Spring 2005
Featured Article

Insuring Health and Income
Needs of Future Generations

By Donna Yee

We recently observed the seventy-fifth anniversary of the largest market crash in America's history, the event that galvanized this country to do more than encourage individuals to be provident, save, and prepare themselves for a rainy day. The big crash taught millions how powerless individuals can be against national economic and social forces. As a result, we have Social Security, a government-backed insurance program that addresses economic life catastrophes like income needed for a surviving minor child and lifelong income for someone who sustains a disability. Most significantly, Social Security provides a small pension in old age that disproportionately benefi ts workers earning the lowest wages. Social Security is based on assumptions that enough heads of households are steadily employed and paying Social Security taxes so that life's unplanned catastrophes can be mediated and all participating workers have at least a small pension. The system is purposefully designed to provide some help for times when even the most provident person is helpless: when families lose their breadwinner, when hazardous conditions result in total disability, and when workers with inadequate savings retire or can no longer work.

With relatively modest refinements, the broadest American policy programs to insure income (Social Security, initiated in 1932 ) and health needs (Medicare and Medicaid, initiated in 1965 ) have been sustained to benefit family units when a member pays into the fund for at least forty quarters (at least ten years), where total disability fits defined conditions, and an old age and survivors pension provides some income security. More recently, a basic health insurance for hospital and doctor visits was added to assure health security in old age.

As America's social and population diversity increases and its systems for gainful employment and productive family units change, concerns about the future of Social Security and Medicare require more than narrow econometric and health-system interventions. Assumptions about who works, whether program benefits address beneficiary needs, and the extent to which these programs should keep up with public expectations must be explored in a broad social context as well. This article describes some ways in which our social fabric in the future may and may not be adequately supported by programs designed for a time when the United States was less diverse with respect to its family structures, demography, and desire for a government role in the economic and health security of workers and their dependents.

A Wife's Work

In 2004 , if a wife's work credits under Social Security are larger than her husband's, he can benefit from her higher contributions, just as wives traditionally have when their husbands were the primary wage earner of the household. Since the 1970 s, when divorce rates indicated a less than fifty-fifty chance for the survival of first marriages to old age, beneficiary accounts of high-wage-earning males have been increasingly used to determine the benefit level of more than one surviving spouse. Calculations that account for current and past household arrangements recognize the contributory efforts of the spouse who, by earning less, shared the obligations and lifestyle of the higher-earning spouse, even if the couple is no longer together. When Social Security was first established, there were few divorces and marriage was a lifetime commitment. This progressive feature of Social Security is not shared by all private pension plans.

Among the many proposals made over the years to address changes in employment and family structure are those that separate a woman's pension from that of her spouse while assuring an adequate and fair benefit amount. Methods of calculating Social Security pensions of women whose uneven employment history reflects periods of dependent care (most often, children or frail elderly parents) include providing Social Security credits for unpaid, socially necessary work as a family caregiver (Feinberg and Newman, 2004 ). Programs such as the National Family Caregiver Support Program of the Administration on Aging and others have highlighted the costs to economic, social, and physical health of providing family care (Feinberg et al., 2004 ). Considered a "something for nothing" proposal when first raised in policy discussions, this approach to legitimizing the social and economic value of caregiving is again gaining adherents.

Further, as gains in longevity and wellness lead to longer-lived and more active older adults, the resurgence of "sandwich generation" issues among older women is notable as women choose to bear children later in life and the chronic illnesses of elder parents are more commonly managed for one decade and longer. Adult grandchildren can be as challenged by the care needs of grandparents as they are by the needs of parents (Spillman and Pezzin, 2000 ). For women, the timing and tenure of concurrent multiple life-roles (as student, employed worker, family caregiver, and spouse) are additional variables unforeseen by the original authors of Social Security. While small fixes to Social Security cannot address persistent pay inequities of women workers, the system must take into account the many ways in which women make unpaid but productive and necessary contributions to the well-being and stability of families and communities.

Racial and Ethnic Diversity

The 2000 census marked the first time that nearly half of the nation's 100 largest cities were home to more African Americans, Latinos, Asians, and other minorities than whites. In California and other southwestern states, no clear majority race or ethnicity was counted, presaging a trend across the country in the next two decades. The growing diversity of California is due to both an out-migration of whites to inland states and the immigration of young Latino and Asian American families (see Table 1 ).

As a result, the state's population continued to grow, albeit more slowly than in past decades, becoming younger and resulting in a range of economic situations among families (Johnson, 1999 ). The population gains of the 2000 census can be used to address fears of a shortage of workers to care for older people; an immigrant workforce would be in need of the low-paying but steady jobs offered by a burgeoning service industry. And, if their work is taxable employment, more workers would be contributing to Social Security beyond estimates based largely on birthrate. At the same time, growing population diversity indicates a critical need for additional effort to connect generations as well as cultures.

Furthermore, an analysis of the impact of Social Security income on the economic security of older adults shows that 43 percent of older adults in California--and 60 percent of older women--would be poor were it not for Social Security income. Thus, in that state, Social Security effectively reduces the poverty rate among the 65 -plus population to 13 percent (Center on Budget and Policy Priorities, 1999 ). The significance of Social Security as a hedge against extreme poverty for U.S. workers can be seen in the longstanding and continued reliance of low-income workers (including immigrants) on the social-insurance aspects of Social Security that provide some pension income.

Demographic changes, especially those pointing to the likely pension needs of low-wage workers employed in the most hazardous environments and conditions, tend to underscore the need for continued commitment to the social-insurance aspects of Social Security, especially if the taxes of these workers would constitute a substantial portion of funds required by the imminent wave of aging boomers. The in­creasing racial and ethnic diversity of the U.S. has been predicted to have two key impacts on the future of aging services: ( 1 ) there will be a decreasing homogeneity among caregivers and care recipients with respect to race, culture, religion, education, and language; and ( 2 ) there will be greater racial/ethnic diversity among elders who have and those who have not.

Family du Jour

Nuclear families are increasingly just one of many caregiving arrangements in communities, giving way to households headed by single parents, "blended" households with relationships defined by marriage as often as birth, households headed by grandparents and other kin with minor children, and children with an average of four to six "parents." In the earlier days, couples had children as a hedge against tragedy and insurance for their old age. Can we attribute a child's accumulation of parents and guardians to a similar way to meet current needs? The likelihood of stepchildren and birth and adopted children all being part of fulfilling the obligation to care for frail parents is ripe for study as boomers step into old age and the "echo generation" (the offspring of boomers) gains a foothold in the job market. Long-distance caregiving may become as much an international as a national norm consistent with the growing globalization of the economy. The idea of instilling a sense of guilt and obligation as a motivation to provide supportive care for the older generation over an extended number of years is denied among most boomers, who foresee a lifetime of independent decisions for themselves (AARP, 2001 ). Adult children of this modern age are more likely to be well-trained negotiators with their parents and in behalf of their parents who need care. At the same time, parents may be less willing to accept the care offered by their adult children if it means compromising their own preferences.

More Differences, More Choice

A big fear, fed by unsuccessful efforts to address so-called shortfalls and problems with Social Security and Medicare, is that a lack of political will can lead policy makers to walk away from the difficulties of "fixing" programs on which Americans rely to support the income and health security of older people in our society. The barrage of opposing opinions about what needs fixing are as numerous as the proposals offered, and the lack of consensus on the extent to which problems are technical or political in nature seems to lead to the conclusion that "one size does not fit all."

The current chairman of the Council of Economic Advisers claims that the current Social Security system is unsustainable and should be privatized (Andrews, 2004 ), while advocates for sustained universal social-insurance programs have concluded the opposite. Using a simulation model developed under a Social Security contract, additional scenarios were tested to assess an array of likely outcomes of privatization for types of beneficiary situations. The analysis concluded that "the most substantial losers are unmarried women; married couples, but especially one-earner couples; households with lower earnings and high mortality; and African Americans" (Meuller, 1999 ).

One part of the debate focuses on the value of individuals assuming personal risk for making and adhering to their savings and investment choices. Another part focuses on whether life in the U.S. provides equitable opportunities to exercise such choices. Perhaps one of the largest-scale experiments with choice, educating consumers to exercise choice, and improving the cost-to-benefit ratio of a public program has been the options created in the Medicare program. This ongoing shift to an increasingly decentralized and privatized health insurance program for more than 40 million Americans might shed some light on whether the idea of increasing consumer "choice" might work for Social Security as well.

Using prototype beneficiaries that exemplify specific levels of healthcare needs, Snyder, Rice, and Kitchman ( 2003 ) conducted a study comparing out-of-pocket costs among choices that would insure against healthcare costs beyond basic Medicare: 'Medigap' insurance policies, Medicare Plus Choice, and no additional supplement. As well, the influence of geographic variation and product types was assessed. The study found that costs associated with supplemental insurance choices varied widely; that the type of plan (i.e., type of Medigap policy or particular Medicare Plus Choice plan) affected out-of-pocket costs; that geographic location made a difference in costs; and that premiums are a poor barometer for gauging total out-of-pocket spending, largely because of cost-sharing requirements and uncovered services. The authors conclude that even though policy makers favor providing consumers more health plan choices, and some studies show increased consumer satisfaction with more choice, the study shows that "providing more choices also increases risk of uncertain costs, since costs will vary in ways that are not readily apparent to beneficiaries" (Synder, Rice, and Kitchman, p. 22 ).

This and other approaches that focus on new systemwide ways to create more choice (including the choice to pay more out-of-pocket for preferred care) and to implement ways to foster client-centered healthcare are still inconclusive in demonstrating overall value for beneficiaries in cost or care quality. By controlling outlays, Medicare is doing exactly what proponents of Social Security privatization desire—to shift cost increases and risks to the consumer. For people of limited means, the resulting uncertainty about where and how to get the best affordable care means that Medicare no longer represents the kind of health security in old age that was embedded in the original public policy. Consumer experiences with choice under Medicare Plus Choice appear to be more focused on reacting to market changes and trying to understand the "residual" choices that are limited to those health providers willing to remain in a local market. As pointed out in the beginning of this paper, the problem is the risk of unforeseen catastrophes over which individuals are powerless, not whether and how we might create the mechanism to distribute goods and services (somewhat fairly) among an entitled group of workers.

Still Poor After All These Years

The social-insurance features of Social Security notwithstanding, individuals from communities with less access to a good education and steady work continue to be more reliant on the pension and disability income provided by Social Security and less likely to have the other three legs of the four-legged stool for their income security (i.e., savings, investment, and pension income). As well, many of these same populations are more vulnerable to disability associated with low-paying jobs and hazardous work conditions. Some would argue that when the train left the station, several segments of society could not get on board.

Examples of ways that the current social context of work, savings, and pensions creates uncertain futures for today's workers are described below.

Diverse norms of saving and spending on care. Different cultural groups vary as to what should be spent on older members of the community compared to expenditure for "next" generations. Particularly among immigrants, older adults tend to "choose" to make their assets available to next generations as a way of assuring opportunities for their happiness and well-being. Is the choice to invest in an adult child's business in lieu of restricting savings for long-term-care needs attributable to class, ethnicity, or culture? Are the obligations of the child to care for parents in their old age enforceable? When public policies moved away from insisting that the "family" take responsibility for the cost of care needed by their dependent members, it was an acknowledgment that larger social systems were required to ensure that the social contract exchanging the provision of care of children with receipt of care in old age was kept. In fashioning programs like Medicare and Social Security, policy makers determined that nuclear families were too small a social unit to bear the entire burden of providing care and paying for care. The impoverishment of family units because of the expenses of care for one member jeopardized the social viability of the family, and policy was changed to make this expense a social rather than individual family cost. How can a greater reliance on individual savings address an increasing population that values communal rather than individual investment planning?

Larger numbers of vulnerable workers. While increased employment in contingent and low-paid service jobs in which workers work for cash and no benefits (which some population groups do in disproportionate numbers) may result in maximizing cash flows in local communities, it may also result in larger portions of workers with short-term and seasonal work patterns. Under these arrangements, workers feel that they get more cash for their work, but employers have no commitment or obligation to retain workers or encourage planning for personal health and family needs, much less to provide incentives for savings plans that provide income for a worker's old age. Even as some policy makers are advocating stronger employer-based health and pension programs, employers may be increasingly divesting themselves of any such obligation to their workers. Proposals for improved health or pension coverage based on work history may need to refocus on new organizational units instead of on employers.

Defined-contribution pension plans and shorter job tenure. It is increasingly common for workers to change jobs every three to five years. With such a pattern, they will not become vested in an employer pension or savings plan or contribute to or benefit from the employer and employee contributions made over time that are needed to sustain the viability of such plans. As private pensions are increasingly limited to defined contributions, they increasingly rely on individual savings decisions. Employers are rarely making the commitment to their workers that defined-benefit pension plans represent: The latter have become too costly, they saddle companies with long-term obligations that can limit their business flexibility, and statutes have effectively enforced such employer commitments even at the risk of the company's solvency. While defined-contribution plans reflect the providence of the worker, recent rules have made such plans portable, and they increasingly offer investment choices to the worker. This is another "self-serve" example of a trend that severs any sense of commitment or relationship between employer and employee while transferring all investment risks to the worker. While the modern portfolio theory of earnings on investment has demonstrated positive long-term gains, recent market volatility is a reminder that no individual is guaranteed the investment earnings he or she expects, particularly just at the time when the earnings are needed. The possibility of a poorly performing market during retirement years provides little security and comfort, even for the most provident.

Lack of saving and planning. While increasing portions of "Xers" and younger generations say they do not believe that Social Security will be there for them, surveys also appear to show that few have become more informed about private investment or savings plans. Among those who say they believe that Social Security is broken and not repairable, a failure to change their current savings behavior may raise the prevalence of poverty as these workers reach old age. Yet, the current administration's proposal to privatize Social Security shows disadvantages for younger generations. In Meuller's ( 1999 ) simulation " . . . comparisons show that for everyone now alive, the choice of assumptions makes little difference: mostly because of the 'transition tax,' every cohort now alive faces substantial losses from partial or full privatization."

The notion that each boat must float on its own is a clear vision of America's culture of rugged individuals maximizing their efforts to grow private wealth. But when a storm overtakes a harbor, boat owners become reliant on each other to identify the best protective strategy, enjoin one another to minimize damage to any one party, and provide mutual assistance because each party can be equally vulnerable to the terrifying outcomes of nature. A wholesale move away from a universal social-insurance old age and survivors program to one reliant on individual effort will result in an assurance of increasing uncertainty and insecurity associated with old age and retirement.

Conclusion

Unless we have a way to structure policy and program responses so that they are appropriate for the increasing diversity among older adults, political quick-fixes will continue to compromise policy and program efforts to ensure that the goals of income and health security of older adults are achieved.

The insufficiency of demographic projections alone--instead of as one part of sound analysis and planning--to address these underlying changes in our communities can only lead to poor estimation of and preparation for the needs of older adults and their reliance on income and health security assistance in the future. Will the needs be more of the same, or will they differ significantly because of the shifts in how we live and take on intergenerational mutual assistance(Johnson, 1999 )?

Assumptions about the economic and physical well-being of the current workforce will need to be revisited in the near future, when the following situations can be expected.

• The dependence of elders on Social Security to avoid poverty will grow, as larger numbers of boomers retire from 2010 onward.
• A growing number of immigrants will have aged in place without the opportunity to accrue forty quarters of taxable employment that would entitle them to Social Security and Medicare, and they either will have exhausted the ability of adult children to support both them and dependent children or will be among the oldest workers in jobs prone to workplace hazards.
• Workers will be increasingly pressured into contingent and per-diem jobs without tenure, pension, or health insurance benefits, and will not have private savings plans in place for their old age.
• The disappearance of traditional nuclear households will result in fewer available and willing family caregivers for elders, and no one will be willing to bear the cost of managing and providing the range of assistance traditionally provided by family and kin.

Or, another option is possible. As a society, we can choose to ensure that the least of us have some measure of income and health security in order that everyone can compassionately and wisely manage and plan for personal income and health security. As families who began on the margin of society become part of the broader mainstream of extended, blended, single-parent, and single-person households, notions about what social unit is the best denominator for gauging productivity, savings, and the management of income and health resources for old age must be redefined. We will most likely find that a sustained, universal social-insurance program will provide the kind of basis required by the changing social context in which we plan for old age in the future. 1

Donna Yee, Ph.D., is executive director, Asian Community Center, Sacramento, Calif.

References

AARP. 2001. "In the Middle: A Report of Multicultural Boomers Coping with Family and Aging Issues." Washington, D.C.: AARP.

Abraham, K. G., and Houseman, S. N. 2004. "Work and Retirement Plans Among Older Americans." In Employment Research, WE Upjohn Institute, Kalamazoo, Mich. 2 ( 4 ): 1 - 4.

Andrews, E. 2004 . "Warning on Social Security." New York Times : Dec. 3.

Center on Budget and Policy Priorities. 1999. Social Security and Poverty Among the Elderly: A National and State Perspective. Washington, D.C.

Feinberg, L. F., and Newman, S. 2004. "Family Caregiving and Long-Term Care: A Crucial Issue for America's Families." San Francisco: Family Caregiver Alliance.

Feinberg, L. F., et al. 2004. The State of the States in Family Caregiver Support: a 50 -State Study. San Francisco: Family Caregiver Alliance.

Johnson, H. 1999. "How Many Californians?" in California Counts 1 ( 1 ): 1 - 3, Public Policy Institute of California. Pamphlet.

Meuller, J. 1999. Winners and Losers from 'Privatizing' Social Security. Washington, D.C.: National Committee to Preserve Social Security and Medicare.

Snyder, R. E., Rice, T., and Kitchman, M. 2003. Paying for Choice: The Cost Implications of Health Plan Options for People on Medicare. Menlo Park, Calif.: The Henry J. Kaiser Family Foundation.

Spillman, B. C., and Pezzin, L. E. 2000. "Potential and Active Family Caregivers: Changing Networks and the 'Sandwich Generation.'" The Millbank Quarterly 78 ( 3 ): 5 - 21.

From Generations Spring 2005 issue, 29(1): 62-63. © 2005 American Society on Aging

American Society on Aging
71 Stevenson St., Suite 1450
San Francisco, CA 94105-2938
www.asaging.org
info@asaging.org