How Women Could Lose in a Grand Bargain

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As the fiscal cliff looms, acknowledging the risks of entitlement reform

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Erskine Bowles, co-chairman of the National Commission on Fiscal Responsibility and Reform, after a closed-door meeting with House Speaker John Boehner on Wednesday (J. Scott Applewhite/AP Images)

Women. Even though we are increasingly likely to be better educated than men, we earn less over our lifetimes. We're more likely to take on the caretaking of everyone from children to elderly relatives. We do more in the way of housework than our spouses. We might live longer, but we are more likely to come down with chronic (and costly) illnesses along the way.

And it increasingly looks like the women—especially middle aged and elderly women—will be asked to give more than men when it comes to any "grand bargain" over entitlements such as Social Security, Medicare, and Medicaid.

While the final details of any such "grand bargain" are still being worked out, we can look at what is being proposed to get a sense of what the final plan will possibly contain. There is the idea that the age of eligibility for Social Security and Medicare be raised. There is also the idea that annual Social Security benefit increases meant to adjust for inflation be slowed. Benefit cuts to Medicaid are on the table too.

And why will women suffer in particular? Women are disproportionately dependent on government services at any time of life, a situation that gets worse with age. This can be explained, not by an inability to resist a good sale on sweaters at the local mall, but as the end product of women's lower lifetime earnings, more peripatetic work history, and longer lives.

(I don't want to have an argument about whether women earn less because they choose less lucrative careers and choose to take on the care of children more often than men. I'm simply laying out the ground situation.)

As a result, women are more likely than men to rely on Social Security for a majority of their income in retirement, and would be more likely to live in poverty if not for the program. Moreover, women make up more than two-thirds of those eligible for both Medicare and Medicaid, a reflection of the fact that not only do they live poorer, they are also more likely to need the supplemental coverage for treatment of a long-term disability.

"People talk about these issues separately but they come together," said Joan Entmacher, a vice-president at the National Women's Law Center. "People are so focused on the country's balance sheet they don't think about individuals' balance sheets, particularly those of women."

So where to begin taking this apart?

Let's look at the impact of changing how Social Security cost-of-living adjustments (known by the acronym COLA) are determined. Would-be budget cutters and entitlement reformers from Simpson-Bowles Commission to the Washington Post editorial board are arguing for replacing the current formula with something called Chained Consumer Price Index (known as chained CPI). The difference between the two is estimated at somewhere between 0.25 and 0.3 percent year. The Congressional Budget Office estimates this would save the federal coffers $108 billion over a decade.

The difference—again, we are talking 0.25 to 0.3 percent—is minor at first. The problem is a problem of compounding. Start with a slightly smaller raise the first year, give smaller increases than in the past each subsequent year, and, after a few decades, we're talking real bucks.

According to numbers worked out by the National Women's Law Center, a single elderly woman currently receives a median annual Social Security benefit of $13,200. That translates to $1,100 a month. Under chained CPI, this woman would lose $56 a month by age 80, $87 a month at 90 and $101 a month at 95—that last number is a more than ten percent reduction in benefits.

"That may not sound like a lot to someone who has a lot of money, but that represents a week's worth of food to someone who lives on Social Security at age 80. If she lives to 95 it is two weeks worth of food," Entmacher said.

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Helaine Olen is a journalist in New York. She is the author of the forthcoming Pound Foolish: Exposing the Dark Side of the Personal Finance Industry.

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