Congress Debates Social Security;
High Court Will Decide if Benefits
Are Fair Game for Debt Collectors

By JENNIFER JOHNSON
Staff Reporter of THE WALL STREET JOURNAL
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April 29, 2005

In the Social Anxiety column, we round up some of the best writing on Social Security and Medicare from around the Web. (Some links may require registration or subscriptions.)

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THE PRESIDENT'S PLAN: In his first prime-time press conference since his re-election, President Bush gave a few more details for his Social Security plan. He said he would favor adjusting the system so that people with lower incomes would see their benefits grow faster than those who are better off. MSNBC reports that as Mr. Bush spoke, the White House issued written material explaining that the type of change he had in mind would be accomplished by a "sliding scale benefit formula," in which future upper- and middle-income retirees would get lower payments than are currently promised -- a fact the president did not mention during his press conference. Democrats quickly reacted. "All the president did tonight was confirm that he will pay for his risky privatization scheme by cutting the benefits of middle-class seniors," said Sen. Harry Reid and Rep. Nancy Pelosi, acccording to the Associated Press. The Dallas Morning News reports that before Mr. Bush's speech House Democratic leader Nancy Pelosi said: "The more his plan is out there, the less people approve of his handling of Social Security. So, as far as I am concerned, I hope he announces tonight that he is going to go on another 60-day tour to another 60 cities."

VIDEO REPORT

Watch Associated Press video excerpts from President Bush's press conference. (RealPlayerG2 is required)

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THE PACK SEPARATES: Earlier this week, in the first congressional hearing on Social Security, Democrats were unified in their opposition to private savings accounts, but Republicans began to splinter amid faltering public support for the president's plan, the Washington Post reports. Sen. Craig Thomas, a Republican from Wyoming, questioned the wisdom of adding trillions of dollars to finance the president's plan, and Sen. Olympia Snowe, a Republican from Maine, questioned the value of jeopardizing guaranteed benefits that many seniors have come to rely on. "What cost and what risk is it worth to erode the guaranteed benefit?" Ms. Snowe asked. This division prompted some lawmakers to question the viability of passing Social Security reform legislation.

Meanwhile, the Des Moines Register reports that Sen. Charles Grassley, an Iowa Republican and chairman of the Senate Finance Committee, has acknowledged the need to get some Democrats' support. Mr. Grassley, who, as head of the committee, is charged with rounding up support for the president's plan, challenged Democrats who are "bad-mouthing every other plan out there" to come up with a plan of their own.

Mr. Grassley has tried to persuade the White House not to "put a full-blown plan before Congress," the Wall Street Journal's Jackie Calmes reports. Other Republicans, however, such as Finance member and party leader Rick Santorum of Pennsylvania, have "lobbied the president otherwise, arguing that only specifics from Mr. Bush can jump-start debate."

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EXIT SIGN: President Bush needs an exit strategy on Social Security, writes Fred Barnes, executive editor of the conservative Weekly Standard. Despite the president's "valiant effort" to sell Congress on his plan, the "prospects are dim" for getting Social Security-reform legislation passed, Mr. Barnes says. If the president must accept defeat, he adds, "it's important he do it the right way. If he's petulant, it will only make things worse." History will "surely vindicate Bush for trying to solve a serious national problem before it becomes a staggering mess," Mr. Barnes says, adding that the president's priority now should be to accept defeat on the issue and prevent any Social Security-related losses for Republicans in 2006. Consider that the population of "red states" tends to be older and poorer -- key ingredients for dependence on Social Security benefits.

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FUZZY MATH: In Galveston, Texas, where the president recently stumped for his Social Security plan, public employees have been opening personal retirement accounts for 20 years, something Mr. Bush cited as an example for the rest of the country to follow. But Edwin Chen and Warren Vieth of the Los Angeles Times report that figures cited by the president clash with finding from several studies that show the county's workers would have fared better with traditional Social Security. Keith Brainard, research director of the National Association of State Retirement Administrators, says that, while the Galveston plan appears to provide a better overall return than traditional Social Security, it concentrates benefits on the upper end of the wage scale. The conflicting statistics illuminate the difficulties Mr. Bush faces in selling his privatization plan even as he winds down his 60-day road tour to promote the plan, the Times article says.

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SHIELDING BENEFITS: As the Senate debates the future of Social Security accounts, a Social Security debate of another kind is brewing over in the judicial branch of government -- over student loans. This week, the Supreme Court agreed to decide whether the government can reclaim Social Security benefits from individuals who haven't repaid student loans, writes David Savage in another Los Angeles Times article. Lower courts are split over which of two conflicting federal laws to follow. One law says the Education Department should try to collect money from those who have defaulted on their loans by garnishing wages or other sources of income, which might include Social Security. A second law says the government shouldn't take Social Security benefits to repay debts that are more than 10 years old. The debate hinges on a case involving James Lockhart, who was living on a Social Security disability benefit of $874 a month and carrying unpaid college loans of $80,000 at the same time. To repay the debt, the government began withholding a portion of his benefit check. Mr. Lockhart sued, lost and is now appealing to the Supreme Court, which will hear his case in the fall.

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'NOTCH' IN THE BENEFITS BELT: A group of Americans born between 1917 and 1921, who believe they were "stiffed by the Social Security system," are giving up their fight to get Congress to replenish their benefits, writes Sue Doyle in the Inland Valley (Calif.) Daily Bulletin. These self-titled "notch babies," now in their mid-80s, were created when Congress implemented cost-of-living increases in Social Security benefits. In the process, lawmakers accidentally wrote into the law a double adjustment for inflation, which inflated some recipients' benefits. To fix the problem, Congress cut benefits incrementally for people in that age group, which caused problems for those people, many of whom came to rely on their benefit check to live on. The term, notch baby, was as political a buzzword a few decades ago as privatization is today, Ms. Doyle writes. But most activists have given up as they have gotten older, discouraged by the lack of action on Congress's part. Shirley Hagen, who lobbied Congress on the issue for 14 years, is among those in the notch who have let go of the issue. "It was a good fight, but you have to give it up. Most of us in the notch are dead," Ms. Hagen says.

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MEDICARE TV: A new federal policy will make it harder to get face-to-face hearings when the government rejects Medicare claims for home care, nursing-home services, prescription drugs or other services, writes Robert Pear in the New York Times. That's because the number of sites that hold these hearings will be whittled down to four from 140 once the Health and Human Services Department takes over the responsibility in July. Instead of in-person meetings, most hearings will be held by telephone or videoconference, and only beneficiaries who show "special or extraordinary circumstances" will meet face to face with a judge. Any beneficiary who insists upon a face-to-face hearing forfeits the right to have their case decided within 90 days. The policy change comes as administration officials are predicting an increase in the number of claims and appeals. The Government Accountability Office, an investigative arm of Congress, recently questioned the videoconference policy, pointing out that "beneficiaries are often uncomfortable using videoconference facilities and prefer to have their cases heard face to face." The Health and Human Services Department defended the policy, saying it would increase the number of cases judges would be able to resolve within the 90-day deadline.

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