By By JOHN EBY / Dowagiac Daily News
Dr. Fred L. Mathews suspects the prescription drug benefit was set up "as a hidden agenda in Washington to privatize Medicare."
Companies received the right to advertise and to seek out the public with their plans. But, Mathews finds, "They're switching them out of Medicare and into HMOs."
"They should not be doing that without people knowing exactly what they're doing," John Coupe responded. "I don't like to hear stories like that.
Coupe, of Allegan County, is Social Security Administration district manager for Cass, Berrien and Van Buren counties, based in Benton Harbor (269/926-1865; toll-free, 1-800-772-1213).
He came to southwest Michigan from the Upper Peninsula and spoke to Dowagiac Rotary Club Thursday noon at Elks Lodge 889.
"It's hard to read a politician's mind" to determine motive. Quite frankly, we're supposed to avoid political issues. As a private citizen, I think there's probably some truth to what you're talking about based on other things I've seen come out of Washington or Lansing," Coupe said.
William Livingston commented that when he turned 65, provision was made that an individual could continue working without further deduction for Social Security benefits.
"At the end of the year when I went to have my taxes prepared," Livingston was asked to provide his Social Security statement along with his other income.
"I have paid income tax for the past six years on my Social Security benefits, which I also paid from 1951 on … Where's the justice?" Livingston wanted to know.
"The earnings test is when you file for Social Security retirement benefits whereby if you continue to work we measure how retired you are. For people under 65 there's a limit in the neighborhood right now of $12,800. If you make that much or less, it will not affect any of your Social Security. If you make more than that, then we withhold one dollar for each two dollars of gross earnings you have above that. That's not a tax, that's an earnings test," Coupe explained. "The tax you talk about is covered on page 16 (of the booklet Understanding the Benefits).
It says about one third of current beneficiaries pay taxes on their benefits.
You have to pay taxes on your benefits if you file a federal tax return as an "individual" and your total income exceeds $25,000. If you file a joint return, you have to pay taxes if you and your spouse have a total income that is more than $32,000.
"Might" be taxed because, ultimately, "It's an IRS issue," Coupe said. "Just like I don't get into politics, I don't get into IRS issues. When it becomes a tax issue, there might be some exceptions and I have not been educated formally on (Internal Revenue Service) rules."
"Ultimately, I predict that within five to 10 years, it will all be earnings-based," Livingston replied. "There is no entitlement based on your contribution. A nice little social transfer of wealth."
"I recognize that is your opinion, and it is a political issue, so I'm not going to go any further," Coupe said.
Coupe told dentist Dr. Matthew Cripe that Congress enacted Social Security in 1935, with the first benefits paid in "1937 or '38" to persons 65 at a time when the life expectancy was less than that.
"As the years went by, why didn't they up the benefit year to be higher than life expectancy?" Cripe wondered.
"That's a political issue," Coupe said, though he allowed that instead of 1 percent, beneficiaries pay 7.65 percent, which employers match.
"I vote for making it higher to past life expectancy and taking the taxes down," Cripe said.
"There are some concerns about what to do," Coupe said, "because by 2042, forecasts say we will have depleted our trust funds and the money we have going out will be greater than the money we have coming in. We'll only be able to pay 75 cents on the dollar, so some things have to change between now and then."
Haven't those trust funds been looted by politicians to address other spending needs? inquired Marilu Franks.
Coupe answered, "Right now we have more money coming in than we're paying out, so those trust funds are still growing and will reach over $7 trillion by the time they nosedive. We don't just put those trust funds in a drawer. We're making them work for you, the taxpayer, by investing them in special government securities. They're funding the federal government. That's why people think they're being 'robbed,' but right now the investment is getting a pretty good return of 5 to 7 percent. We're getting some good money back. Those government securities are funding a number of things, including probably for the war in Iraq. Whether or not you agree with that, I'm not going into that. It's a political issue."
City Clerk Jim Snow asked where obtaining Social Security cards stands.
"They're more difficult to get now because of issues related to national security," Coupe said. "In mid-December 2005, the Department of Homeland Security issued a number of more restrictive measures for us to file for Social Security cards. We need more documentation. We prefer a picture ID like a passport or driver's license, and we also need one other document in addition to that. The second issue on that is that there is now a maximum number of cards that can be issued to a person in a lifetime. That is 10. And there is a limited number that can be issued in a given year, and that is three. Up until that time it was unlimited."
Ironically, the Social Security Administration does not require a card as long as you have your number. But most employers demand to see a card because they can be penalized for hiring someone with the wrong number. Some schools also consider cards mandatory.
Brooks Thomas pointed out the irony that citizens are strongly discouraged from carrying their Social Security cards to guard against identity theft, yet it appears on Medicare cards asked for with each medicine purchase or doctor visit.
"Once you've done it one time, they should have that information. They make a copy of my health insurance card and I never have to bring it again," Coupe stated.
Coupe also discussed Medicare Part D prescription drug benefits and the so-called "doughnut hole."
The basic benefit in Michigan runs $13.75 to $65.69 per month with a deductible of up to $250 a year.
The variance is attributed to private companies such as Blue Cross/Blue Shield, Aetna and Humana bidding provider contracts with the federal government.
In the process, various individual companies can design their own plans so long as they abide by federal requirements.
After meeting the deductible, a beneficiary pays 25 percent up to $2,250 in expenses for "covered" drugs. Medicare absorbs 75 percent of drug costs, but stops for the $2,850 gap until catastrophic coverage of 95 percent kicks in at $5,100.
"There are some holes in the plan," Coupe said.
Judge Herbert Phillipson asked Coupe to explain "the notch," which relates to the introduction of indexed benefits translating dollars to today's standards before computing the retirement benefit amount.
"Before that," he said, "we just took what you paid in, dollar for dollar, and computed your benefits. That changed for people born between 1917 and 1921 or '22. Notch-year babies were born in that transition from the old method of computing to this new method of indexing."
Coupe said some organizations have "opted out" of Social Security.
"They have to be a government entity. A lot of the community mental health agencies in Michigan have opted out," so long as they have plans equal to or exceeding Social Security.
"I know we did this with Riverwood in Berrien County," he said, "and I've talked to a number of employees since then who regretted it."
www.socialsecurity.gov