Improving work incentives and fairness in Social Security and Medicare

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Event Summary

On Thursday morning, AEI's Andrew Biggs, the Urban Institute's Eugene Steuerle, and Stanford University's John Shoven convened to discuss the structural problems of Social Security and Medicare that decrease work incentives for older Americans. The panelists agreed that as people live longer and the expected duration of retirement benefits increases, the programs should be reformed to incentivize people to work longer. Steuerle proposed offering partial retirement options to encourage workers to continue working even after they reach the Social Security claiming age.

Biggs recommended eliminating the 12.4 percent payroll tax rate for workers older than 62, which would increase the tax incentive for older workers to stay in the work force in a simple, revenue-neutral approach. Shoven then described the "Medicare Secondary Payer" requirement -- in which workers over the age of 65 are required to purchase employer-offered health insurance if it is available rather than claim their Medicare benefits -- as an on-average 30 percent tax for workers over the age of 65. He proposed removing this tax by adopting Medicare as a primary payer to keep people in the workforce longer. Near the end of the discussion, Steuerle emphasized the importance of taking a holistic approach to entitlement reform, which includes but is not limited to improving work incentives at older ages.

--Brittany Pineros

Event Description

Social Security and Medicare are the two largest government programs, accounting for 36 percent of federal expenditures in 2011. In the coming decades, both programs will experience substantial cost growth because of a decreased ratio of workers to retirees and — in the case of Medicare — growing health care costs. Without reform, these programs will continue on an unsustainable path.

Reform proposals often focus on altering the level of entitlement benefits and payroll tax rates. However, Social Security and Medicare programs currently discourage work at older ages and discriminate against two-income families. Our expert panel will discuss ways to restructure the programs to improve work incentives, fairness, and solvency.

If you are unable to attend, we welcome you to watch the event live on this page. Full video will be posted within 24 hours.

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About the Author

 

Andrew G.
Biggs
  • Andrew G. Biggs is a resident scholar at the American Enterprise Institute (AEI), where he studies Social Security reform, state and local government pensions, and public sector pay and benefits.

    Before joining AEI, Biggs was the principal deputy commissioner of the Social Security Administration (SSA), where he oversaw SSA’s policy research efforts. In 2005, as an associate director of the White House National Economic Council, he worked on Social Security reform. In 2001, he joined the staff of the President's Commission to Strengthen Social Security. Biggs has been interviewed on radio and television as an expert on retirement issues and on public vs. private sector compensation. He has published widely in academic publications as well as in daily newspapers such as The New York Times, The Wall Street Journal, and The Washington Post. He has also testified before Congress on numerous occasions. In 2013, the Society of Actuaries appointed Biggs co-vice chair of a blue ribbon panel tasked with analyzing the causes of underfunding in public pension plans and how governments can securely fund plans in the future.

    Biggs holds a bachelor’s degree from Queen's University Belfast in Northern Ireland, master’s degrees from Cambridge University and the University of London, and a Ph.D. from the London School of Economics.

  • Phone: 202-862-5841
    Email: andrew.biggs@aei.org
  • Assistant Info

    Name: Kelly Funderburk
    Phone: 202-862-5920
    Email: kelly.funderburk@aei.org

 

Aspen
Gorry
  • Macroeconomist Aspen Gorry studies employment and tax policy. His research focuses on jobs, specifically on how labor market policies impact employment outcomes for young workers. He has written about the impact of minimum wages on youth unemployment, optimal taxation over a worker's life cycle and the importance of early career experience for workers' labor market outcomes. Before joining AEI, he taught economics at the University of California, Santa Cruz.

  • Phone: 435-797-2397
    Email: aspen.gorry@aei.org
  • Assistant Info

    Name: Regan Kuchan
    Phone: 202-862-5903
    Email: regan.kuchan@aei.org

 

Sita Nataraj
Slavov
  • Economist Sita Nataraj Slavov specializes in public finance issues dealing with retirement and the economics of aging. Her recent work has focused on whether retiree health insurance encourages early retirement, the impact of widowhood on out-of-pocket medical expenses among the elderly and the optimal time to claim Social Security. Before joining AEI, Slavov taught a variety of economic courses at Occidental College: game theory, public finance, behavioral economics and econometrics. She has also served as a senior economist specializing in public finance issues at the White House's Council of Economic Advisers. Her work at AEI will focus on Social Security and retirement issues.


    Click here to view CV


    Follow Sita on Twitter

  • Phone: 202-862-7161
    Email: sita.slavov@aei.org
  • Assistant Info

    Name: Brittany Pineros
    Phone: 202-862-5926
    Email: brittany.pineros@aei.org

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