Weekly Update for Week Ending August 7, 2020

Weekly Update for Week Ending August 7, 2020

Despite the coronavirus emergency, TSCL is continuing its fight for you to protect your Social Security, Medicare, and Medicaid benefits.  We have had to make some adjustments in the way we carry on our work, but we have not, and will not stop our work on your behalf.

Last week there was major news concerning Social Security, Medicare, and prescription drug prices – or at least so it seemed.  But “the devil is in the details” and we will try to sort it out for you below.

Congress Fails to Reach Agreement – President Takes Action

Last May the House of Representatives passed a second coronavirus-related economic stimulus bill that addressed the on-going economic and medical hardships resulting from the pandemic.  The legislation, which passed the House, included over $1 trillion in relief for state and local governments, around $200 billion in hazard pay for essential workers, and $75 billion for coronavirus testing and contact tracing.

It also included a second round of direct payments of $1,200 per person, and up to $6,000 per household.  The bill also extended the $600 per week federal unemployment insurance benefit through January, which expired at the end of July.

However, Senate Majority Leader Mitch McConnell (Ky.) refused to bring the bill up in the Senate for debate or a vote.  As a result, Congressional leaders have been struggling over the past few weeks to come up with legislation to deal with those issues to help those Americans who have been hurt so badly by the virus and the horrible economy that has resulted.

Unfortunately, the Senate disagreed among themselves about what to do and they were unable to craft a bill that could pass the Senate.

Last week, in a last ditch attempt to try and come up with new legislation,  Secretary of the Treasury Mnuchin and White House Chief of Staff Meadows met with the leaders of the House and Senate see if they could reach a compromise.  They could not. One of the big reasons was the overall cost of the legislation and in the amount of money that would be given to those who are unemployed because of the pandemic.

There is a wide difference in what the White House and Democrats want to give states and localities, plus school funding, virus testing, and other issues. The difference between Democrats’ $3.5 trillion aid package and Republicans’ $1 trillion appeared unbridgeable. Treasury Secretary Steven Mnuchin rejected House Speaker Nancy Pelosi’s offer of a compromise $2.4 trillion. As a result, President Trump on Saturday signed what have been largely referred to in the popular press as four executive orders dealing with the issues that had been under discussion.  However, it turns out that is not exactly what happened.

The President ordered a payroll tax deferral, not a cut, meaning the taxes will not be collected for a while but they will still be due at a later date.  However, some observers have suggested that rather than give employees the additional money and then try to collect it back from them at the end of the year, employers will simply hold onto the money so that the employees would never see it in their paychecks.

A second of the measures the President signed on Saturday aims to provide $400 in weekly unemployment aid for millions of Americans. Trump said 25 percent of this money would be paid by states, many of which are already dealing with major budget shortfalls. The federal contribution would be redirected from disaster relief money at the Federal Emergency Management Agency. Those funds are not likely to last more than two months, and the President did not say when the benefits would kick in.

The other two actions are related to eviction protections and student loan relief.

On housing, the President instructed key officials to “consider” whether there should be a ban on evictions. He also insists that state governments pick up the tab for some of the unemployment aid.  But there are serious questions about whether states have the finances to pay the additional amount.

It is likely the President will face a legal challenge over these actions. The U.S. Constitution gives Congress the power of the purse and any changes to taxes or spending are supposed to come from Congress.

As we said above, the devil is in the details. Rather than signing four “executive orders,” the only real executive order was the one on housing. The other three actions are marked as “memorandum,” which carries less authority.

First, on the payroll tax, he delayed payroll tax collections for those making under $104,000.  President Trump instructed the U.S. Treasury to halt collection of payroll taxes from Sept. 1 through Dec. 31 for workers who earn under less than $4,000 every two weeks (that’s people earning under about $104,000 a year).  The President has the authority to do this because it is not actually a tax cut, but rather a tax deferral, which will, as we said, have to be repaid by workers at a later date.

Congress already had deferred most employer payroll taxes for the rest of 2020, so the President is now attempting to defer workers’ payroll taxes. This relief only applies to people who are working and collecting a paycheck. Most importantly for seniors, if the taxes were not repaid, it would move the Social Security Trust Fund more quickly toward insolvency.

On the unemployment payments to individuals, there are a lot of legal questions about the money the President wants to use to pay for this. He calls for $44 billion of funding from the Department of Homeland Security’s Disaster Relief Fund that is normally used for hurricanes, tornadoes, and massive fires to be shifted over to unemployment.

The federal contribution would be redirected from disaster relief money at the Federal Emergency Management Agency (FEMA). Those funds are not likely to last more than two months, and the President did not say when the benefits would kick in.

Furthermore, this hurricane season is predicted to be a very bad one and money taken from FEMA for unemployment payments may be needed to deal with the destruction caused by the storms.  What is more, the California fire season appears to be underway and federal funds are often used for relief efforts with those.

On halting evictions, the President has said many times in recent days he wants to prevent them. The President called for Health and Human Services Secretary Alex Azar and Centers for Disease Control and Prevention Director Robert Redfield to “consider” whether an eviction ban is needed.

He also did not provide any more money to help renters. The executive order calls only for Treasury Secretary Steven Mnuchin and Housing and Urban Development Secretary Ben Carson to see if they can find any more funds to help. It does not promise more aid.

The President’s final memo waives all interest on student loans held by the federal government through the end of 2020 and allows people to delay payments until Dec. 31.   This will help those who are repaying student loans.

There will likely be court challenges to the President’s actions, making it unclear how quickly any money would reach the unemployed. On top of that, it is unclear how many states will want to participate in this enhanced unemployment program or how many companies will want to suspend payroll taxes for employees only to have to pay them in 2021.

TSCL is strongly opposed to any cut in the payroll tax and we have lobbied aggressively against one.  The 2020 reports from the Social Security and Medicare Trustees projected that the Social Security trust funds will become insolvent in only 15 years.  At that time, all Social Security beneficiaries would face a 21% benefit cut in benefits that would eventually go to 27%.

As far as Medicare goes, the Part B funds will last for 30 years but the Part A funds, which pays inpatient hospital costs, will become insolvent in only 6 years.  Both of those projections assume that nothing will be done before then to fix the programs, and TSCL has been working to get Congress to come up with a plan to stop those cuts from taking place.

Cutting the payroll tax permanently, which President Trump said he would seek to do if he is re-elected, would bring insolvency even closer and make the whole situation so much worse.

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Trump Issues Executive Order on Prescription Drugs

President Trump signed an executive order Thursday directing the federal government to buy certain drugs solely from American factories.

The so-called “Buy American” order could represent a seismic shakeup of the drug industry: No one knows exactly how much of the American drug supply chain is produced abroad, but some experts say that up to 90% of critical generic drugs are made at least partially abroad.

It remains unclear, however, how broadly the order will be implemented — the executive order does not specify what drugs it covers. Instead, the order directs the Food and Drug Administration to decide which medicines will be subject to the new requirements. Certain drugs can also be exempted from the executive order if they are too expensive to make in the U.S. or the U.S. is not already making them.

Government officials, like the head of the Department of Veterans Affairs, can opt out of buying American drugs if the product is not produced “in sufficient and reasonably available commercial quantities” in the United States or buying the product in America would raise procurement costs by 25 percent.

The order covers certain medical supplies that are deemed essential, as well.

The President’s proposal is likely to increase the already-escalating tension between the drug industry and his administration. The new order comes on the heels of the four executive orders he issued regarding drug prices two weeks ago.

In addition to drug manufacturers, major business groups and 32 conservative organizations to his actions and have been lobbying The President to change his mind.

They claim that a “Buy American” order could raise domestic drug prices, since both labor and materials are much more expensive in the U.S. — which could cut against one of The President’s signature health care planks going into the November election.

“Taxpayers and patients will pay more for drugs and medical supplies,” a group of more than 250 economists warned in a letter to the White House earlier this year.

Two weeks after President Trump signed an executive order "Lowering Drug Prices by Putting America First," the White House still has not released the text of the order. The unorthodox move is apparently a leverage play, an attempt to squeeze drug companies into offering concessions.

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And one last Executive Order

President Trump also said this last weekend that over the next 2 weeks he will pursue an executive order requiring health insurers to cover pre-existing conditions.  “We will be pursuing a major executive order” on pre-existing conditions, Trump said during a news conference in N.J.

However, the ACA, also known as “Obamacare”, already requires health insurers to cover pre-existing conditions.  We are not sure why The President said what he did, except that his administration is in court trying to have the ACA declared unconstitutional, and maybe he anticipates a need for his order.

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For progress updates or for more information about these and other bills that would strengthen Social Security and Medicare programs, visit the Bill Tracking section of our website or follow TSCL on Twitter.