By Richard Fleming, M.D., Benicia resident and author, Older But Wiser. June 9, 2025

The new tax and budget bill signed into law July 4 will have substantial negative impacts on almost everyone in the country, except for the wealthy. Lower-income people will take the biggest hit. The bottom 20% of families will lose about $700 per year, while the top 20% of families will gain $5,700 per year (data from Yale Budget Lab). The new law orchestrates one of the biggest transfers of wealth from the poor to the rich in U.S. history.

While the new law will have widespread economic, social, and political effects, I want to focus this post on several ways seniors will be impacted. The consequences on our lives will likely be big, and they will not be beautiful.

For decades, we old folks have been able to rely on helpful government programs as we navigate the challenges of our post-retirement years. We have been able to count on benefits we earned through decades of hard work. In particular, both Social Security and health care – especially Medicare and Medicaid – have been programs we could depend on to provide a measure of stability in our senior years.

Well, those days appear to be over and the support we receive from those programs is on shaky ground. Let’s look at what we oldsters are now facing.

Social Security

The Trump administration proclaims that its new law “eliminates federal income taxes on Social Security benefits for most beneficiaries.” Simply stated, this is not true. The new law actually makes no changes to taxes on Social Security. What the law does is temporarily increase the overall personal withholding amount for people 65 and older. Individuals who earn less than $75,000 per year or couples earning less than $150,000 can claim an extra $6,000 or $12,000 personal deduction. These amounts taper down to zero as income rises. So, for people with moderate incomes, they will see a temporary reduction in federal taxes on total income, not specifically on Social Security payments.

But a closer look shows how limited this tax change really is. Currently 64% of seniors pay no tax on their Social Security benefits because their income is too low. So they will experience no benefit from the new law. Some seniors earn more than the income limits, and they too will see no change in their taxation levels. Only 24% of all seniors on Social Security will benefit from the new law (data from the White House’s Council of Economic advisers). And it will be modest and temporary. Three quarters of seniors on Social Security will see no tax reduction.

But misrepresenting the new law as “no tax on Social Security” is not the worst problem. The law actually inflicts serious damage to Social Security itself. It reduces the money going into the Social Security Trust Fund by $30 billion per year, meaning the program will run out of money earlier. In 2032, unless something changes, everyone’s Social Security benefit will be reduced by 24% across the board. This is mandated under current law.

We seniors have been around the block a few times. We know the carnie barkers and fancy-talking shills promising us no taxes on Social Security are just blowing smoke.

Medicare and Medicaid

Almost all seniors get their health insurance through Medicare, and about 10% of seniors have what is called dual coverage, receiving benefits through Medicaid and Medicare. Both programs are seriously threatened by the new budget law, and seniors will probably suffer as a result.

The law reduces Medicaid spending by more than a trillion dollars over the coming decade. The most immediate impact will be on people who rely on Medicaid for their health care, and it is predicted over 10 million people will lose their health insurance as a result. Seniors with dual coverage will remain insured through Medicare, but will have much less coverage.

But here is an important fact that is not receiving much attention. The adverse impact of the drastic cuts to Medicaid will not be limited to Medicaid recipients. All seniors, as well as younger people, will be affected. Why do I say this? Many rural hospitals are primarily funded by Medicaid and are at risk of closing. The impact on everyone living in rural areas, including all seniors, could be devastating.

Even in urban and suburban areas, every hospital receives substantial funding from Medicaid, and this income will be reduced by the new law. What will be the result? Hospitals will feel pressured to increase billing charges across the board. Copays for insured patients will likely increase. Seniors will end up having to pay more for their health care even if they are not on Medicaid. Quality of care and service could also suffer as hospital revenue declines.

Long term care facilities will face similar financial pressures as Medicaid funding is slashed. Many old folks reside in these care facilities, or will need to as our years accumulate. The new law also allows nursing homes and long term care facilities to reduce staffing levels. Having fewer facilities available, at higher costs, with less staff, is not a prospect most people would describe as “beautiful.”

While Medicare is not explicitly targeted, the new law forces a $490 billion reduction in Medicare spending between 2027 and 2034. This decrease is not optional. It is mandated by a 2010 law known as S-PAYGO. What will happen when Medicare spending is reduced? I’m not a rocket scientist, thank goodness, and you’re probably not either. But we learned how to do subtraction in grade school. We know that when you take money away, you end up with less.

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I have just scratched the surface of how old folks will fare under the new law. Almost 5 million seniors are dependent on SNAP food benefits, and this program is being scaled way back. In-home care services will become harder to access and of lower quality. And other problems are waiting in the wings.

So, my fellow seniors, we have our work cut out for us. We need to speak up and speak out, in defense of our future. And in defense of our children’s and grandchildren’s futures. We old folks carry a certain air of, shall we say, gravitas which enables us to speak more powerfully than the volume of our voices.

The cuts made by the new law do not go into effect until after the 2026 midterm elections, which confirms the architects of these cuts knew how unpopular they will be. Our job is to make sure the new Congress elected next year will put a stop to these cuts before they start. We need to make sure the legacy we leave the future generations is not a return to the 19^th century.

………Dr. Richard Fleming’s
……….OLDER BUT WISER
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