The majority of elderly blacks and Hispanics are economically vulnerable, at 63.5 percent and 70.1, respectively, a new Economic Policy Institute briefing paper finds. In Financial security of elderly Americans at risk: Proposed changes to Social Security and Medicare could make the majority of seniors ‘economically vulnerable,’ Elise Gould, EPI director of health policy research, and David Cooper, EPI economic analyst, explain that because official poverty statistics do not account for seniors’ increased health costs, they mask the true vulnerability of the elderly population. Using a more comprehensive assessment of seniors’ living expenses, they find that nearly half of America’s seniors, especially minorities and women, are just one bad economic shock away from falling into poverty. As such, any proposed changes to Social Security and Medicare must be evaluated not just for their impact on future budget deficits, but for their impact on living standards of the elderly.
“After working hard their entire lives, millions of our elderly are struggling to pay for basic needs like food, medicine and housing, even with Social Security and Medicare,” said the report’s co-author Elise Gould. “As such, policymakers should consider the dire consequences proposals to restructure these programs would have on our parents and grandparents, shifting more costs unto them when many are already barely making ends meet.”
Researchers and public officials have long recognized that the official federal poverty line does not reflect families’ real living expenses. Because of this, the Census Bureau developed the Supplemental Poverty Measure (SPM), a poverty metric that takes a more comprehensive appraisal of both a family’s expenses—accounting for regional differences in prices— and available resources, including government assistance programs. However, even this improved measure still only calculates income necessary for the most basic level of subsistence, and because it is designed to reflect the needs of the average American, it does not address the unique needs of elderly Americans. As such, the authors use the Elder Economic Security Standard Index (Elder Index), an income standard developed specifically for the elderly by Wider Opportunities for Women (WOW) to determine what level of income represents actual economic security for elderly Americans. They find that elderly “economic vulnerability” can be defined by having an income less than 2.0 times the SPM threshold. Under this more appropriate threshold of economic security, the authors find that 48.0 percent of the seniors live with dangerously low levels of income, varying considerably across different groups of elderly Americans.
Comparing the elderly by age group—65 to 79 years old versus 80 years old and older—shows that the older elderly have a far higher rate of economic vulnerability (58.1 percent) than people age 65 to 79 (44.4 percent). At 52.6 percent, elderly women are more likely to be economically insecure than men (41.9 percent). Meanwhile, though blacks and Hispanics constitute just 15.4 percent of the elderly population, they comprise over one-fifth (21.9 percent) of the vulnerable elderly, at 63.5 percent and 70.1 percent, respectively. Lastly, the share of vulnerable elderly varies across all 50 states and the District of Columbia, from a low of 35.4 percent in North Dakota to a high of 59 percent in the District of Columbia. Not surprisingly, states with large minority populations—like the District of Columbia and California (55.8 percent)—tend to have the highest levels of elderly vulnerability. Hawaii, Georgia, Tennessee, and New York each have at least 52 percent of seniors living below two times the supplemental poverty line. North Dakota (35.4 percent), South Dakota (37.2 percent), Nebraska (40.5 percent), and Wisconsin (40.6 percent) have the lowest shares of vulnerable elderly.
Because lower-income elderly households depend heavily on social programs such as Social Security and Medicare, changes to these programs should be viewed through the lens of how they would affect economically vulnerable seniors. From 2009 to 2011, medical out-of-pocket costs equaled 30.1 percent of elderly families total cash income, on average, or about 14 percent of total family income. Proposals to shift additional health costs onto seniors, such as House Budget Committee Chairman Paul Ryan’s plan to convert Medicare into a voucher system, would drive more seniors into poverty. Under Ryan’s proposed changes to Medicare, the predicted increase in seniors’ out-of-pocket health costs would raise the share of economically vulnerable elderly from 48.0 percent to 56.4 percent, an increase of almost 3.5 million more vulnerable seniors. Similarly, proposals to change the calculation of cost-of-living adjustments (COLAs) to Social Security to a chained consumer price index (CPI) would result in 132,000 more economically vulnerable seniors.
“We can dispel the myth that most seniors are ‘greedy geezers’ with lavish retirements. Almost half are either in poverty or close to it,” said Cooper. “We shouldn’t be cutting the benefits that are barely adequate as is, effectively legislating more of them into poverty.”