A new social contract for a new era

It's been a helluva few weeks if you're of a certain age.

Those 65 and older are getting a financial windfall from the Federal government that is coming in the form of a historically high cost of living adjustment, or COLA, of 8.7% from the Social Security Administration and lower drug prices, thanks to the Inflation Reduction Act, but all that glistens isn't gold.

According to the Social Security Administration , approximately 70 million Americans will see an increase in their Social Security benefits and Supplemental Security Income (SSI) payments in 2023. On average, Social Security benefits will increase by more than $140 per month starting in January.

On the surface, these are good policy, especially for individuals who are at-risk or may be struggling to make ends meet; no one should be forced to choose between purchasing life-saving medicines and food, or even paying rent. These changes also have the potential to be good politically, because older adults tend to support Social Security and Medicare, and they vote at higher rates than their younger cohorts too.

But are these changes in the best interest of the nation and its current and future generations?

Social Security and Inflation

The moves by the Federal government affect everyone receiving Medicare and Social Security. They do not take into account income or current tax brackets, which means that some individuals may actually lose benefits on other assistance programs as a result. This is due to the fact that programs that support food or housing security are often income tested. Extra cash could push some people out of these welfare programs altogether.

These changes may have unintended consequences that could affect those of us under 65 too. The cash infusion of over $100 billion into a red hot economy could stoke the flames of inflation, which remains stubbornly high. An increase in government spending is one of the factors that economists say can drive inflation.

Medicare and Drug Prices

The Inflation Reduction Act's (IRA) drug pricing reforms include Medicare drug price negotiation, Medicare inflationary rebates, and Medicare Part D redesign. While narrow, the IRA achieves the following: provides the Secretary of U.S. Department of Health and Human Services (HHS) with the authority to negotiate prescription drug prices for Medicare, limits the rate at which companies increase the prices of existing prescription drugs in Medicare, and restructures the Medicare Part D benefit both to limit patients’ out-of-pocket costs.

The Congressional Budget Office projects that this will end-up saving the United States Federal Government money. However, the IRA does nothing to bring pharmaceutical pricing in-line for those people under 65, which means that younger populations - the 'average Joe' - may end-up paying more for drugs. This is because pharmaceutical manufacturers will need to maintain their profit margins in order to appease stakeholders. They they will pass-on financial losses to

Real Change

I am not one to stoke the flames of generational divides; I find this approach to be counterproductive, repugnant, and without any merit. However, I do believe that we are well-past the point of debating the need for a full-scale renegotiation of the social contract that considers generational equity.

Our social welfare programs must take into account the new longevity and the Super Age, because we can no longer afford to pay for 20th century programs with 21st century realities. We owe it to current and future generations to stop kicking the the proverbial can down the road, because we cannot continue to force them to carry the financial burden of our increasingly older society, especially when those post-65 are mentally, physically, and cognitively healthier than previous generations.

This means that everyone who is able will need to work for longer periods of time, perhaps until they can no longer. This was the original intent of old-age pension systems when their implementation began over a century ago across Europe and North America. The age-based model for 'retirement' is backwards for the vast majority of workers and it harms our economy by prematurely removing productive opportunity from the workforce.

We also can no longer 'solve' for one part of the health system, which only benefits one age-based interest group, without considering the effects it will have on others, including younger generations and those who have yet to be born.

To learn more about the future and how it affects government policy and spending, please visit The Super Age or purchase a copy of The Super Age: Decoding our Demographic Destiny today.

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