A few weeks ago I started a column about Social Security, referring to an entitlement program. Many readers took issue with my use of the term. Here is a representative comment, from Bill A.:
“Social Security is not, I repeat, not an entitlement. I paid into SS for 48 years like millions of others. The government is giving us our own money back. Please refrain from calling it an entitlement.”
We hear politicians on both sides label government spending they don’t like, from corporate tax breaks to social programs, as “entitlements,” loading the term with negative connotations beyond the dictionary definition.
My calling Social Security an entitlement program was not intended to impose a value judgment. It describes the basic arrangement since Social Security was established in 1935 to provide an income floor for workers and their families after they stop working. Government outlays not subject to Congressional appropriation, such as Social Security, provide recipients with financial benefits they are entitled to by law. In the case of Social Security, those benefits are based on their own work history or that of a spouse or parent.
The world has changed since the 1930s. People are living longer and retiring later. Congress has altered the program, creating a complex set of rules over timing and benefit amounts. Even though Social Security is designed to be financially neutral whenever one starts receiving benefits, those rule changes have spawned a host of claiming strategies as individuals attempt to maximize their total payments.
I was writing about reactions to recent legislation curbing two such strategies, noting that even discussing Social Security’s basic nature generates heat and light.
The Congressional Budget Office (CBO) projects that the gap between what people pay in to Social Security and what the system pays out will rise from 9 percent today to almost 30 percent by 2025. Federal outlays for Social Security combined with those for major health care programs (including Medicare, Medicaid, and health insurance subsidies) total $1.8 trillion in 2015, making up roughly half of all federal outlays, 10 percent of GDP and nearly 80 percent of mandatory spending. CBO projects this will grow to $3.4 trillion, more than 12 percent of GDP and 83 percent of mandatory outlays by 2025, even after receipts the programs collect.
Call them entitlements or mandatory spending programs, we need to have a rational debate about how to fix the finances of these programs.
The other recent column that also generated reader comments looked at Minnesotans’ experience following implementation of the Affordable Care Act. I wrote about why Minnesota’s state exchange, MNsure, continues to see high enrollment rates despite premium increases as high as 49 percent. I wrote that the success is due, in part, to the fact that premiums on the state exchange still remain among the lowest in the country.
Reader John E. properly chastised me for focusing on premiums alone. “You … failed to point out a crucial part of insurance pricing: deductibles … Reporters and analysts often conveniently neglect to point out that [Minnesota’s] exchange’s users have the highest deductibles.” He referred to a study by the Robert Wood Johnson Foundation (RWJF) reporting that Minnesotans in 2014 enjoyed the lowest average premiums but had the highest average deductibles among a sample of 15 states.
John is right that the combination of premiums and deductibles should be considered when consumers budget for health care. But his information is two years old, as deductibles on Minnesota’s exchange have fallen below the national average. A follow-up study by RWJF found deductibles for an individual in Minnesota average $2,334 in 2016 compared with a national average of $4,219 while deductibles for a Minnesota family average $5,857 compared with $8,003 across all 50 states.
In addition, MNsure officials credit their enrollment success to efforts informing the public about subsidies and tax credits that offset premium increases and the launch of an online tool that allows consumers to comparison shop for plan premiums and deductibles customized to their needs.
But another reader, not eligible for subsidies or tax credits, pointed out that he has had to absorb the premium increases. He’s right. I was focusing on previously uninsured Minnesotans who now have access to health insurance with government support.
In my columns, I try to look at the individuals and organization that research, create, market, sell and regulate products and services impacting people’s personal financial lives. With that mission, I’m privileged to explore what interests me, ask questions and learn from experts, then share what I’ve learned with readers.
But I also learn when readers push back and offer their own perspective. I’m grateful for the comments and criticisms to keep me both accurate and balanced. Thanks for the feedback and have a Happy New Year.
Brad Allen is a freelance journalist and former investor relations executive for companies including Imation Corp. and Cray Research. His e-mail is firstname.lastname@example.org.