AARP – The State of 50+ America

William D. Novelli, AARP Executive Director and CEO

Those 50 and older in the U.S. are—in a word—vulnerable. And, by most indications, that vulnerability is increasing. Like everyone else, for those 50+, homeland security is on everyone’s mind.

But, 50+ Americans increasingly are also threatened by the increasing vulnerability to their health security and their economic security, the effect this has on the day-to-day decisions that impact their lives and the long-term effect on their quality of life.

A recent study by Harris Interactive found that higher out-of-pocket drug costs are causing massive non-compliance in the use of prescription drugs. Millions of Americans do not ask doctors for the prescriptions they need, do not fill the prescriptions they are given, don’t take their full doses and take their drugs less often than they should. Moreover, the higher people’s out-of-pocket costs for drugs, the more likely they are to be non-compliant.

We hear from our members every day on this. It is a huge and persistent problem that is getting worse. It affects not just low-income seniors, but middle-class people on fixed incomes, as well.

There is really only one way to cope with this.

America needs to have affordable drug coverage in Medicare, along with cost containment so that a Medicare benefit can be sustained.

In the current economic situation, there is also a major problem with Medicaid and the states’ ability to sustain these programs. Forty states currently face Medicaid shortfalls driven by unsustainable drug costs.

And American businesses large and small are feeling the squeeze of high drug costs. Many are dropping drug coverage or requiring employees and retirees to pay significantly more.

Another part of the vulnerability of older Americas is that these are increasingly difficult times for people planning retirement. In addition to the high costs of prescription drugs, shrinking retiree pensions and health coverage are adding to their burden. Today, roughly half of all American workers do not have any type of pension benefit, and many lack the savings needed for a secure retirement.

For those fortunate enough to have a pension benefit, the declining stock market has decreased the value of their retirement funds and other investments.

Recently, we did a survey of stockowners between 50 and 70 years old and found that 80 percent reported losing money over the past two years in individual stocks, mutual funds, or other stock investment accounts, including 401(k) plans. One in four lost over 25 percent.

And even those with traditional guaranteed plans have seen an erosion in value as a result of the trend toward cash-balance plans. Among those still working, one in every five said they have had to postpone retirement as a result of their losses. And many people have gone back to work.

These trends again remind us that today it takes four pillars to build a secure retirement: Social Security, savings and pensions combined, continued earnings from work and adequate health insurance. They all work together to determine the size and value of your retirement nest egg.

With the continuing stress on pensions and saving, the pressure created by the high rate of uninsured and the lack of protection from high drug costs, preserving Social Security’s guaranteed benefit and strengthening Social Security for future generations is more vital than ever. For many, it will be the only source of guaranteed, lifelong, inflation-protected retirement income.

What can we do about this trend of increasing vulnerability for 50+ America? Let me tell you what we’re doing here at AARP.

We’re going to focus our advocacy work and our resources this year in four critical areas:

1. Prescription-drug coverage in Medicare and Medicare reform… We almost made it last year even though no one thought it was possible. We face a new set of challenges this year, but we also have some new opportunities as well.

It’s easier because it was promised to the American people by candidates and elected officials in the last election, this is an issue that Senator Frist has focused on in the past and has stated that he wants to see it accomplished, enactment of a prescription drug benefit is now conventional wisdom, and the 2004 election year is around the corner.

It’s harder because there is less money available, the benefit will cost more because an additional year has passed, there are more competing priorities, and the 2004 election year is around the corner.

2. State budget cuts related to health concerns, namely Medicaid and long-term care benefits. As I said earlier, the states are really hurting to find ways to balance their budgets, and we want to make sure that as they do that, the most vulnerable in our society, especially kids and the elderly, don’t bear the full burden.

A few years ago, we realized that more and more of the services that our members need are being legislated, regulated, or delivered at the state level, so we set out to shift more of our efforts to state advocacy. Last year, was our first to have all of our state offices fully-staffed and operating. We’ve had a very substantial impact in the states because of that, and we’ll be even more effective this year.

3. The Uninsured…This is a tremendous problem, especially for our members age 50-64, as well as other groups. We will be working with the Robert Wood Johnson Foundation and other national groups to bring attention to this issue.

The Maine Rx case argued before the Supreme Court yesterday illustrates this. The state said it primarily meant its program to go beyond Medicaid to help uninsured residents who can’t cover their prescription drug costs.

4. Economic Retirement Security… Again, this is an issue that is hitting people in the face every day. It has many facets to it that we will address: pension protections and reforms, Social Security, increasing savings and older worker issues-especially as many people have had to postpone retirement because of declining stocks and other problems with pension funds.

These will be our four focal points for the year. We will, however, continue to work on other issues including predatory lending, utility issues, long-term care quality and safety.

Decreasing the vulnerability of 50+ America requires immediate action. Prescription-drug coverage in Medicare, strengthening Medicare, Medicaid and long-term care, the state budget crises, the 40 million uninsured in this country, and economic security issues such as pensions, Social Security and others…These are critical urgent issues that require our immediate attention.

Looking out a bit further than just the year before us, the U.S. needs to begin to adapt our policies, programs and institutions to meet the needs of the aging baby boom generation. The first baby boomer will turn 65 in eight years. That’s only four election cycles—2 presidential elections—away. In public policy time, that’s like tomorrow. So, we have our work cut out for us, and we need to get started now.

We’ll be glad to take your questions.