The race and class dynamics of old age entitlement programs

The President and leaders in Congress have been bandying about different ideas for reforming Medicare and Social Security. As one might expect in a deficit reduction showdown, these ideas uniformly seek to reduce the costs of the programs for the federal government. Of course, any time a politician or commentator mentions reducing the costs of entitlement programs, they actually mean something a little bit different. What is really going on in these plans to cut costs is not a reduction in spending, but a shift in who carries out the spending. Cutting Social Security benefits, for instance, does not magically make seniors need less food; it just shifts the cost of that food on to the seniors and off of the federal government.

In the last year alone, there have been numerous and creative approaches to making old people pay more. Paul Ryan’s budget plan — which replaces Medicare with a voucher program that is indexed to inflation instead of health care inflation — was designed in a way that ensures that the rising costs of health care will be increasingly shouldered by seniors instead of the federal government. An idea which changes the way the cost of living adjustment for Social Security is calculated would decrease monthly outlays to pensioners by 9% in the next 30 years relative to current law. Finally, a recent proposal to increase the Medicare eligibility age to 67 would require seniors to pay for two additional years of private health insurance before they become eligible for Medicare.

This last idea — which was apparently endorsed by Obama at times in the debt ceiling negotiations — runs into more than just the typical cost-shifting problems. In addition to requiring old people to pay more, it has a disproportionate impact on poor people and oppressed racial groups. This is something that does not typically get brought up in the debates surrounding increasing the age qualifications for entitlement programs. For instance, I have never heard it mentioned when the occasional plan surfaces to increase the retirement age for the Social Security program.

The reason raising the qualifying age for entitlement programs disproportionately hurts poor people and oppressed racial groups is that these constituencies have a shorter life expectancy than average. A study published in 2010 provides a snapshot of the life expectancy differentials of various socioeconomic and racial groups. Differential socioeconomic status — which includes considerations of education, income, job type, and other factors — neatly correlates with differential life expectancies. Those in the lowest socioeconomic group have a life expectancy of 75.4 years while those in the highest group have a life expectancy nearly 6 years higher at 81.2 years. As this chart indicates, significant differences are also found along racial lines, with Blacks enjoying a life expectancy significantly shorter than their otherwise similar white counterparts.

While raising the qualifying age for Medicare or Social Security does take away benefits from all of the racial and socioeconomic groups, it takes away a higher percentage of benefits from the groups that have shorter lives. Taking away 2 years of benefits — as raising the Medicare qualifying age to 67 would do — from someone who lives to 70 years of age strips them of 40 percent of all of the benefits they would have ever received from the program. Meanwhile, someone who lives to 75 years of age would only be foregoing 20 percent of their benefits in such a change. At the extreme end, some groups — namely Black males in the lowest socioeconomic group — would, on average, miss out on Medicare benefits altogether if the qualifying age was increased to 67 since the life expectancy of that group is 65.3 years.

Compounding the injustice even more is the fact that the payroll taxes which fund Social Security and Medicare are only paid up to a certain level of income. These regressive taxes are not paid on any income made above $106,800. So wealthier individuals are paying a smaller percentage of their income into the Social Security and Medicare programs despite the fact that they live longer, and therefore reap more of the benefits from them. Raising the qualifying age will only increase the already existing imbalance of burdens.

The proposal to increase the age for Medicare eligibility is thus truly heinous. If forcing seniors to pay more for their health care is not enough of a problem by itself to reject the proposal, the class and race dynamics ought to be. Reducing the deficits by giving poor people and oppressed racial groups an even worse deal in this society than they already have is totally unacceptable.