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6 Realities of the 'New Normal' for Seniors

Philip Moeller

When President Obama gives the State of the Union address Tuesday, it will doubtless be filled with aspirational calls to improve lives in the United States and throughout the world. It will call for action on many fronts. It will positively frame great opportunities for the country and its citizens.

What it won't do is change the increasingly clear picture of where the country and its people are headed. After a tough recession and an unsatisfying, long recovery that is still far from over, the nation seems set on a course whose direction has been set. In many ways, the future we will face will not be surprising. Here are six realities for seniors:

1. Working. Nearly a third of men and women between ages 65 and 69 are still in the U.S. workforce. The percentage will rise, as will the shares of even older people who are still drawing down or seeking regular paychecks. There is no way this can happen without changing the nature of some types of work. It will trigger new and not always welcome changes in how older employees are regarded. But along with the steadily rising share of seniors in the general population, the aging workplace will force society to adapt. Seniors will at once be more accepted and not so special.

[Read: Why More Americans Are Working Past Age 65.]

2. Incomes. Try looking for economic forecasts that predict a future of rising incomes, a renewed middle class, or the dawning of a new age of material prosperity for Americans. You won't find them because, outside the fringes, they don't exist. Foreign competition and the relentless automation of work itself will keep a lid on real income gains. Economic disparities between people with and without college degrees already are large. Yet even households with lots of education will hardly have free rides. Psychology gurus will push the virtues of living better with less. But making enough money will remain the nation's unofficial pastime.

3. Taxes. We all know taxes are headed higher and that further increases are likely on the way. National, state, and local governments can't balance their budgets on spending cuts alone. Many people believe otherwise until confronted with the reality of reduced support for education, social services, and other favored programs.

Beyond higher taxes, though, it seems likely that the role of taxes in our lives has been raised to a higher level, and it will stay there for the rest of most seniors' lives. Tax reform, whatever that really means, will be in the news for years. Taxpayers thus will face continuing uncertainty about how IRS rules may change.

And while Obamacare largely has an oblique effect on people on Medicare, it does rely heavily on income means testing. This will be felt as we enter the brave new world of state insurance exchanges, expanded Medicaid programs, and big changes in the role of employer-based health insurance. Directly and indirectly, health insurance will involve complex and confusing tax issues for all of us.

4. Medicare. Medicare remains one of the great bargains for seniors. Beyond their payroll taxes to help fund the program, most people receive benefits several times greater than what they've paid in. Uncle Sam, of course, foots the bill for the difference and much of the money it spends to do this comes not from other federal taxes, but from deficit spending. As lawmakers and bureaucrats struggle with ways to at least restrain if not cut healthcare deficits, seniors will be affected in these ways:

Coordinated care among all a patient's healthcare providers can save money and improve the quality of care. Expect much more of this.

[Read: How Personal Health Reform Taxes Will Work.]

Healthcare providers will slowly move from being paid for performing procedures to achieving results (coordinated care enables this transition as well). Expect more free wellness programs and heavier emphasis on preventive medicine.

Medical technology will explode. Seniors will have a unified health record that members of their diverse healthcare "team" will share, leading to better care and fewer healthcare mistakes. Aging-at-home programs will take off because of the effectiveness and cost savings of remote technology services.

The range of Medicare insurance programs will be reduced. Obamacare's state insurance exchanges are based on standardized insurance packages, and this approach will spread to Medicare. This will save money but narrow consumer choice as well. Wealthier seniors will migrate to concierge medical practices and pay to retain their healthcare options.

5. Social Security. Defenders and critics of Social Security both make outlandish claims about the program. But in the end, the program's financial imbalances require relatively small fixes, not a big overhaul. Any changes to Social Security will be relatively modest, take effect over a long period, and have relatively little effect on anyone past the age of 55.

[In Pictures: 10 Places to Retire on Social Security Alone]

The one exception is adopting a new price index to use in the program's annual cost of living adjustment. Using the so-called chained CPI instead of the current measure would represent a real cut in benefits for many, if not all, seniors. If AARP and other program protectors cannot head off adoption of the chained CPI, they will try to strengthen benefits for lower-income retirees and pay for them through higher payroll taxes on wealthier wage earners in return.

6. Immigration. Seniors will be living in an increasingly multicultural society with a decided Hispanic influence. With both political parties and President Obama in broad agreement on immigration reforms, the country will become the legal home of more foreign-born residents. Historically, immigrants fill many of the nation's service jobs, and this includes being caregivers. Given the rise in senior populations and their corresponding need for more care, increasing the immigrant workforce could be a very good thing.

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