In recent articles, I have lamented poorly designed components of the Reconciliation Bill, from a poorly-designed “free childcare” program to a family leave plan that’s designed to be “free” rather than funded by the workers who benefit, to a Medicare drug benefit that’s planned to be implemented at the same time as Part A Medicare is facing insolvency, to a mandate that employers provide retirement plan access that leaves virtually all of the specifics up to a bureaucratic agency. And this just scratches at the surface of the expansive programs on tap if the bill is passed as currently drafted. But there’s one piece of legislation that advocates have been calling for, for years, which didn’t make the cut: an increase in the benefits for the poorest of the poor elderly and disabled who receive Supplemental Security Income, or SSI.
Here’s a quick refresher on what SSI is: benefits are provided to the elderly (those 65 and over) as well as to disabled individuals with no or very low incomes as a means of topping up Social Security Old-Age or Disability benefits, for those with low earnings history, or replacing them, for individuals who never had enough work history to qualify in the first place, such as people with life-long disabilities. (There are also benefits for disabled children, which is something of a different story.) For those with no wages, SSI tops up Social Security to a benefit of $794 per month for an individual or $1,191 per couple. (About half of the elderly SSI recipients and about a quarter of disabled adult recipients also qualify for Social Security benefits.) That’s not much — it works out to about 75% of the federal poverty rate for a single person, or maybe about 90% adding in Food Stamps and Heating Assistance. For a couple, the added benefit works out to a bit under 100% of the two-person poverty rate with the extra assistance. And, of course, recipients also qualify for Medicaid, though this doesn’t translate into additional income so much as a harder-to-quantify alleviation of a common expense. (Some states also provide a supplemental benefit but there is no easy summary of these amounts.)
The benefits are provided in full for recipients with no wage income at all, and the first $65 per month of work or “earned” income (including employer pensions) are excluded from eligibility calculations, but for every dollar earned after that, $0.50 is deducted from the SSI benefit, so that at a monthly income of $1,673, or $20,076 annually, the benefit phases out entirely. In part for this reason, although among all those 65 and up, 20% continue to work, only 1.3% of elderly SSI recipients work. There are also strict asset limits, disqualifying potential recipients who have assets of more than $2,000 (or $3,000 for a couple), not counting a car or a house but including 401(k) or other retirement accounts. There are also reductions in benefits for recipients who receive “in-kind” help from others, such as (at least in principle) grocery help from family members or a rent-free place to live. What’s more, these limits — the asset limit and the $65 income exclusion — have not been updated since 1989 and 1972, respectively.
And that’s the context for efforts to improve the SSI program through the Supplemental Security Income Restoration Act, a bill which had its first iteration in 2013, with a long list of supporters, but had never managed to secure passage, and has now taken the form of the Supplemental Security Income Restoration Act of 2021. Unlike many of the provisions of the ‘Build Back Better’ Reconciliation Bill, we have a true cost estimate for this bill, because, although supporters had been hoping to see it included in the larger bill’s provisions, it is for the moment a stand-alone bill.
This legislation would increase the benefits provided in SSI, and the numbers of individuals eligible for them, in a number of ways. The most substantial part of the bill would increase the basic benefit amount up to 100% of the single-person poverty rate, and provide that benefit on a per-person basis (that is, doubled for eligible couples), at a cost of $350 billion for 10 years. (This is a “true” cost without any tricks of phase-ins or phase-outs as are being used for many of the Reconciliation Bill provisions.) In addition, the bill would
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- Increase the general income exclusion from $20 to $128 per month, and the earned income exclusion from $65 to $416 per month, and further increase these limits annually based on the CPI-E at a cost of $60 billion over 10 years;
- Increase the asset limit to $10,000 per individual, doubled for couples, likewise increased with inflation, at a 10 year cost of $8 billion;
- Eliminate the consideration of in-kind support such as food and housing, in determining eligibility and benefits, at a 10 year cost of 31 billion; and
- Exempt qualified retirement savings from being counted as “income” for purposes of eligibility, with a negligible effect over the next 10 years (though with no comments on future effects as more people with IRAs and 401(k)s reach retirement age),
a set of changes which add up to $510 billion in cost increases over 10 years. Split by age group, 13% of the cost would go towards increases in children’s benefits, 46% towards increases in working-age adult benefits, and 41% toward increases in benefits for the elderly.
With these new benefits and income limits, the point at which benefits would phase out entirely would shift from $19,836 of earned income, for a single retiree, all the way up to $30,744. (The income exclusion amounts are the same for unmarried individuals and for couples, so the threshold for couples is not double, but $56,496 due to the higher base benefit.) For those eligible for both SSI and Social Security, their total combined benefit could increase from today’s current “extra $20” to an extra $128 per month.
For some advocates, even this bill doesn’t go far enough. Sen. Bernie Sanders has proposed an increase not only to 100% of the poverty rate but up to 125%. The Center for Budget and Policy Priorities has called for Social Security to be treated as “earned income,” so that each dollar of Social Security decreases SSI by only 50 cents; this group has also called for immigrants to be eligible for SSI without needing to become US citizens, and for SSI to be provided to US territories on the same basis as the 50 states.
So why didn’t SSI make the cut, when the Democrats compiled their list of programs for the “American Family Plan”? Do some of these changes go too far, increase benefits too much? Did they want to avoid opening up a can of worms with respect to larger plan design issues with the system, for example, concerns that the children’s benefits have become an “alternative welfare system” providing benefits for children equal to those for adults, even with mild conditions such as ADHD, that mean no one wants to touch the system?
Or does an enhancement of SSI benefits simply fail to meet the Democrats’ objective of making voters happy with broad outlays of cash benefitting the middle class as well as the poor?
As always, you’re invited to comment at JaneTheActuary.com!