[Senate Hearing 107-63]
[From the U.S. Government Publishing Office]
S. Hrg. 107-63
MODERNIZATION OF SOCIAL SECURITY AND MEDICARE
=======================================================================
HEARING
before the
SPECIAL COMMITTEE ON AGING
UNITED STATES SENATE
ONE HUNDRED SEVENTH CONGRESS
FIRST SESSION
__________
WASHINGTON, DC
__________
APRIL 19, 2001
__________
Serial No. 107-2
Printed for the use of the Special Committee on Aging
U.S. GOVERNMENT PRINTING OFFICE
73-339 WASHINGTON : 2001
_______________________________________________________________________
For sale by the U.S. Government Printing Office
Superintendent of Documents, Congressional Sales Office, Washington,
DC. 20402
SPECIAL COMMITTEE ON AGING
LARRY CRAIG, Idaho, Chairman
JAMES M. JEFFORDS, Vermont JOHN B. BREAUX, Louisiana
CONRAD BURNS, Montana HARRY REID, Nevada
RICHARD SHELBY, Alabama HERB KOHL, Wisconsin
RICK SANTORUM, Pennsylvania RUSSELL D. FEINGOLD, Wisconsin
SUSAN COLLINS, Maine RON WYDEN, Oregon
MIKE ENZI, Wyoming EVAN BAYH, Indiana
TIM HUTCHINSON, Arkansas BLANCHE L. LINCOLN, Arkansas
PETER G. FITZGERALD, Illinois THOMAS R. CARPER, Delaware
JOHN ENSIGN, Nevada DEBBIE STABENOW, Michigan
JEAN CARNAHAN, Missouri
Lupe Wissel, Staff Director
Michelle Easton, Minority Staff Director
(ii)
C O N T E N T S
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Page
Statement of Senator Harry Reid.................................. 1
Panel I
Carla Sloan, Nevada State Director, American Association of
Retired Persons (AARP)......................................... 3
Jackie Ridley, Member, Nevada Commission on Aging................ 4
Hans Riemer, Founding Chairman of 2030 Center.................... 6
Steven Samson, SSI and Medicaid Recipient........................ 9
(iii)
MODERNIZATION OF SOCIAL SECURITY AND MEDICARE
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THURSDAY, APRIL 19, 2001
U.S. Senate,
Special Committee on Aging,
Washington, DC.
The committee met, pursuant to notice, at 10:01 a.m.,
Foothill High School auditorium, Las Vegas, NV, Hon. Harry Reid
presiding.
Present: Senator Harry Reid.
OPENING STATEMENT OF SENATOR HARRY REID
Senator Reid. This Senate Aging Committee is called to
order. I appreciate everyone being here. Foothill High School
is certainly unique to me. I have been here a couple times; but
this, as you know, is an extension of old Basic High School. I
guess we are going to have even a third high school in
Henderson before long. So it's really a pleasure for me to be
here, a place where I went to high school.
It's probably safe to say that most of you in this room
can't remember what life was like prior to the creation of the
social security program in 1935. It's also safe to say that
those of you who do remember what it was like prior to 1935
won't admit it.
In the 1930's growing old was often correlated with being
poor. Many men and women at the time faced what was termed the
stark terror of penniless, helplessness, old age. But President
Roosevelt, Franklin Roosevelt changed that when he signed the
Social Security Act of 1935 and created a program that provided
basic measure retirement security for all Americans. Almost 30
years later, President Johnson signed the Medicare program into
law. For the first time in the history of our nation, Americans
no longer had to worry about depleting their life savings to
cover medical associated with being sick. Together, the Social
Security and Medicare programs have grown to be essential
facets of modern life. One in six Americans, almost 45 million
Americans, receive social security benefits.
More than 39 million men and women are enrolled in
Medicare, and that number is projected to nearly double to 77
million in the next 30 years. Most of you young folks probably
are thinking that it will be years or maybe even decades before
you should care about Social Security or Medicare. However, the
realty is that social security and Medicare programs are facing
several new challenges. These challenges must be addressed in
the near future. And how they are addressed will affect every
one of us in this room. As a result, everyone here today from
16 to 77 has a stake in the debate over the future of the
Medicare and the Social Security programs.
Social Security/Medicare are what we call pay-as-you-go
programs. This means today's workers pay for tomorrow's
retirees. Right now the government collects more money in
premiums and taxes than it must pay to support Social Security
and Medicare beneficiaries. However, this is expected to change
as early as 2009 or 2010 when the costs supporting Medicare and
Social Security beneficiaries will become greater than the
amount of money coming into the program. This will occur
because, as the baby boom generation nears retirement, there
will be more retirees than workers for the first time in our
nation's history.
In order to keep these programs viable for future
generations, we will be confronted with a series of tough
choices. How do we continue to finance the Medicare and Social
Security programs? Do we raise taxes? Increase retirement age?
How do we update the Medicare program to make sure it keeps
pace with advances in modern medicine? Do we add a Medicare
prescription drug benefit? If we do, how do we do it? Well,
there are a number of different proposals that would address
some or all of these issues. The purposes of today's hearing is
not to debate the merits of these proposals, but to explain why
you should take an interest in the future of these two
programs.
We begin today's hearing--I mention that most of you
probably could not remember what life was like prior to the
creation of Social Security or Medicare. So before we hear from
our witnesses, let's take a moment to consider what your lives
would be like today without these programs.
Many of us are looking forward to graduating high school
and beginning your lives as adults. This will likely involve
moving out of your own homes, living independently from your
parents. But what if you had to consider supporting your
parents in their retirement, if it was up to you, there was no
other program? What if your parents and grandparents had to
move in with you? What if one of your parents or grandparents
were to become seriously ill or disabled? How would you pay for
these medical expenses? Would you have to use your money that
you had saved to go to college? Would they have to deplete
their life savings to cover these expenses? What if there were
no safety net or savings to fall back on? What if after school
today, you were to get into your car and get into an accident,
a car accident, or other type of accident that left you
permanently disabled? I talked to one young lady as I came in
today, she broke her leg skate boarding. She is going to be
well. The cast is going to come off today or tomorrow. But some
people, when injured, they don't get well. That's the way they
remain the rest of their lives. How would you pay for the cost
of your disability? And what would you do if the accident left
you unable to work or provide for yourself? It's probably not
something you think about, certainly not every day. But the
fact of the matter is that Social Security and Medicare
programs impact all of your daily lives.
I am pleased to be joined today by four distinguished
guests who will help me illustrate how these programs impact
their lives and why the fate of these programs will affect each
and every one of us. After all our witnesses complete their
testimony, we will have the opportunity to ask questions. So
write your questions on your question cards. If we don't have
time to respond today because of the time problems, I will make
sure that I prepare a response for each of you and respond to
you by mail.
It's my pleasure to introduce someone I have known for a
long time, Carla Sloan, the Nevada State Director of the
American Association of Retired Persons; AARP. The AARP is the
nation's largest organization for people aged 50. There is not
a close second. Almost a quarter of a million Nevadans are
members of AARP.
Carla Sloan has a long history. She spent a lifetime
working on behalf of Nevada seniors. She served as the
Administrator of Nevada Division of Aging Services among other
things. She spent 10 years working with senior programs with
the Las Vegas Housing Authority. Ms. Sloan will give us a brief
insight in one of the biggest issues facing the Medicare
program today, the need to update the program to include a
prescription drug benefit.
Carla.
STATEMENT OF CARLA SLOAN, NEVADA STATE DIRECTOR, AMERICAN
ASSOCIATION OF RETIRED PERSONS (AARP)
Ms. Sloan. Thank you, Senator.
Senator Reid. Move that microphone over, because they are
having a little trouble hearing in the back.
Ms. Sloan. OK. How is that?
Senator Reid. Perfect.
Ms. Sloan. Good.
I am Carla Sloan, AARP State Director for Nevada. And the
Association appreciates the opportunity to present our views
regarding the future of the Social Security and Medicare
programs. And since neither program is in crisis, we have some
time to craft a thoughtful solution. Hearings such as this one
provide our elected officials and the public with an
opportunity to explore ways to strengthen these important
inner-generational programs.
Social Security and Medicare have brought financial
security and piece of mind to today's older Americans and their
families. We must work together to ensure that future
generations can count on these programs as well.
According to the latest report by the trustees, Social
Security has sufficient assets to continue paying full benefits
on time until 2038 and over 70 percent of benefits for decades
thereafter. The Medicare Hospital Insurance Trust Fund has
sufficient assets to continue paying benefits until 2029, 4
years longer than last years' projections. These dates are a
substantial improvement from the past and are attainable in
part to a strong economy.
Let me briefly turn to the issue of prescription drug
coverage in Medicare. In the 36 years since the Medicare
program began, prescription drugs have become essential in the
treatment and prevention of disease. According to a 1998 Wall
Street Journal poll, 80 percent of retirees use prescription
drugs every day. The average Medicare beneficiary takes 18
prescriptions a year. Yet, Medicare does not offer prescription
drug coverage to help pay for the costs of these necessary
medications. That is why AARP believes that modernizing
Medicare to keep up with advances in medicine is a must. That
means that Medicare should include an affordable prescription
drug benefit that must be available to all Medicare
beneficiaries.
Another program older Americans depend on is Social
Security. And AARP acknowledges that Social Security will need
adjustments in order to keep paying full benefits after 2038.
In the past reducing benefits or adding revenue have restored
Social Security's solvency until, however, we currently find
ourselves in a favorable economic and budgetary environment
with surpluses in both the Social Security and non-Social
Security portions of the budget. AARP is pleased that Congress
and the President have agreed that the surplus in the Social
Security Trust Fund should be as used exclusively for Social
Security.
AARP looks forward to participating on a bipartisan basis
with our nation's elected officials to achieve a solution to
Social Security and Medicare's future. This solution should
maintain the Social Security programs, guiding social insurance
principles, ensure benefit adequacy, and achieve solvency in a
fair and timely manner.
Thank you, again, for this opportunity to testify.
Senator Reid. Carla, thank you very much.
I receive every day literally hundreds of letters, phone
calls and e-mails from seniors who are overwhelmed by the high
price of prescription drugs. Some seniors on Medicare are
forced to choose between paying for the prescription drugs and
paying for food or rent or their power bill.
Mrs. Jackie Ridley is a retired college professor who has
been a senior advocate for about 25 years. In addition to being
a member of the Nevada Commission on Aging, she volunteers as a
counselor for the Medicare programs. She's active in the Nevada
Senior Coalition and writes a column for the Clark County
Chapter of the National Council of Senior Citizens.
To show her integrity, to show her strong feelings about
this issue, Jackie is one of a kind. She's had some terribly
difficult personal losses in her recent days. The fact is just
this Monday, she lost her husband. It was very easy for her to
not come today, but because of her wanting to communicate with
young people, she's here.
Jackie, thank you very much.
STATEMENT OF JACKIE RIDLEY, MEMBER, NEVADA COMMISSION ON AGING
Ms. Ridley. Thank you, Senator. Thank you for the
opportunity to talk to you today on the subject of prescription
drugs to seniors.
I am 71 years old, and I have been working with seniors for
a long time. I can speak about the prescription drug program
from two points of view; my own personal experience, and that
of many seniors who I have talked to as a Medicare counselor
for the last 5 years.
My husband and I have ongoing medical problems such as
heart disease, high blood pressure and diabetes and must take a
large number of drugs. He was taking 12 separate drugs, and I
have 14 separate drugs which we have to take every day. Now, we
belong to a health maintenance organization, and like many such
programs, it has a prescription drug plan, but there are yearly
limits on how much prescriptions will be covered.
My husband went into the hospital with congestive heart
failure in July a couple of years ago just as his limit had
been reached. When he was discharged, his new drug
requirements, when added to his regular maintenance drugs, came
to over $1,000 a month. Like many seniors, our income is just
over the poverty level, and we could not find help anyplace.
You wonder how did we manage. Well, we were fortunate. We got
some samples from the doctor's office. We stretched out some
drugs by taking them less often than prescribed. We used our
limited emergency reserve. And knowing that we might exceed the
limit, we had stocked ahead some drugs by renewing them as soon
as it was allowed which is a few days or so. Each time we were
allowed to stockpile some. We had some drugs that we were no
longer using that could be substituted for the new ones. And we
were both on a few of the same drugs so we could share those.
We knew that we would be back on the insurance program at
the first of the year. But not all seniors have these options.
At the present time, we pay an additional premium each month
which gives us an extra $1,000 of drug coverage a year. Also,
our HMO now offers unlimited generic drugs which is a big help.
Of course, all the latest new drugs are not generic, and they
are very expensive.
As a Medicare counselor, some of my most difficult advising
has been in relationship to drugs. Some seniors have to make
some unacceptable choice such as choosing between drugs and
other necessities, like food. There are a few programs for
seniors such as the one the State of Nevada has started and
several drug companies have which will supply drugs for those
in need with very low income. For those above the poverty line,
there is little help available. Some can make a trip to Mexico
or Canada. Some receive a supply of drugs from a neighbor or
friend who has died and use their unused drugs. These are not
really legal ways, but at least the drugs are not wasted. It is
sad and frustrating to try and have someone find an alternative
when there is no good one.
One of my major concerns is that any new Federal
prescription drug program will once again be income limited.
When the cost of drugs are deducted from someone's budget,
there is insufficient money to live on. If income must be a
factor, then the cost of prescriptions should be deducted
before the income cutoff is made.
Thank you for allowing me to share my thoughts with you
today.
Senator Reid. Jackie, the one thing that I want these young
people to understand, it's not going to be long that they are
going to be as old as we are. And you young folks have to focus
on the fact that time goes so quickly. And I can remember when
I was at Basic High School, and when I was a senior in high
school, I would see people come to ball games and they had
letter sweaters on, they probably graduated 3 years ahead of
time, what old people. What are they doing around here? Well,
it really changes your perspective. So, the older you get, the
quicker time goes, and the more you understand that just a few
years goes very quickly.
Anyway, thank you very much, Jackie, for being here.
We are going to now hear from Hans Riemer. Hans is a
founding chairman of 2030. The 2030 Center is a public policy
organization that advances economic agenda for young workers.
The 2030 Center addresses budget issues such as Social
Security, health care, and tax deferments. Hans has been
featured on media outlets ranging from National Public Radio to
CNN to the news part of CNN, ``Inside Politics'' on CNN. He
writes op ed pieces, which are editorials appearing in
newspapers around the country. He's described as an, and I
quote, an eminent D.C. force fighting for Social Security, end
quote, by a number of newspapers. This particular quote I just
gave you was from the Oakland Tribune. Hans has been recognized
for his work in 2000 with an invitation to speak at the
Democratic National Convention during prime time television
where he discussed the impact of budget policy upon younger
generations.
Hans, I am very appreciative for your being here.
He had to travel from Washington, D.C. to be with us here
today.
Hans.
STATEMENT OF HANS RIEMER, FOUNDING CHAIRMAN OF 2030 CENTER
Mr. Riemer. Thank you, Senator Reid, for the opportunity to
speak here today. My name is Hans Riemer, and I run the 2030
Center, which is a public policy group for young people, and we
know we need our voice in Washington and your participation.
I think it is great to see a positive constructive dialog
here today between high school seniors and senior citizens. It
is discussions like this that remind me how we are all in it
together, all generations, young and old.
Now, a lot of young people have never lived in America that
did not have a strong Social Security and Medicare system. As a
result, trying to manage life without these two programs is
pretty near impossible. Yet it wasn't that long ago, as
recently as the 1960's, when one in three older Americans lived
in poverty. Today, thanks to Social Security and Medicare, that
number is only one in ten. In other words, over only the past
few decades, millions and millions of older Americans have been
lifted out of poverty by Social Security and Medicare. I
believe that is one of the greatest success stories of our
government during this century.
But Social Security benefits do more than just help with
the bills. They enable older Americans to live with
independence and dignity. How does that affect us as young
people? Well, what would happen if our grandparents had to look
to their children to meet their basic needs. Wouldn't that have
an impact on their grandchildren? Indeed, it would. If it
weren't for Social Security, many families would have to make
impossible choices whether to care for grandparents or, for
example, to pay for their children's college education. That's
a terrible choice. Without Social Security, in fact, a lot of
families would go back to the way things were not too long ago,
every generation living under one roof. Think about that for a
second. Without Social Security, your grandparents might have
to live in your room and just when you finally got rid of your
little sister and the bunk bed, too.
Now, I know we all love our grandparents dearly, but we can
still love them and want them to have an independent life, too.
This might sound a little funny, but how much would you be
willing to pay in order to make sure your grandparents did not
have to come home and live in your room. Well, I bet most of
you would be willing to pay about what you are paying to Social
Security or will be soon. And if you look at it from that
perspective, getting a benefit in retirement is just icing on
the cake. Well, in this way, Social Security actually promotes
independent all generations, young and old. That's what I mean
by we are all in it together.
Now, some say that young people should not support Social
Security. Perhaps these individuals do not fully appreciate the
progress we have made thanks to these programs. Perhaps they
already live in the same room as their grandparents and think
should you, too. I'm not sure. But what they propose is that
young people should take the money they are now paying into
Social Security and invest it on their own. Now, I am the first
person to encourage everyone, and particularly young adults, to
invest for the future. But the important thing to keep in mind
is that the money you are paying into Social Security today is
being used for benefits; benefits that help people stay out of
poverty, provide them with independence and dignity. And if you
weren't paying in Social Security, the government could not
provide these benefits.
Of course, it's also not just about retirees. The money you
are paying in also helps a lot of young people during their
time of need. Across the country, there are about three million
people under the age of 18 who collect Social Security benefits
every month. And, no, they are not retired 17 year old former
CEOs of Internet startups. Many of them come from a family
where a parent has died or has become disabled. We probably all
know a family in the audience perhaps there may even be a few
of them where a parent has died. Well, that family is entitled
to Social Security and just imagine how important that monthly
check may be. So I hope you can see how Social Security is
about independence for everyone, young and old alike. The money
you are paying into Social Security is going to a good cause.
That's the big picture. Please don't lose sight of it.
But it wouldn't be exactly fair if you had to pay into the
fund and were never able to collect benefits. But there is no
need to worry about that. Don't be tricked into thinking that
Social Security is going to dry up like a desert creek. There
will always be people paying into the system. And even if we
didn't make any changes, benefits would be larger for you when
you retire than they are for today's retirees. So rather than
talk about how to get rid of Social Security in favor of
private investments, I suggest we should talk about improving
Social Security for young people; for example, those three
million young people under age 18 who collect Social Security
due to a tragic family situation. Once Social Security will
continue to pay benefits past the age 18 so long as they were
in college. That was a great program, but it was eliminated,
and we should bring it back.
So let me close with the special comment for the older
participants in this hearing--not you, Senator--but I know how
deeply you care about your grandchildren and about all the
young people coming after you. I know that when you think about
Social Security, you are concerned about the future, what kind
of legacy you will leave for future generations. Well, it
should be clear by now that the future of Social Security is on
the table. Young people need your voice and your leadership if
we are going to win this one. We need to fight together. Thank
you.
Senator Reid. Hans, as you were speaking and saying that
you can't remember when there was no Social Security, others
can't imagine such a time, I lived through a time recently in
Congress where there were very powerful Members of Congress
wanting to do away with both programs. And I carry with me in
my wallet--and I never want to misquote anyone--it's getting a
little weathered now--but I carry with me the knowledge that
Social Security and Medicare is not necessarily always going to
be here. A very powerful United States Senator, someone who ran
for President of the United States by the name of Bob Dole
said, and I quote, I was there fighting the fight, one of 12
voting against Medicare because we knew it wouldn't work in
1965. He said this a couple of years ago. Newt Gringrich, when
he was Speaker of the House of Representatives said, now, we
didn't get rid of it in round one because we don't think it is
politically smart, but we believe Medicare is going to wither
on the vine. The present house majority leader, Dick Armey from
Texas says, Medicare has no place in a free world. Social
Security is a rotten trick. I think we are going to have to
bite the bullet in Social Security and phase it out over time.
So I want everyone here, especially you young folks to
remember that there are people in Washington who are not on the
band wagon yelling the laurels of Social Security and Medicare.
Some people, some very powerful people in Washington would do
away with both programs tomorrow if they had the chance.
We are going to now hear from a remarkable young man. Most
people don't think of Social Security simply as a retirement
program. Social Security is more, however, than just a
retirement program. It provides families with disability and
survivor protections. As has been indicated by Hans, one out of
three Social Security recipients are not retirees. Our last
witness today, Steve Samson, understands this as well if not
better than anyone. He's been collecting supplemental security
income, called SSI, benefits under Social Security disability
program since he was a baby.
Steven was born 2 months before he should have been born.
He weighed about 3\1/2\ pounds. His early birth and light
weight didn't stop Steve from being the fighter that he is
today. In fact, the nurses in the neonatal unit dubbed him
``The Champ.'' He was sent home to his parents, two sisters and
brother about a month after he was born, but then he only
weighed 4\1/2\ pounds. It was short time after going home that
Steven was diagnosed with cerebral palsy.
Steven attended The Variety School where he participated in
everything from varsity sports to choir and school politics.
And when he was in high school he was a member of the student
council, held offices in student body; secretary/treasurer,
vice president and president. During his senior year, Steve won
the title of prom king. He's a remarkable young man. Those of
us who serve in government know him because he's an advocate
for many different causes. He is someone who is very
politically active. He works in the campaigns tirelessly.
It's a pleasure for me to introduce to you Steven Samson.
Steven.
STATEMENT OF STEVEN SAMSON, SSI AND MEDICAID RECIPIENT
Mr. Samson. Thank you, Senator, and good morning Senator
Reid, faculty and students. My name is Steven Samson. Thank you
for allowing me to come and speak to you today. It is of great
importance that every American, young and old, be aware and
concerned about Social Security. My name is Steven Samson. I am
24 years old and was born with cerebral palsy. Because of my
handicap and condition, my parents were able to apply for SSI
on my behalf. SSI is Social Security Supplemental Insurance.
When you receive SSI, you also qualify for Medicaid. My father
was a Vietnam veteran and has been a truck driver for over 25
years. My mom was a stay-at-home mom until I was about 8 years
old. My older sister also has cerebral palsy. I have another
sister who suffers from migraines and has lots of allergy
problems. And I have another brother who is very athletic and
has lots of allergy problems as well as manages to have minor
injuries on a weekly basis. I guess you could say that my
parents made us all active in church, school, and sporting
activities. Of course, you also have to throw in all my
doctor's appointments. I was seeing a pediatrician, a
neurologist, an ophthalmologist, and my orthopedic surgeon.
Then for a little extra spice, throw in my physical therapy, my
sister's physical therapy, and my other sister's speech
therapy. I guess you could say my mom was more as an attachment
to the car instead of a stay-at-home mom. It's funny.
[Laughter.]
My father often worked jobs with no medical insurance which
is where SSI and Medicaid came to the rescue. But I was over
two before my parents even heard of SSI. Also, at that time
there were more conditions to receiving SSI. My sister was
deemed not handicapped enough to receive benefits. She only has
mild CP. Your eligibility is determined on your parents'
income. There were many years that I did not qualify for SSI
because my father made too much money. That was the case when I
was 14. My father had a good job with insurance, but my doctor
felt--at that time I needed a major operation on my hips and
legs, so I had my surgery as well as in a body cast for a whole
month. And let me tell you something, ladies and gentlemen, it
was not fun.
Afterwards, I was in rehabilitation for a year and a half.
But in September, my parents were informed that my medical
benefits had been depleted back in January. Now, mind you, I
had been going to therapy twice a week at $159 a session. You
do the math. The next week the hospital canceled my therapy,
and a week later the bills came rolling in. They wanted their
money now. My parents were forced to file bankruptcy. When I
turned 18, I was able to apply for SSI as an independent adult.
My family helps me manage my money so that I can pay my own way
in life. Next month, I will have yet another surgery. SSI and
Medicaid are there to make it possible. I would not have--with
every year I need new braces. They run almost $1,000 apiece.
Every few years, I need a new walker. They cost between $200
and $400. Add to that, I need new glasses every 2 to 3 years.
Without SSI and Medicaid, I would not have these essential
items.
My last testimony turns to you, the seniors. When you turn
18, please register to vote and please vote responsibly. Do not
allow your government to play dice with Social Security. The
stock market is not a sure-fire thing. It is gambling at its
finest. Do not gamble with Social Security. We want Social
Security to be here strong and secure for all generations now
and in the future. Thank you. [Applause.]
Senator Reid. Steve, thank you very much.
Mr. Samson. Thank you, Senator.
Senator Reid. Steve is physically handicapped but not
mentally handicapped. He's a brilliant young man, and I don't
know how many of you recognize that he referred very rarely to
his written statement. Most of it was simply from memory.
Social Security and Medicare programs represent an economic
compact among generations. This hearing today, senior to
senior, deals with the seniors that are interspersed throughout
the audience with seniors here at Foothill High School. Today
its workers pay for the benefits that their parents and
grandparents receive. We must all work together to ensure that
today's workers and their families will be able to depend on
Social Security and Medicare during this entire century. Too
often those seeking to dismantle the Social Security/Medicare
programs try to stir fear in the younger generations that
greedy seniors are eating up all their hard-earned benefits.
This kind of divisiveness will only hurt our country. There is
something very right about each generation working together to
protect the generation of seniors who have given so much to our
society.
Before we take questions, I would like to take a moment to
thank my staff, especially, Caroline Slutsker who works with me
on aging issues. She's is here from Washington, along with the
staff member from Senator Larry Craig of Idaho, who is the
chairman of the aging committee. I am very happy that they have
worked so hard, and they have come here. And their staff person
is Janine Scott. And also the ranking member democrat on aging
Senator John Breaux of Louisiana, they have allowed this
hearing to take place for which I am very grateful. They
weren't able to be with us today, but as I have indicated,
Janine is with us and Phil Thevenet who both traveled here
along with Caroline from Washington to help with this hearing.
We are going to now take questions for the next 20 minutes
from anyone in the audience. And as I have indicated, any
questions that we can't answer, I will make sure that we answer
them in writing.
Caroline or Lelani, do we have the questions? Anyone has
questions? I guess we didn't write anything. Anyone have any
questions?
Yes?
Ms. Nielson. I'm Taylor Nielson. And all my grandparents
have passed away; therefore, my parents are next in line for
Social Security, and they still have 20 years before they
retire. Do you think that their take on Social Security is,
since they are still working and earning money, why is it that
they are not able to invest a small part of their Social
Security into a low risk investment into the stock market and
make their money work for them, make their Social Security
money work for them? That's before they retire.
Senator Reid. Sure. Steve responded to that briefly. Let me
try it, and then we will have members of the panel respond to
it because it is a very typical question. There has been a lot
of bad information passed out that this fund is about to go
broke and it's a terrible program. In fact, Social Security, if
we don't put a penny into Social Security, it will still be OK.
Everyone will draw 100 percent of benefits for the next 40
years. We need to do things make sure Social Security is strong
and viable for more than 40 years. But we also hear from people
all the time, why shouldn't I be able to invest my money in the
stock market. Well, all you need to do is see what happened in
the stock market in the last month. There is some people who
have lost everything. In the past 60 days, there's been $5
trillion lost in the stock market. These are people who have
lost their homes, had their cars repossessed. People would have
had their way of life changed as a result of the stock market.
It used to be that the stock market was just for a certain
small group of people to invest. But it appeared so easy that--
I watched on TV last night, a cab driver who has lost
everything he had in the stock market. He is trying to
determine if he should file bankruptcy, because he thought it
would be easy. It is not easy. And Social Security has had a
very strong growth pattern in the trust fund over the many
years it's been in existence.
And I personally believe that investing the money in the
stock market would be very, very bad. And also I say this--and
some don't like me to say this, but I say it anyway--my father
was probably as smart as anybody in this room, but he had no
education. He didn't graduate from the eighth grade. How could
my father have invested money in the stock market? And the fact
is, if your parents make a bad investment, when they turn 65,
we are going to be responsible to take care of them anyway. So
I think that we have to be very, very cautious how we invest
these moneys in the Social Security Trust Fund.
I would like to hear another panel member's response.
Hans.
Mr. Riemer. Sure. You know, it's a question I hear a lot,
and I appreciate your asking. I would argue there is two
reasons; one is sort of philosophical, one is kind of
practical. Philosophically, Social Security is not supposed to
be just for people who are lucky or know how to invest. It is
supposed to provide a basic benefit that is there for everyone
regardless of whether they can hire a financial manager or pick
the right stock. It needs to be a level of protection that will
keep them from falling into poverty. And that's just not--it's
fundamentally inconsistent with the idea of investing our own
Social Security. And, you know, you start with a little piece
and then it gets to be a bigger piece and pretty soon it's a
slippery slope until the whole thing is being investment
oriented.
The second reason is very practical. And I urge you to
think not about Social Security as just me and my family, but
also about everyone else in this room. If your parents or you
or anyone in this room were to pull their money out of Social
Security so they could invest it, well, that would leave less
in the common pool for everyone else, and it would take a
little money out of the checks of everyone else in this room.
And we wouldn't consider that to be quite fair, no. Everyone
says, why can't I just make sure it only comes out of my
benefit. You know, but, administratively we could never do
that. But as the senator said, you know, you might make that
point now and then you invested all your money in Amazon stock
that you bought at 200 and now it's at 25. And who are you
going to come knocking on the door to help you make up the
difference?
And I can assure you, as a society, we are never going to
let people starve in the streets. So I don't think that's--I
understand where the question comes from. And I think practical
and philosophically, it wouldn't be in the right direction.
Senator Reid. Other questions?
Jackie, did you want to say something?
Ms. Ridley. I was just going to say, speaking from someone
who is older, it sounds like you could do a real good job of
investing. And we have already gone over that. But having lived
all these years, I can tell you that most people do not spend
money on investments. They always need their money to live on.
If you gave people the option of investing, most of them would
find another way to spend that money. When it is put in Social
Security, they don't have that option. They are forced to save.
And I think that we have to consider that also. Maybe you would
be able to save your money and invest it and do a good job, but
when you go over the whole spectrum of people, most of them
would not be able to.
Senator Reid. Yes?
Ms. Lo. Shawn Lo. I have heard some facts from government
teachers and whatnot saying that the rate of interest on social
security money is only 2 percent. You can do better at any
local bank if you just take some of your money out and stick it
in that, you can get 4 percent or 6 percent return on there.
So, as investments go, why is it that everyone thinks that
everybody is going to invest in the stock market rather than
putting it in a savings or CDs or bonds or some such thing. The
stock market is not the only viable option.
Senator Reid. First of all, I say this with all due
respect; your teacher is wrong about the rate of growth of
Social Security. I would also just reiterate what Hans said
that the fact is that, you know, you take your money out and
somebody else takes their money out and you invest yours in
land and you invest ours in a CD and someone else invests
theirs in the stock market and pretty soon we don't have a
Social Security Trust Fund. What we have now is a trust fund.
Money is collected, put in to this fund drawing interest so at
the end of the day, when people need help, as Steve as an
example, or somebody like my grandmother who used to call her
check her old age pension check. Call it fancy name, whatever
you want to call it, but these--my grandmother's old age
pension check gave her independence. She had eight children,
and she was not in good health all the time I remember her.
She's the only grandparent I knew. But what gave her the
independence was that check. She didn't have to depend on our
children because that check came with a certain degree of
independence.
And had you, and her, and him, and I invested our money
some other way, my grandmother would not have had her old age
pension check, and Steve would not have his monthly check to
take care of things we have talked about.
Of course, Hans?
Mr. Riemer. Here is a good exercise I might ask you to try.
Call up Charles Schwab or Payne Webber or any of the investment
brokers and ask them for a product, an investment product that
will give you the following benefits: First of all, the rate of
return needs to stay the same whether the stock market goes up
or down. Second of all, your contribution also needs to provide
you with disability insurance, not only for you, but for your
whole family and also life insurance, and not only for you, but
for your whole family. Your contribution needs to provide, not
only benefits to your grandparents right now, but also benefits
to you when you retire. And then see what kind of rate of
return that they tell you they can give you, if any. Probably--
well, realistically, in fact, such a product is not available
anywhere in the market.
So I think we want to think about Social Security as a
broader range of benefits, and it is not easy to think about a
rate of return.
Second, as the Senator said, the 2 percent figure is simply
false.
As I had mentioned earlier, even if we did nothing to fix
Social Security, benefits for everyone in this room would be
larger in real terms than the amount of money that you can pay
toward rent, toward food, toward grocery bills, whatever,
larger than they are thought. So for me, that's a good enough
rate of return. I am comfortable with that.
Senator Reid. We do have a number of individuals who don't
want to stand and give us some questions:
Are you going to--I appreciate that. We are not going to
need any Yucca Mountain. We are doing our best to stop it. I'm
sorry. I didn't see that question.
``I don't understand how my grandma, who is on Social
Security, should be suffering the way she is. She's divorced
and retired and only gets $180 a month. No one can survive on
that. Also, my grandma got insurance so she can have a decent
burial, so now they have lowered what she gets. Just recently,
since they realized they were paying her $6 a month extra, so
they took it out of one check and she got only $32 that month.
The government is supposed to be taking care of our seniors, so
what is going on?''
Carla, would you respond to that?
Ms. Sloan. Well, to begin with, I would like to suggest
that perhaps the student see one of us after the program. Your
grandparent is likely eligible for the SSI benefits. That will
raise the income above $181. The reduction in income based on
the change in income is part of the program. I think that's
something that Steve spoke to very eloquently during his
presentation; that it is a program that does have some means
testing.
In addition to the Social Security program, there are other
programs that help senior citizens. Senator Reid has long been
a great advocate of the Older Americans Act funding programs,
and those are programs that provide for services such as Meals
on Wheels, programs such as Adult Day Care or Respite Care. So
that in addition to the benefit--your question is how is the
government providing for senior citizens--in addition to Social
Security and Medicare, which are more the financial services,
there are also services available at the community level that
can help to increase independence and dignity and help to
stretch those limited dollars.
Senator Reid. Make sure that you follow-up on Carla's
suggestion. Grab either one of my staff, Lelani, where are you?
Lelani, Carla, Jackie--and talk to them when this hearing is
over, and they will see if they can do something to help your
grandmother.
I have a question--it's a little off track--it's about an
appointment to the United States military academy. Again,
Lelani can answer that for you.
Questions from the audience. Yes?
From the Audience. I would like to make a brief statement.
I will be 84 next month, and I have Social Security now for 18
years. Without it, it would have been difficult to meet
expenses. In fact, even with it. But I'd like to also say that
Senator Reid has been one of the greatest benefactors of his
constituents here in Nevada through the Older Americans Act
that he's worked on various committees and in being a real
fighter for Social Security and Medicare. So I just have one
question. Something called Medicare assignment, that's when you
have Social Security and a supplemental. I have noticed this
year the doctors are reticent to give you a Medicare assignment
due to some changes in the Medicare program. I don't know
exactly what they are.
Senator Reid. Jackie, can you answer that?
Ms. Ridley. Well, for those people who do not have a
supplemental insurance, do not have any kind of HMO, in other
words, all they have is Medicare, Medicare will pay 80 percent
of what they call assignment. They have what they considered to
be a fair price for a certain office call and procedure,
whatever it is. And that's what they call assignment. Now, some
doctors will accept assignment. If they do that, then you pay
20 percent.
Medicare is not free. We pay $50 a month for Medicare to
start with. Then there are co-pays and deductibles, so you
either have to get a supplemental insurance or, if you belong
to a health maintenance organization, you still have to pay
money for it. I think sometimes people get the idea that we get
all these things for free. That's not true, but they are
reduced prices.
When you have assignments, that's what Medicare says the
doctor should be charging for a certain procedure. Let's take
an office call, for instance. He may say that he thinks it's
worth $125, and Medicare says, no, it's really only worth $100.
They will pay $80, you pay $20. But that doctor cannot charge
you $125 because Congress says he cannot charge more than 15
percent more than what Medicare allows. So he would be able to
charge you an extra $15. You would pay $35 out of that bill.
But he is restricted on the amount. Now, that's for doctor
bills. So there are restrictions there.
Medicare is trying to keep these costs in line so the
doctors don't charge outrageous fees. If we didn't have
Medicare, you might go to the doctor and he might charge $250
for an office call. So we do have those protections. That is
what they mean by assignment.
Senator Reid. And it's set up so, they don't go along with
that, they can't take any Medicare patients. Prevented from
taking all the Medicare patients.
Also, thank you very much for your kind compliments. There
are so many programs we have worked on to help those people in
their older years. We have a lot more to do. But the Old
Americans Act is an example of things we have done to assist
seniors; Meals on Wheels programs, we have all kind of therapy
programs that are now part of what we are allowed to pay for.
In fact, something as unusual as music therapy is something I
worked on to allow Medicare to cover, so we have made some
progress.
This young man in the white shirt, please. You will have
the last question.
From the Audience. My name is Andrew, and I only want to
ask, would you define yourself as a socialist?
Senator Reid. I'm sorry?
From the Audience. Would you define, would you see yourself
as a socialist?
Senator Reid: Would I see myself as a socialist? Well, from
your very slight accent, it appears that you have some exposure
in some other country to socialism. Here in America, we have
had very limited exposure to socialism. In Nevada as an
example, you will be surprised to know that in 1920 in the
Presidential election in that year--I'm sorry in the senatorial
election of that year, we had a candidate that was a socialist
that ran. They were--the socialist at that time were based in
Fallon, Nevada. Socialists didn't do very well. Socialists
haven't done very well in America. But I would describe myself
as far from being socialist. I am a member of the Democratic
party. I think I would be described as moderate within the
Democratic party as all the voting records that they publish
indicate that I am.
I think one of the strengths of America is our two-party
system. We are the envy of much of the rest of the world. To
form a government in Israel, or Italy, or England, they have a
lot of difficulty, many times, because they have splinter
parties. Before you have one more than 50, you have to make a
deal sometimes, one would say, with the devil, and it makes it
very, very difficult. In America, we don't have that. We have
two parties, and it's worked out very well over the history of
this country. And when there is a new election, the transition
is very smooth even when there is a hotly contested election
like the one we had this year where the winner got less votes
than the loser. And when we had all the problems that we had in
Florida, there wasn't a single arrest, there was nobody beaten
up, no fires set. And when Bush was sworn in as President, it
was just very smooth. That's because we are a nation based on
law, not on what men think the law should be.
So, I appreciate your question very much. And I hope I
answered it well.
Boys and girls, ladies and gentlemen, the five of us here
have really enjoyed being here. This is kind of an experiment,
this senior to senior program. The seniors here, I believe
without question, understand the importance of Social Security,
Medicare, Medicaid. I am not sure that you young people do. I
hope that this hearing will give you a better feel of Social
Security and why it is important for your parents and
grandparents, why it is important for people like Steve who for
reasons we don't really understand is handicapped and has
relied on this program to allow him to lead a normal life. He
is involved, as I have indicated, in many things. He doesn't
complain much about problems he has. He mentioned to you very
briefly that he has some surgery to go through. We were worried
that he wouldn't be able to come here today in preparation for
that surgery. But he told us he will put off the surgery. It's
important enough to me to communicate with young people about
the importance of this program that I will put off my surgery.
And as he indicated, this surgery, as difficult as it will be,
is easier than some of surgeries he has been through before. He
will not have a full body cast this time, only a half body cast
for 3 or 4 months.
So I hope each of you young people go away from this class
today understanding the Social Security is program that makes
America the greatest country that it is.
Thank you very much for being here. This committee stands
adjourned.
[Whereupon, at 10:57 a.m., the committee was adjourned.]