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Bill Novelli is CEO of AARP, a membership organization of 40 million people age 50 and older, half of whom remain actively employed. AARP’s mission is to enhance the quality[…]

New Deal reforms have become obsolete, our surplus is running out and our Medicare system is no longer sustainable, Bill Novelli reports.

Question: Are we headed for Social Security and Medicare crises?

Bill Novelli: Social Security and Medicare are problems. They’re problems waiting to happen. If you look at Social Security first of all, we’re gonna have a problem in about 10 years. Right now we’re sort of in surplus, but the Congress is spending the surplus money. And what we need to do is we need to look at both sides of the Social Security equation. We need to figure out a way to get more revenues into the system, and a way to adjust the benefits. We’ve got to take into account longevity. Social Security was set up when, you know, people lived to be 65. Now they live to be 85. And so we need to do something about that. But this is . . . this is not rocket science. This is something that we could do if we sat down and the two parties reasoned together. And so that’s what . . . that’s what makes it so frustrating. From a Medicare standpoint, Medicare is not sustainable in its current form; but that’s because healthcare is not sustainable in its current form. Medicare is kind of a subset of healthcare. And it’s the healthcare system that we have to fix.

Question: How can we fix Social Security and Medicare?

Bill Novelli: Social Security is . . . as big as it is, it’s the easy one. What we could do is get the two parties together. And what I’ve been saying in Congress is, “Look. It’s going to take two miracles to fix Social Security. One miracle is that you Republicans and Democrats are gonna have to sit down at the same table, and reason together, and come up with a fair, equitable plan for long term solvency. And the second miracle is that the public is gonna have to buy it.” And I think that AARP can help deliver on that second miracle. When we go out and talk to our members and other, you know, elements of the public, we lay out social security. We tell them what the problems are, and they are willing to engage. It’s not the third rail that politicians like to talk about. So we can get that one done. Political will is what we need. The other one, Medicare, as I say . . . the conversation we had on . . . on healthcare is where we have to go. We’ve gotta squeeze down costs, which we can do. We’ve gotta cover the uninsured, which we can do. And we’ve gotta improve quality of care through things like health information technology and electronic prescribing so that we cut down the errors in healthcare and improve the quality of care. We can do all these things, but it’s very hard because of the complexity of the system, and because of the political stalemate in which we find ourselves.

Question: Should we raise the retirement age?

Bill Novelli: It’s a tough question. People do not like that idea. Now you know if you’re 41 or under right now, you’re gonna have to work ‘til you’re 67. But at the same time, many people want to work into their older years. There’s another way to think about it which has been called “longevity indexing”. And some countries do this. And what they basically say is, “Okay. Let’s actuarially figure out how long you’re expected to live. And we’ll give you your Social Security money stretched over that period of time.” So you will get less money per year over a longer period of years. That’s one way to think about it. There are a lot of ways to consider fixing the system.

Recorded on: 9/27/07