Two Paths For Biden Legislation To Improve Americans’ Retirement Well-Being – And One Dead-End

Supporters Of Joe Biden Celebrate Across The Country, After Major Networks Project Him Winning The Presidency

LAS VEGAS, NEVADA – NOVEMBER 07: Chris Vela of Nevada carries a Biden-Harris flag as supporters of … [+] Joe Biden hold American and Mexican flags while preparing to hold a car parade to celebrate the outcome of Tuesday’s election on November 7, 2020 in Las Vegas, Nevada. Supporters around the country are taking to the streets to celebrate after news outlets have declared Democratic presidential nominee Joe Biden winner over President Donald Trump in the U.S. Presidential race. (Photo by Ethan Miller/Getty Images)

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As I write, Joe Biden appears to have secured an electoral victory solid enough to survive any recounts or court objections by President Trump, and is seeking to assure Americans that he will work for the betterment of all Americans regardless of party or demographics. However, Democrats’ hopes of retaking the Senate appear to have been dashed (though I don’t envy Georgians now doomed to two months of a barrage of campaign ads before their runoff election) — which means that any Biden proposals must be broadly acceptable in a bipartisan fashion to succeed. At the same time, though, one of the delays preventing the “regular order” of legislating in the Senate had been Majority Leader McConnell’s determination to move judicial appointments and the Senate-minority Democrats’ determination to delay by maximizing debate time on each nominee (as was the explanation for why last year’s SECURE Act could only pass as part of a dumpster-fire budget bill). Will January 20th prove to be a new era in cooperation?

Consider two recent issues: prison sentencing reform and immigration reform. With respect to the latter, we’ve heard plenty often of a “Grand Bargain” in which legislation would combine both a wide-scale legalization program and increased enforcement for future would-be illegal border-crossers or visa-overstayers, but skeptics repeatedly pointed to the similar promises of Reagan’s 1986 amnesty, which likewise promised the same bargain of increased enforcement, which ultimately failed. And, whichever side of the debate one finds oneself on, it is plain to see that a Bargain that entails an immediate win for one side with only the promise of implementation of the other side’s objectives at some point in the future, without the ability to ensure that those promises will truly be carried out, is simply not realistic to imagine.

On the other hand, the prison sentencing reform was not such a “Bargain.” Each side shared a common objective, rather than making concessions on another matter to secure their own objective. While there remained the same issues of preferring not to give political opponents a “win,” each side perceived the value of the legislation as being substantial enough to be worth it.

Keeping these two examples in mind, then, I’m asking myself: what issues within retirement policy lend themselves to “common objectives” rather than merely “Grand Bargains”?

Let’s start with what I don’t see happening: a Social Security “Grand Bargain.” That is, it has long been assumed that Social Security solvency would be achieved through a combination of benefit cuts — reductions for upper-income folk, increases in the retirement age, and the like — and tax increases. But the Democrats have now made Social Security increases so much a part of their platform that I can’t see any sort of “compromise” legislation happening, because Democrats and Republicans no longer have the common objective of restoring Social Security’s long-term solvency but instead two different ultimate objectives; indeed, the Biden plan, as evaluated by the Urban Institute, does not meaningfully increase the system’s insolvency, which, quite honestly, I had concluded signaled an intention simply to absorb deficits into general tax revenues.

What about Biden’s 401(k) proposals?

Certainly the Senate Republicans won’t extend their support to Biden’s proposal to shift from the existing 401(k) tax treatment — exempting investment income from taxation and shifting taxation from marginal tax rates while working to overall net effective rates while retired — to a tax credit. But Biden also called for greater expansion of 401(k) access; the line in his plan calling for “access to an ‘automatic 401(k)” for “almost all workers” suggests a call for a nationwide version of the “OregonSaves” and similar programs, in which states (or, in the version envisioned by some proponents, the federal government) manage IRAs for those whose employers don’t offer retirement plans, but it could equally be interpreted as a call for enhancements to existing programs meant to make it easier for small employers to surmount the hurdles of high administrative costs. And indeed it is certainly likely that the less ambitious of these interpretations, which already exists in the form of the recently-proposed bipartisan Securing a Strong Retirement Act, or “Secure Act II,” will pass without much trouble.

But that’s not particularly transformative or exciting.

Medicare, however, is a different story.

In the primaries, the chant of the also-rans was “Medicare for All”; Bernie Sanders promised not only a single-payer healthcare system, but the elimination of all out-of-pocket payments. Regardless of the ultimate preferences of Democratic voters, Biden himself rejected this. But whether or not Americans under age 65 should be a part of a single-payer system is in any case irrelevant with respect to the existing Medicare system, the trust fund for which is indeed forecast to become insolvent during Biden’s term in office, namely, in 2024, based on the most recent Congressional Budget Office projection, which reflected expectations for the impact of covid. Without Congressional action, Medicare Part A (Hospitalization) spending would have to be cut by 17%.

But it’s not merely that there’s a need for some sort of action, far sooner than with Social Security. There is a real desire for an improved healthcare system that’s not stemming from any partisan perspective. The ACA/Obamacare introduced the concept of an “ACO,” an Accountable Care Organization, groups of providers incentivized to improve the healthcare of their patients through a new payment structure. At the same time, Republicans have supported Medicare Advantage plans, in which Medicare enrollees may elect a private-sector plan, either an HMO with no out-of-network benefits or a plan with better benefits in network, which promises better care coordination and enhanced benefits for participants, but Democrats have objected to what they claim are higher payment rates for these plans than for traditional Medicare. And, notably, at the same time as the expected vice-president-elect Kamala Harris herself promised Medicare-for-All, she did at least state an intention to keep the system of “private Medicare plans.”

But regardless of partisan battles with respect to the tools used, there is a recognition that the existing system of controlling costs merely by reducing fee rates does not provide appropriate health care, and that there’s much more that can be accomplished by creating, or providing incentives for the private sector to create, truly coordinated care, in which the elderly do not have to figure out how to navigate the healthcare system, identify what treatments are truly appropriate for their needs and the most cost-effective way to receive them, make sure they are preventing future health crises, etc., because this is being managed for them. (See my comments on two recent books on the subject, The Price We Pay and Elderhood.) This means that there is far more potential for a shared common objective to produce meaningful legislation than a mere “Grand Bargain.”

What’s more, there is broad consensus that the cost of prescription drugs must be lowered. While Biden promised to have Medicare “negotiate” prices and candidates such as Elizabeth Warren announced intentions to simply override patent protections and have the government manufacture drugs directly, the Trump administration took a “most favored nation” approach, with an executive order mandating that Medicare not pay more for drugs than the prices at which pharma companies sell their products to other wealthy developed nations. While nothing much has come of this plan, it does suggest that, again, there’s a path forward because there’s a shared objective.

So, in short: Grand Bargains are out. But legislation to achieve a common objective which goes beyond partisan-ness, maybe.

As always, you’re invited to comment at JaneTheActuary.com!

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