A recent letter to the Washington Post by an 80 year old man explains how much he has received in benefits compared to what he has put in:
At 80, I am a “poster boy” for what is wrong with Medicare and Social Security. I worked full time from 1950 until 1993, when I retired. I paid the maximum amount annually required by law. My payment from Social Security in 1993 was $1,170 per month, and it now exceeds $1,500. I paid $47,377 into the fund and have so far received more than $288,000 from it.
As for Medicare I paid $14,350 into the fund from 1966 to 1993. I have been very healthy but had cancer several years ago and a craniotomy five years ago. The costs of those exceeded $1 million. Even minor surgery would far exceed what I paid to the fund.
Please tell me how such a system can be sustained. Both programs need to be overhauled now. No one should believe that he has paid for and earned the right to such payments.
http://www.washingtonpost.com/opinions/2011/08/04/gIQAdI9C1I_story.html
Sadly, we have issues with many of our older folks and those preparing to retire. They want government cut down, but insist no one touches their entitlements. AARP is a very powerful lobby, and knows that older people tend to vote. Recently AARP has agreed to changes in Social Security, simply because it sees that boat is coming in, either with or without them. They refused to sign onto a coalition of 300 unions, women, and liberal groups to fight any changes. But they still aren’t ready to change Medicare.
http://online.wsj.com/article/SB10001424052702304186404576389760955403414.html
How can we afford such programs if a retiree has put in only a fraction of the amount we pay out? As I explained recently to a 80 year old retiree I know, who was concerned because he wasn’t getting better benefits from Social Security and Medicare: we can’t afford the programs. We can either go bankrupt helping you, or have your children and grandchildren paying for decades to pay off the debt you now incur.
Yes, it seems heartless. It seems unkind to tell the elderly they are going to have to “eat their peas” with the rest of us. But do we spend $1 million on one older person’s heart procedure, or on improving grade schools for little ones who are just starting out in life?
A solution? Turn Medicare into a voucher system useable at any insurance company, with a retired person’s patient bill of rights. Provide them with standard care. If they want more, they and their families are welcome to spend more in insurance for them. But let’s not ask our little ones to be paying for this decades from now.
I find there is no shame in dying when someone is 65 or 70 years of age. I would rather die at 65 than have my nation go belly up in debt.
I am 51 years old. I am willing to do without Social Security and Medicare to save my children and grandchildren? Who else will send such a message to Congress?
Simple statement of fact:
Life Expectancy Rank Medicine as % ofGDP
U.S. 78.3 36 15.3 1
Canada 80.7 20 10.0 3
Frankly, our effort should be in reducing the cost of medical care and not in cutting benefits. The Four Horseman of Profligacy ( Big Medicine, Big Pharma, Lawyers and Insurance Companies) have been successful in their effort to define the issue. Much of the media and the many Republican legislators (and some Democrats) do their bidding. Why do we spend the most and get the least results of any industrialized nation?
1. One simple reason is we eat too much, we eat the wrong things and we do not exercise. I find it sort of sad that the people who want to cut entitlements are oten the same ones who belittle Michelle Obama’s efforts to reduce childhood obesity and rail against trying to limit childrens intake of junk food (the food police of many a Fox News presentation).
2. The Medicare Drug plan was built to increase Big Pharmas profits. The law includes provisions that the government cannopt regulate prices or even use its baqrgaining power to negotiate lower rates. At one time it had a ban against Americans buying cheaper meds from Canada or Mexico (that proved to difficult to enforce)
3. The inefficiency of private insurance. Administrative costs including payment of dividends and CEO salaries for private insurance, about 20%; of evil socialist Medicare a little over 4%. How many doctors offices have you seen that have more book keepers than nurses?
4. The cost of Malpractice Insurance and prevention efforts. The lawyers get their wish, they can continue to sue and do not have to deal with arbitration which costs a lot less and would lower the cost of insurance. Defensive medicine tends to lead to overtreatment and more cost.
5.The high, and in may cases unnecessary, cost of dying (to avoid reading my screed, google “60 Minutes High Cost of Dying) One reason insurance costs less in Minnesota is that they do a good job of educating people about advance directives. Of course we have Sarah Palin yelling “death panels” and some right to life groups decrying any type of advance directive (re Terry Schiavo and Fox News).
6. Milking the System. The 60 Minutes piece has a nice section on sending large numbers of specialiststs see a dying person. In my second job as a financial analyst for the teachers union, I always wanted to see a HMO’s rate of hysterectomies, appendectomies and tonsilectomies. One of my more cynical colleagues called that the “I need a second BMW” factor.
The point is that there a lot of different ways to reduce the cost of medical care and thus reduce costs of Medicare and other Government health programs. There are a lot of choices on how tofund a government medical program than just the stereotypical British socialized system. Germany’s social system is quite intriguing, for example.
The favorite idea of the libertarians that the market will solve the problemss is mainly hogwash. The key players are basically interested in making profits, not in treating patients. These people have too much invested in the current very profitable, but broken medical system.
I already assume I won’t have social security or Medicare.
I think there are many other things the government could cut, that we aren’t willing to cut. Such as agricultural subsidies and other scientific research. And I say this more or less from the inside, as someone hoping to get my doctorate in such a field in the next few years. Sure, it would mean that we lose our status as a world power, at least for a time. But we’re doing that anyways.
SR, I agree with you on this. Government would do better to just get itself out of the way, and let natural market forces direct where things will go.
Don’t get me wrong. I think there is every reason for government bodies to support advances in the sciences, when they can afford it.
But that’s the point, isn’t it? We can’t.
Now agricultural subsidies are a whole other issue.
SR, the problem is government tends to politicize what in science should be subsidized. How much money should we spend on scientists doing global warming studies, which often end up with falsified or exaggerated data?
Should we spend tons of money going up to the International Space Station, which really does not give us a lot for the money spent? Or should we spend it elsewhere?
Sometimes we put the money in things the current Congress loves, while ignoring true advances, simply because some Congress person wants money coming into his/her own district. This happens with military expenditures, too. There are a lot of military bases and equipment we don’t really need, but a powerful person in Congress keeps it alive because his constituents get jobs through those subsidies.
Or how about the Feds telling Boeing they cannot build a new aircraft plant in South Carolina, simply because it would be a non-union plant? Do we really want the feds doing such things? Well, they are right now.
Stan,
You make some decent points. However, no system is not without its problems. I have friends in Canada who have to wait months to get a MRI, or cancer treatment. Their life expectancy there may have more to do with lifestyle and culture than medical care. Our lifespan data is skewed by some inner city cultures, particularly among poor blacks and Hispanics. Not only do they eat more junk/fast food, but they also have a very high rate of mortality among the young men. While medical care has some impact in this, it is much bigger than medical issues involved.
Obamacare did not fix the medical problems. It does not cover 100% of Americans. It does nothing to lower costs. It does expand Medicare, while cutting money out of the program – meaning greater unfunded mandates in the future to the tune of tens of trillions of dollars. It does nothing in regards to tort reform, where arbitration needs to be brought in here.
Then again, Bush’s drug prescription program also is a major problem with no funding.
For a country as small as Canada (1/10th the population), their system works. It may not work here with more complexities. Already, similar systems in England and other places are now having to seriously cut back on medical benefits due to budget problems. Canada may yet have to do the same.
For America, a patient/insurance bill of rights that requires insurance companies to accept all people, that allows people to buy insurance across state lines (real competition), addresses tort reform, and a voucher system for basic care for all families, would probably be the best solution.
It works on the markets to provide the lowest cost product. It also realizes we cannot afford $1 million operations on people that are 80 years old, but allows insurance companies and doctors to determine other options that are less expensive. If a person does not like a certain company, their voucher is transferable to another insurance company that fits their needs better. And any person can spend more for higher quality coverage.
There is no perfect system out there. There are better systems and worse systems only. We have a mixture of good and bad right now, much of it due to politicking.
Good points. Medicine is our modern tower of Babel, our self reach for immortality. In the old days the family paid and grandpa and grandma used their own resources or the family’s resources. Grandkids go to college or grandpa live another 18 months was a no-brainer. The moral choice is to turn financial responsibility back to families. It will ensure the correct allocation of resources.
Though I dont really have an opinion on how to deal with the whole Medicare/Social Security issue, I do take issue with the fallacies of it being a ponzi scheme or the complaint that people cant feasably take out more than they put in.
If we all stopped paying into Social Security now, it would still have enough funds to give out benefits when those who had paid into it retire. This is because it is a national savings account, not just a redistribution machine. It can be easily shown that saving less than $10,000 at age 21 and getting a return of at least 12% (which the market has consistantly done through various recessions), it would easily turn into millions by retirement age (being 65).
Yes, the responsibility should be going more to families. The problem is those who cannot, and do not, go without social security benefits, either because they have not been able to save, have chosen not to save, or decide to get as much as they can from the government even if they dont need it. This was supposed to be a program to help those who could not help themselves, not a way for the government to take responsibility for your own retirement out of your hands.
Ok, I guess I do have some of an opinion 😉
Frank, I would agree with you if the system were designed that way. But Social Security wasn’t designed that way. It was designed to achieve a 2% return, which doesn’t even keep up with the average 3-4% increase in costs.
Second, instead of personal accounts, or a large account that could never be touched, we have a large account that has been dipped into for decades by Congress until all that is left is a big IOU. If we stopped paying Social Security today, there would be no real money to pay out to anyone.
Even with the current payments going in, with the number of people reaching retirement age right now, the system will not have enough annual funds to cover retirees by the year 2017 (some say 2014). And it will be totally broke by 2027.
Had we designed a system where 1/2 of our SS money went into a big pot to help the poor retirees, while the rest went into personal accounts that could be 1/2 safe investments and 1/2 stocks/mutual funds, we would have a different story today. Even safe investments of the past, like bonds or CDs would have historically given us 4-8% returns.
That Congress has used the money already in the system, and uses current SS payments to fund those currently retired, DOES make it a Ponzi scheme. Eventually the money will run out, and those currently paying into the system will not get anything back, or will get a highly reduced benefit back. That is how Ponzi schemes work.
To extend or “fix” the current system, they will have to increase the revenue received (probably from people making more than $150-200K/year), reduce the monthly payment received by retirees, and/or increase the retirement age. Any way you look at it, it screams Ponzi.
Wouldnt the best way to fix the system be to stop borrowing from the funds for other things and pay back the money owed? Yes, adjustments will have to be made for the aging population, but it’d be impossible to pay anything out if the money ahs all gone elsewhere, no matter how much is paid in.
Everyone agrees that Medicare needs fixing. But to assume the free market will take care of everything is naive in the extreme. I used to work for the private health insurance industry and I can guarantee you they don’t want to cover anyone who is old or sick unless they can charge an arm and a leg for it.
A couple of “outside the box” possible solutions:
1. Stop the war on cigarettes. Cigarettes save the country billions in long term health care cost by lowering the life expectancy rate for a significant portion of the population.
http://www.nejm.org/doi/full/10.1056/NEJM199710093371506
2. Ration Care/Death Panels. (Not really death panels, since anyone can pay out of pocket for a million dollar treatment which has a 2% chance of effectiveness.) But don’t allow Medicare to pay for treatments which cost exorbitant amounts of money, but have limited effectiveness.
Nate, those would only work under certain circumstances.
1. If a tobacco user gets cancer, he must use private insurance for any treatment. If he has an “emergency” he cannot go to the emergency room for any thing that may be related to tobacco: emphysema attack, intense pain caused by cancer metastasizing in the bones, heart attack, stroke, bleeding, etc.
2. This will not work right now, because either Democrats say Republicans are trying to kill seniors, and Republicans are saying Democrats want to set up death panels. Such politicking scares Seniors, who again, are one of the biggest voting blocs out there. Take government out of the decision by having the individual responsible for working with the insurance and doctors, with us only providing a voucher for basic care.
Frank,
I’m genuinely confused…. ” This is because it is a national savings account, not just a redistribution machine.”
Can you explain how Pres. Obama said social security checks might not go out if the debt limit was not signed if social security was simply a national savings account? If the money is already there, then it’s on the books and they can pay it out.
If it’s not there, then they need to borrow money to send out the checks (among other things). Since he said we can’t send out the checks unless we borrow money, I’m assuming it’s not there. In fact, it really isn’t there. Those treasury IOUs in the social security trust are just statements that the government presently agrees to borrow or tax that money at some point from future workers to make good on the IOUs. Note, that it is a present agreement. The agreement can change tomorrow, with SS retirees receiving a haircut, just as the GM bondholders did — they received approximately 29 cents on the dollar for what they were owed last time I checked.
Chris,
I think he was being alarmist (though I am, thankfully, not an economist). I find it quite annoying that much of the debt we owe is to the medicare and social security programs. We robbed Peter to pay Paul, then want Peter to take a pay cut.
Sadly, Pres Obama isn’t an economist, either. Nor, obviously, are his people in Treasury….
That we have to discuss Social Security in terms of Peter and Paul is just another example that it has become the world’s biggest Ponzi scheme. Except, that is, for Medicare….
It’s hard to reform medicare without reforming medicine in general. One of the best things we could do is stop the artificial tying of medicine to work via tax credits for insurance. I also think one problem is that medicare tends to fund everything with “rationing” being primarily driven by doctors opting out of the program. There are a lot of perverse incentives. Both parties are primarily to blame. I was sickened by Republicans, purportedly the party of fiscal responsibility, crying about death panels – effectively saying that medicare should cover everything and anything damn the costs.
Clark, good comment. Reward yourself with a medicinal Amano chocolate…