July 2025
By Richard Fleming
Photo courtesy of Cal Gao
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.
* * *
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 19th century.
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Well written and on point.
I don’t agree with your comments. Trump was the only candidate who promised to decrease your taxes if he was elected. Kamala promised tax increases. Medicaid is being cut for those who are in this country illegally and the able bodied who have no legitimate reason for not looking for work. Further legislation including a second reconciliation bill will take care of rural hospitals. Social security changes are designed to help those with less income, the wealthy do not need increased benefits so benefits are fazed out for them. Under Trump’s first term, all racial groups as well as income levels improved and that will likely recur during his second term. Trump is a business man who understands payrolls and the effects of monetary policies. The last administration gave us high inflation, unlimited influx of illegal immigrants including many who have turned out to be violent criminals. If these policies do not improve the lives of our people, the voters will replace them with Democrat ideas. By the way, I haven’t heard what their ideas are and am interested in hearing how they would like to govern.
There is much we could discuss about promises made during the campaign, Trump’s first administration, and Biden’s administration, but my post was focused on how the new law affects seniors. I want to briefly address the thoughtful points you brought up about the new law, and will leave the other topics to other venues.
* Under federal law, Medicaid money may not be used for undocumented immigrants. Some states use a combination of Medicaid funding and other state funds for undocumented children or the elderly. California is the only state which provided more extensive coverage. This started in 2024, though the governor has already said the program will be scaled back.
* Most people on Medicaid are working, at low-wage jobs which do not provide health insurance. A KFF study found that 64% of Medicaid recipients are employed, 12% cannot work because of family care responsibilities, 10% are disabled, and 7% are in school.
* Under the new law rural hospitals will lose $87 billion. Congress approved $50 billion to cover this shortfall, of which $25 billion will be distributed proportionally, and $25 billion will be distributed at the discretion of Dr. Oz, the CMS administrator, however he wishes. There is no question that both rural and urban hospitals will see their Medicaid funding cut by large amounts.
* As far as Social Security, as I mentioned in my article, only 24% of recipients, those in the moderate-income category, will benefit from the new law. Low-income and higher-income recipients will see no changes. I explained why in my post. BTW, the 24% figure comes from the White House.
To recap my post briefly, there is little question seniors, including those not on Medicaid, will be adversely impacted by the new law. Our health care is at risk and the Social Security system has been weakened. It is a big “tell” that the adverse impacts from the bill will be delayed until after the 2026 midterms. If the law’s provisions were really about reducing waste and fraud, there would be no reason to postpone implementation. The authors of the new law knew exactly what they were doing.
Thank you for laying out more of the story and their consequences.
Thank you for saying what must be said so clearly and insightfully, Richard. Leaving the Kinsgton, RI Amtrak station at this moment I look at my country easing by and ask, how on earth did it come to this? Can’t we do better? The answer is, yes, we can, we *must* do better. ASAP.
Thanks again!
Bravo, Richard! You described some key consequences of this bill very clearly and convincingly. One of the very best summaries I’ve read. I liked the call to action as well. Keep up the great work!
Thank you for your succinct summary of a few of the disastrous parts of the big bogus bill that will directly and negatively affect us. We sure are in a helluva mess now, huh? This isn’t the retirement we were looking forward to.
Richard, I am feeling dense. But I don’t see how Medicare is required to cut back as you point out in your article. How does S-PAYGO demand a reduction in spending?
S-PAYGO requires that if there is an increase in the budget deficit at the end of a Congressional session, spending on non-exempt programs must be reduced to make up for the shortfall. The current Congressional session ends in December 2026. The Office of Management and Budget will at that time identify an increased deficit due to the new law and will issue a mandatory order to decrease spending. Medicare is the largest non-exempt program which will be affected. Others include farm support programs, vocational rehab grants, and others. Congress could vote to exempt Medicare from the S-PAYGO law at that time, but without such action, Medicare cuts will happen automatically.
Thanks!
Nice job of cutting through the confusion. I had not previously read about the mandatory reduction of Medicare spending. What most do not understand is that any reduction in support for Medicare and Medicaid will result in increased costs to be borne resulting from both delays in diagnosis and uncollectible bills. Hospitals and practices are likely to close. What a mess!