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Still the third rail? Social Security, Medicare mostly unharmed in budget deal

Still the third rail? Social Security, Medicare mostly unharmed in budget deal
Social Security check: Another close call, but still saved from Washington tampering. (Bradley C Bower / ASSOCIATED PRESS)

Social Security has long earned its status as "the third rail of American politics"--touch it, and your political career gets electrocuted.

But its immunity had seemed threatened during the Congressional negotiations over the federal budget deal reached Monday night. Leaks from the party caucuses and negotiations suggested that the agreement to raise the federal debt ceiling and remove some sequester caps would be paid for by cuts to Social Security disability benefits and Medicare.

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For the most part, that didn't happen, according to the latest available version of the budget agreement and a point-by-point summary provided to members of Congress. Social Security, it seems, still has its power to shock would-be tamperers into submission.

At the risk of damning by faint praise, the newly negotiated budget deal certainly could have been a lot worse.


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"At the risk of damning by faint praise, the newly negotiated budget deal certainly could have been a lot worse," said Max Richtman, CEO of the National Committee to Preserve Social Security and Medicare.

Indeed, the disability program, which risked running out of reserves sometime next year, was shored up in exactly the way favored by Social Security advocates--by reallocating some of the Social Security payroll tax from the old-age program to disability insurance. The reallocation of about one-half of a percentage point of the 12.4% payroll tax (counting both employer and employee shares) in 2016 to 2018 will extend the disability reserve at least to 2022, the summary says. Without the fix, disability recipients faced a benefit cut of about 20% when the reserve ran out.

The deal also will head off a Medicare premium increase of 52% that loomed for about a third of all Medicare beneficiaries--8 million seniors--next year. The increase will be cut to about 14%, raising those person's monthly rates to $120 from $104.90.

Finally, the deal closes a 15-year-old loophole that allowed high-income two-earner couples to game Social Security to garner higher benefits than they were entitled to. The complicated maneuver was described last year by retirement expert Alicia Munnell here.

The social insurance programs weren't entirely exempt from negative tinkering, however. The deal extends a 2% cut in Medicare provider payments imposed by the 2011 sequester, a budget accord aimed at raising the debt ceiling then.

The deal also expands anti-fraud programs for Social Security, especially a program to root out purported disability fraud. These provisions, however, reflect Congress's cherished conviction that the programs are beleaguered by fraudulent claimants rather than reality.

The occasional high-profile investigation of a fraud ring notwithstanding, fraud is exceedingly rare in Social Security and disability--about 0.6% of all payments are "improper," according to a 2012 survey by the Government Accountability Office.

While no one can object to a concerted effort against fraud, "those provisions will likely require workers with disabilities to wait longer to receive their earned benefits and may prevent some from receiving their earned benefits completely," according to a statement by Nancy Altman, president of the advocacy group Social Security Works.

But the agreement does avoid some of the more harmful Social Security "reforms" recently proposed by conservatives. One widely-reported proposal aimed at saving money in disability by taking it away from disabled people would have changed the formula for benefits from one based on the recipients pre-disability wages to a "flat benefit" tied to the federal poverty level.

This would have meant lower benefits for more than half of new disability recipients. (Existing recipients wouldn't be affected.) According to the Heritage Foundation, its chief promoter, the change would cut benefits for newly-filing disabled workers to $981 a month, the federal poverty level for a single person. That compares to the average benefit today of $1,165.

Heritage said that based on the existing demographics of the disabled population, 47% of new applicants would receive higher benefits than they would under the existing formula, and the rest would get less. It estimated the savings at $168 billion over 10 years.

The "flat benefit" didn't make it into the final bill. Curiously, however, the savings it was expected to provide was still being cited by some Republicans as a point in favor of the deal.

Keep up to date with the Economy Hub. Follow @hiltzikm on Twitter, see our Facebook page, or email michael.hiltzik@latimes.com.

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