Thomas Throws Cold Water On Bush Social Security Reform Plans
The life insurance industry was buoyed last week when the powerful chairman of the House Ways and Means Committee labeled President Bushs call for reform of the Social Security program a “dead horse” and suggested that a more viable alternative would include adding a savings plan for long term care or chronic care as “an augmentation to Social Security payments.”
At the same time, a securities firm in Washington that advises institutional investors cautioned that the death of the Social Security reform proposal would bring into play a compromise that could include establishment of Lifetime Savings Accounts, which are anathema to the life industry, as well as Retirement Savings Accounts.
In a note to investors, Tim VandenBurg, of Washington Analysis, said the Bush administration proposed these accounts last year and will likely push for them again this year. “Should the administrations push for broad tax code and Social Security reform bog down, the enactment of LSAs and RSAs would represent a second best form of tax and retirement security reform that the administration could point to as a policy achievement,” VandenBurg said. “By creating a highly flexible savings vehicle that effectively eliminates taxes on the investment income of small investors, this proposal should boost the savings rate and hence inflows into the capital markets.”
Even before President Bush proposed reform of Social Security by possibly creating private accounts and lessening benefits, Rep. Bill Thomas, R-Calif., chairman of the Ways and Means Committee, which will be the gateway for passage of any plan, called it a “dead horse” because of opposition from Democrats. Instead, he suggested that Congress undertake a broader evaluation of the tax incentives needed to deal with an aging nation that include adding a savings plan to pay for LTC and chronic care coverage.
“What Im trying to get people to do is get out of the narrow moving around of the pieces inside the Social Security box,” Thomas said at a forum on Bushs second term last week. “If we miss this opportunity…I think we will have missed an opportunity that may not present itself for another 20 years.”
The implication of Thomas and VandenBurgs comments is that tax changes that would enhance the marketing of insurance industry products are in play but that intense lobbying will be needed to ensure that Congress and the Bush administration keep the industrys needs in mind when drafting legislation dealing with retirement security.
Thomas comments yielded immediate support from the insurance industry. Jack Dolan, a spokesman for the American Council of Life Insurers, said, “Weve been saying for a long time that Congress and the President should address our nations retirement security challenges on a comprehensive basis. Ensuring the Social Security systems viability as well as boosting long-term savings and encouraging pension plan creation are each critical elements to any such initiative.”
Guy Bertsch, vice president, product development at UnumProvident in Portland, Maine, said, “We welcome the debate on all issues related to long term care and hope and believe there is a strong role for private LTC insurance going forward. We have been a part of the LTC debate on the regional and national level for a long time, and we feel we have something to offer on this issue.”
Bertsch said the industry and UnumProvidents primary goal “is having more and more people enroll in LTC insurance programs.” One of the vehicles for that is tax enhancement, specifically inclusion of LTC insurance in pretax coverage through the workplace, Bertsch said.
Americans for Long-Term Care Security (ALTCS), a broad-based bipartisan coalition of 32 organizations, responded to Thomas comments by writing him a letter supporting his ideas. In a letter by Robert B. Blancato, president, the group said it was “most salient” for Thomas “to raise the issue of long term care in the context of dealing with our rapidly aging population.” Blancato noted in the letter that, “Today, we are aware that 9 million Americans over the age of 18 receive long term care assistance. We also know that total spending for long term care in 2002 exceeded $137 billion, which is more than combined spending on medical devices and prescription drugs. These numbers will continue to increase as the baby boomers age.”
Blancato added that for several years, Reps. Nancy Johnson, R-Conn., and Earl Pomeroy, D-N.D., have introduced bipartisan legislation (H.R. 2096 from the 108th Congress) calling for an above-the-line deduction for LTC premiums. “We expect this bill will be reintroduced early in the 109th Congress,” Blancato said. “In the new legislative session, we urge the Ways and Means Committee to take action on the Johnson-Pomeroy bill as an initial step toward making long term care insurance more affordable.”
Thomas comments pointing the way toward a compromise took on more viability last week when House and Senate Democratic leaders said after a policy meeting that they would work to defeat
President Bushs plan to divert a portion of Social Security revenues into private accounts.
“Its a non-starter to talk about privatizing Social Security; were not going to allow that to happen,” said Senate Minority Leader Harry Reid, D-Nev. He did not directly answer a question on when or whether Democrats would put forward an alternative plan for addressing projected shortfalls in the Social Security trust fund.
“Lets see what the president will do,” Reid said. “Lets see him put something on paper for a change…Were willing to take a look at a program that we want to make a little bit better.”
Reproduced from National Underwriter Edition, January 20, 2005. Copyright 2005 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.