An Overview of Christie's Entitlement Reforms: Five-Year Outlay Savings

January 25, 2016
Demian Brady
Chris Christie

Chris Christie released a detailed 11-point plan with reforms for Social Security, Medicare, Medicaid, and Disability Insurance. He has stated that it would save $1 trillion. We don’t dispute that the long-term savings would be significant. However, long-term estimates come with a degree of uncertainty due to unforeseen economic and demographic changes. And as we’ve witnessed recently, Congress has already more than once re-visited the Budget Control Act to reverse some savings that had been enacted into law. For these reasons, NTU Foundation uses a five-year window on cost estimates.

Below is a list of Christie’s reforms that would impact spending (excluding one revenue-only proposal for a reduction in Social Security payroll taxes for working seniors) with notes and references regarding each point’s potential savings. Of the 11 points in his plan, NTU Foundation verified five-year savings for six items. One item would only impact revenues, and the savings for four options are indeterminate.

In total, NTU Foundation identified $201.96 billion in savings over the first five years after implementation, or $40.39 billion per yearIf the reforms are maintained, savings per year would be higher over the long-term.

In order to get the budget deficit under control, lawmakers will have to address entitlements. The latest Congressional Budget Office budgetary and economicoutlook shows that mandatory spending will increase by 6 percent per year over the next ten years, while discretionary spending will increase by 2 percent.


Social Security

Means Test Social Security Benefits

            Cost per Year: -$6.222 billion (-$31.11 billion over five years)

Notes: Current retirees would not be affected. Future retirees with incomes above $80,000 would receive benefits on a sliding scale. Those earning $200,000 or more would not receive any benefits under his plan.A 2011 study from the Center for Economic and Policy Research indicated that eliminating Social Security benefits for those making over $200,000 per year would result in savings of about 0.6 percent of Social Security outlays. Based on data from the Congressional Budget Office, eliminating Social Security benefits for those earning over $200,000 per year could save about $6.2 billion per year over five years. An estimate for the phase-out is not currently available.

Raise Social Security Retirement Age to 69 in 2 Month Increments

            Cost per Year: -$540 million (-$2.7 billion over five years)

Notes: In 2013, the Congressional Budget Office estimated the budgetary impact of increasing the full retirement age for Social Security by one month per year. CBO determined that this budget option would save $5.4 billion over five years and $58.2 billion over ten. Since Governor Christie's proposal would double this timeline, NTUF assumes that this proposal would – on a static basis – result in roughly half of those savings ($2.7 billion over five years, $29.1 billion over ten).

Use Chained-CPI to Index Social Security

            Cost per Year: -$6.9 billion (-$34.5 billion over five years)           

Notes: In 2014, the Congressional Budget Office estimated that instituting an alternative measure of inflation to index Social Security annual COLA adjustments would save $34.5 billion over the first five years.



Means Test Medicare Premiums

          Cost per Year: -$21 billion (-$105 billion over five years)

Notes: Christie proposes to phase-in means testing premiums for Parts B and D of Medicare to 40 percent. In 2014, the Congressional Budget Office calculated a cost estimate for a related proposal that would phase-in premium means testing for Parts B and D of Medicare over several years to 35 percent, saving $105 billion over the first five years, and $299 billion over ten. While Christie's plan would produce greater savings over the long-term than the option considered by CBO, the savings would be comparable over the first five years.

Raise Medicare Eligibility Age by One Month per Year to Age 67

          Cost per Year: -$630 million (-$3.15 billion over five years)

Notes: In 2013, the Congressional Budget Office reviewed an option to raise the age of eligibility for Medicare by two months every year to age 67. While Medicare would see savings, outlays would increase for other federal programs including Medicaid and subsidies for the purchase of health insurance through the federal exchanges established in the Affordable Care Act. On net, savings would be reduced by $6.3 billion over the first five years. NTUF assumes Christie's slower phase-in would achieve half of these savings over that time period.  

Create a Uniform, Single Combined Medicare Deductible of $550

          Cost per Year: -$5.1 billion (-$25.5 billion over five years)

Notes: In 2014, the Congressional Budget Office estimated that establishing uniform cost sharing for Medicare by implementing a single annual deductible of $650, would save $30 billion over the first five years. NTUF assumes the savings under Christie's plan would be 85 percent of the option reviewed by CBO.



Institute per Capita Caps for Medicaid, Adjusted Annually for Inflation

          Cost per Year: Indeterminate

Notes: In 2013, the Congressional Budget Office reviewed an option to impose caps on federal Medicaid spending per enrollee that would be adjusted annual using Chained-CPI as the measure of inflation. Christie supports using Chained-CPI for Social Security. CBO estimates this could save $280 billion over five years, however, due to lack of specificity, it is unclear how closely Christie's plan would match the option considered by CBO.

Reform Coverage for Dual Eligibles

           Cost per Year: Indeterminate

Notes: Christie's plan states that over 9 million low-income seniors and individuals with disabilities are enrolled in both Medicare and Medicaid. Christie would coordinate their coverage through a managed care organization.  In 2011, the economist Kenneth Thorpe estimated that enrolling all dual eligibles into integrated managed care programs could potentially save the federal government $44.1 billion over the first five years. However, it is uncertain whether this estimate is still applicable given related legislation that has since been passed into law.

Require Medicaid Copay for those with Income above 100 Percent of the Poverty Line

          Cost per Year: Indeterminate

Notes: Christie would require a $10 copay for a doctor's visit and $20 for a hospital visit. A cost estimate is unavailable.


Disability Insurance

Reform Disability Insurance

          Cost per Year: Indeterminate

Notes: Christie's plan would seek reforms that attempt to keep Disability Insurance applicants in the workforce by providing incentives to employers, increasing funding for qualification reviews, encouraging vocational rehabilitation, wage subsidies, and preventive care. A cost estimate is indeterminate.

Demian Brady

Director of Research

Demian Brady is the Director of Research for the National Taxpayers Union Foundation. His responsibilities include producing commentaries and studies on fiscal issues, as well as managing NTUF's BillTally program (which tracks the impact of legislation on the size of the federal budget), State of the Union analysis, and more. Demian's research has been cited in the New York Times, the Wall Street Journal, and the Washington Times. In addition, he has written on a number of budget-related issues for both NTU and NTUF. Mr. Brady resided and worked in Columbus, Ohio before moving to Washington, DC in 1998. He earned an M.A. in Political Science from American University. He received a B.A. in Russian Area Studies from Bowling Green State University, Bowling Green, Ohio, where he graduated Magna Cum Laude and was inducted into Phi Beta Kappa. 

Related Posts

Stay in Touch

Thank you! Your submission has been received!

Oops! Something went wrong while submitting the form