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What Does the Fiscal Cliff Debate Mean for Idahoan’s Retirement Security?

What the fiscal cliff means for Idahoans

With the December 31 st deadline to address expiring tax and spending cuts looming, many people across the nation and here in Idaho are left wondering what Washington’s budget debate means for them. Unfortunately, some in Washington are considering making changes to Medicare and Social Security through a year-end budget deal. AARP is providing a breakdown of the impact a shortsighted budget deal could have on the health and retirement security of Idaho seniors and their kids and grand-kids.

In the Gem State, 192,561 seniors currently receive Social Security for an average annual benefit of $13,700.  Social Security makes up about 66% of the typical older Idahoan’s income, lifting 39% out of poverty.  In addition, it pumps $3.6 billion into the state economy. Changing the way cost of living adjustments (COLA) are calculated for Social Security beneficiaries by moving to a chained consumer price index, as is on the table in debt deal discussions, cuts benefits, taking roughly $0.55 billion out of the pockets of Idaho Social Security beneficiaries over the next 10 years – and $112 billion for beneficiaries nationwide.

“The current Social Security COLA already understates what an average older Idahoan spends and purchases each month.  Assuming that most people receiving Social Security, who are already just getting by, will simply ‘trade down’ in their spending on prescription drugs, utilities and other fixed expenses for lower cost options is out of touch with reality,” said Mark Estess, State Director for AARP Idaho. “Americans have worked too hard to earn their benefits to end up getting pushed over the edge in a fiscal cliff deal. Social Security is not a cause of the budget deficit and it shouldn't be used to solve it.”

Roughly 194,616 Idahoan’s are enrolled in Medicare, spending 9%, or $3,100 on out-of-pocket medical expenses. In 2011, Medicare spent an estimated $1.21 billion on health care services in Idaho.  The move being considered by Congress to raise the eligibility age from 65 to 67 would leave 25,759 Idahoan’s without health coverage (based on current beneficiary data), forcing them into the private insurance market, which is estimated to cost them an additional $2200 per year*. In addition, removing the youngest and healthiest older Americans from the Medicare risk pool will increase premiums for those remaining in the program.

“Raising the Medicare eligibility age would dramatically increase costs for recently retired and soon-to-retire seniors, drive up premiums for those enrolled in Medicare and increase overall health care costs,” added Estess.  “Seniors deserve guaranteed coverage, not higher costs.”

AARP looks forward to working with legislators on both sides of the aisle on proposals that strengthen Social Security and Medicare for all generations, but not by rushing changes to these vital programs into a last–minute deal that could harm all of us.

*Kaiser Family Foundation study:  http://www.kff.org/medicare/med032911nr.cfm

[Photo courtesy of www.StockMonkeys.com/flickr]

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