.

Clinton and Trump certainly could make huge differences in the pace or even continuation of these efforts. But the movement toward fee-for-outcome medicine would be very difficult to derail, even if the next administration’s experts feel it should be.

READ MORE: Is there any relief for astronomical drug costs?

Curbing runaway prescription drug prices is a different matter. Trump and Clinton both have promised to deal with this problem. One place to begin would be for Congress to enact a law giving Medicare the legal authority to negotiate prices with drug makers. This power was expressly withheld from Medicare when Congress created Part D drug plans in 2003.

Again, the composition of the next Congress will have a big if not controlling voice in any Medicare changes.