Although President Reagan in September withdrew his proposals for major long-term cuts in Social Security, several earlier Reagan requests for smaller cuts had already been passed by then as part of the budget-bill process.
Those cuts will affect the amount of cash benefits received by millions of persons either already on the rolls or coming on them in the future. In addition, they will mean higher out-of-pocket medical outlays for all 29 million to 30 million people eligible for Medicare.
One of the cuts--elimination of the minimum benefit--is under review by Congress, which in all likelihood will restore the minimum guarantee for most of the 3 million people already receiving it, if not for people going on the rolls in the future. Also under review, as part of the bill that would restore the minimum, is an added cut that would limit the total amount of family benefits that may be received on the basis of one worker's earnings record.
Following is a description of all the provisions that were passed in the budget bill and those under active consideration by Congress; other cuts, so far unspecified, may soon be considered to help reduce trust fund outlays and keep the system solvent.
* Lump-Sum Death Benefit: The $255 lump-sum death benefit, formerly paid to aid in burial costs whenever an eligible worker died, was eliminated for workers dying after August 1981, except where there is a surviving wife or husband living in the home or a minor dependent child who is entitled to monthly survivor benefits. The cutoff thus would affect mainly the benefits in cases in which the worker dies and leaves no wife or dependent child. There are about 700,000 such cases a year.
* Initial Entitlement Date: The budget bill provides that when a worker and his dependents retire at age 62 and the retirement comes in the middle of the month, benefits are not retroactive to the start of that month. Instead, benefits start only after the worker has been fully eligible for a calendar month. This provision was effective Sept. 1. In practice, it means that if the worker became 62 in the middle of October, for example, he would not have gotten a check Nov. 3 covering the entire month of October; instead, he would get his first check Dec. 3 covering the month of November.
* Parents' Benefits: At present, a parent who is not otherwise eligible for a monthly Social Security benefit can get one if he or she is caring for an eligible child under 18. The budget bill reduced that age to 16, effective in two years for about 190,000 persons already on the rolls and in September for newly eligible people. About 20,000 people will be affected by the provision involving the newly eligible in the first year. The child could still get the benefit until 18, but the added payment to the mother or father (the most common situation is a young widow with a child) would stop when the child reached 16, except if the child were disabled.
* Earnings Limit: Under existing law, Social Security beneficiaries with jobs can earn anything they like without penalty if they are 72 or over. If they are younger than that, their benefits are reduced if wages exceed certain amounts (dividend and interest income isn't counted). The exemption age had been scheduled under existing law to drop to 70 in 1982. However, the switch to age 70 was delayed in the budget bill until 1983. The Social Security Administration said about 200,000 people would be be affected. The earnings cutoffs, incidentally, will be $4,440 in 1982 for people under 65, and $6,000 for people 65 through 71.
* Rounding: Most people will barely notice it, but for benefits after August 1981, the Social Security Administration will round down benefit amounts for all to the nearest 10 cents at all stages of benefit calculations except the last, and then round the final benefit to the nearest dollar. These pennies add up and will save the government (and cost beneficiaries) $420 million a year by calendar 1986.
* Worker's Compensation Offset: Under existing law, if a worker is disabled and as a result is receiving both Social Security disability payments and workmen's compensation payments, and the combined benefits exceed 80 percent of previous average earnings, then the Social Security disability benefit is reduced enough to bring the combined benefits total to the 80 percent figure.
The budget bill provided that not only worker's compensation would be included in this offset system but also certain other types of income. Henceforth, the Social Security disability payment will be reduced not only if it plus worker's compensation exceed the 80 percent figure, but also if the employe is receiving any disability payments based on federal, state or local employment, with some exceptions. This provision would apply only for those starting on the Social Security disability rolls in September 1981 or later. About 80,000 people would be affected in the first year.
* Student Benefits: Under previous law, a child who was receiving a monthly benefit as the survivor or dependent of a worker would normally be cut off on reaching age 18, unless in school, in which case the monthly benefit continued until age 22. The budget bill phased out this entitlement and, in the future, the cutoff will be age 18.
In general, those who are already receiving the child's benefit by August 1981 and are enrolled in college by May 1982 will continue to get the benefit until they finish or reach 22. However, they will not receive cost-of-living increases, and beginning in September 1982 the amount of each person's benefit will be reduced by 25 percent each year. Also starting in 1982, no benefits will be paid in summer months (May through August). Under these provisions, all benefits for college students 18 or over will cease after July 1985. About 770,000 persons were on the student benefit rolls at the time this provision passed.
* Minimum Benefit: Under previous law, if a person's basic benefit computed out to less than certain amounts, he or she started with a special minimum benefit, ranging in most cases from $122 a month to as high as $170, depending on a variety of factors, instead of the lower earned amount. The budget bill, at Reagan's insistence, wiped out the minimum benefit guarantee, effective in November 1981 for persons newly entitled to benefits and at the end of March 1982 for about 3 million persons already on the rolls. These persons were not to lose their entire benefit; they'd just get the lower earned amount instead of the minimum.
The public outcry against this retroactive reduction of benefits was so great that the House on July 31 -- the same day it passed the final version of the budget bill -- passed an additional measure restoring the minimum benefit guarantee for both existing and future beneficiaries.
Subsequently, the president backed off his earlier position and the Senate also voted to restore the minimum benefit for most of the 3 million recipients already on the rolls. The exceptions were persons residing outside the United States (about 30,000 minimum beneficiaries were estimated to live outside the country), and up to 350,000 persons who were receiving federal, state or local government employe pensions. These 350,000 would have their minimum benefit cut to the extent that their federal, state or local pension exceeded $300 monthly. If it did, the "windfall" portion of their Social Security minimum benefit would be cut dollar for dollar to the extent the other pension exceeded the $300 figure.
The Senate version of the bill did not restore the minimum guarantee for future beneficiaries except for nuns going on the rolls in the next 10 years.
A final decision on whether to take the House or Senate restoration provision for the minimum benefit was awaiting congressional action.
* Family Benefit Limit: Under existing law, when a worker retires or dies, one or more of his dependents may be entitled to dependents' benefits, but the extra benefits combined cannot exceed an additional 88 percent beyond what the worker gets. Thus, the family maximum (including the worker's benefit) is 188 percent of the worker's benefit. The Senate Finance Committee bill to restore minimum benefits reduces this family maximum. Under the bill, the family maximum would be 85 percent of the worker's earnings prior to death or retirement, or 150 percent of the worker's earned benefit. The fate of this provision awaits congressional action.
* Medicare Cuts: The budget bill contained several Medicare provisions that will force beneficiaries to pay more. The initial deductible that the Medicare patient pays when he goes into the hospital, which was about $204 and was scheduled to rise to $228 in 1982, will go to about $260 then instead and will rise to $328 by 1984. The coinsurance that the same patient pays for each day in a hospital more than 60 days or in a skilled nursing facility for each day beyond 20 days, will automatically also go up since it is set at a quarter of the deductible. The $60 deductible that patients must pay for out-of-hospital doctor costs before Medicare Part B benefits kick in was raised to $75. Other Medicare changes, reducing federal reimbursements to hospitals for nursing and room and board costs of Medicare patients could eventually end up shifting added costs onto the patient, though that isn't clear yet. graphics1: (Illustration by Steve Mendelson-TWP)