Medicare Is Fiscally Medi-scarey
At Cato, David Boaz links to a letter in the WaPo from Dale Everett of Ashburn, Virginia on what's wrong with both Medicare and Social Security:
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.
The letter is in response to a letter from Mary Ann Carmody, of Washington, who doesn't seem quite as sharp on the math as Dale Everett:
What's wrong with using Medicare to keep the heart of someone over 65 "tickin' "? Did we not work for our retirement nest eggs? Are we not careful of how many pleasure trips we take? Do we not give generously of our time and money to our churches and to victims of disasters in New Orleans, Haiti and Somalia?Bring on the dialogue, but don't paint with one brush those of us over 65 who spend our money carefully as enjoying "middle-class welfare."
Her letter was in response to this Robert J. Samuelson op-ed (with the trite headline), "Why are we in this debt fix? It's the elderly, stupid":
True, some elderly live hand-to-mouth; many more are comfortable, and some are wealthy. The Kaiser Family Foundation reports the following for Medicare beneficiaries in 2010: 25 percent had savings and retirement accounts averaging $207,000 or more; among homeowners (four-fifths of those 65 and older), three-quarters had equity in their houses averaging $132,000; about 25 percent had incomes exceeding $47,000 (that's for individuals, and couples would be higher).The essential budget question is how much we allow federal spending on the elderly to crowd out other national priorities. All else is subordinate. Yet, our "leaders" don't debate this question with candor or intelligence. We have a generation of politicians cowed and controlled by AARP. We need to ask how much today's programs constitute a genuine "safety net" to protect the vulnerable (which is good) and how much they simply subsidize retirees' private pleasures.
You should only get back what you put into the system. No more, no less. And frankly I'd give it as one lump sum, save it or screw it gramps, its yours and its up to you. But take your hands off my earnings.
Robert at August 9, 2011 2:34 AM
This guy walks up to me, obviously agitated, saying, "I'm a tipi! I'm a wigwam! I'm a tipi! I'm a wigwam!" So, I said to him, "Relax, dude. You're two tents!"
Patrick at August 9, 2011 4:09 AM
Completely irrelevant. It doesn't matter how noble the cause is, because there's no money left.
Our government spent it all researching shrimp and funding cowboy poetry and a million other little bogosities.
brian at August 9, 2011 4:49 AM
My fear is that 'politicians' always find/invent the need to spend the money. They are sponsored by special interest, not voters. It's how they get elected. If it's not spent here it will be spent there.
nuzltr2 at August 9, 2011 5:41 AM
Dale Everett's comments on Medicare show a basic lack of
understanding. First of all, he looks at Medicare taxes he's paid,
but fails to include the premiums, which are currently at about $100
a month, assuming he didn't opt for prescription coverage.
Secondly, he looks at his medical bills being higher than what he
paid. Let's suppose Medicare didn't exist and he had been paying
into a private medical insurance company. He could see the same
result. That's the principle of insurance. You spread the risk.
Look at fire insurance. You pay in for years, but if your home is
consumed by fire, you collect way more than you've paid in total.
Whether Medicare or fire insurance is sustainable doesn't depend on
whether or not you've collected more than the premiums you've paid.
It's whether or not the entire group has paid in more than the
company has paid out. Everett's simplistic argument doesn't address
this at all.
Ron at August 9, 2011 6:06 AM
I've resigned myself to the fact that, short of winning the lottery, I'll be working until I drop dead. That's just the way it looks right now, and I don't see any improvement in the future. If anything, it'll get worse before it gets better. There are too many people as it is with an over-inflated sense of entitlement. They're just passing it on from generation to generation.
My fear is that 'politicians' always find/invent the need to spend the money. They are sponsored by special interest, not voters.
Yet another argument for term limits.
Flynne at August 9, 2011 6:18 AM
My fear is that 'politicians' always find/invent the need to spend the money. They are sponsored by special interest, not voters.
I don't know what happened to the tags! They were supposed to work!
o.O
Flynne at August 9, 2011 6:19 AM
Amy Alkon
http://www.advicegoddess.com/archives/2011/08/09/medicare_is_fis.html#comment-2410953">comment from FlynneI've resigned myself to the fact that, short of winning the lottery, I'll be working until I drop dead.
I especially resent that I'll be working in a donut shop at 90 to pay the pension of our "community policing" sergeant, who has dealt with years of a bar waking my neighborhood up all night by taking six months to have an underling write us a letter telling us the bar's bouncer would police the noise. They haven't since 2003, thanks to the police not enforcing the noise laws; why should they start now?!
Must be nice to keep a job while apparently doing fuck all.
Amy Alkon at August 9, 2011 6:29 AM
Good grief. I've never seen the actual figures. People always claim they've paid into it, like it's their money to get back, but what a huge discrepancy!
I don't get why Social Security isn't treated like property insurance. If you need it, you use it, but it may never be needed, so you understand that you could lose the money you pay in (the good news being that you didn't face a calamity or financial hardship).
Social Security should simply be a safety net for those who end up poor after retirement, not for those who are comfortable. Politicians turned this into an entitlement for everybody, just to stay in power.
lovelysoul at August 9, 2011 6:35 AM
Amy Alkon
http://www.advicegoddess.com/archives/2011/08/09/medicare_is_fis.html#comment-2410984">comment from lovelysoulSocial Security should simply be a safety net for those who end up poor after retirement, not for those who are comfortable. Politicians turned this into an entitlement for everybody, just to stay in power.
Agree, lovelysoul.
Amy Alkon at August 9, 2011 6:43 AM
I swear, sometimes it seems like our representatives have never even had to balance a checkbook.
Case in point: my daughter is a high school senior. Here in FL, we have a prepaid college program. You purchase it (as we did) when your child is young, then their college tuition and/or dorm is paid for if they stay in state and attend a public university.
Great program. But we also have a scholarship program called Bright Futures, which was supposed to help those bright kids who couldn't afford to attend college. If their grade pt average is 3.0 or higher, they get Bright Futures, which pays 75% of college tutition at 4 yr colleges and 100% at community colleges.
Now, wouldn't it make sense that if your child already has the prepaid fund, they wouldn't be available for Bright Futures? Well, apparently not to our legislatures.
The first time I heard this (4 yrs ago when my son was graduating), I couldn't believe it! But, hey, it's great for us. My daughter will not only have her college expenses fully paid for, she'll also get a check from Bright Futures each semester for the 75%, although it's not needed! She won't even have to get a part time job while going to school because she'll be MAKING money.
As a mom, I'm thrilled, but, as a taxpayer, I'm offended. How can these bozos be so fiscally irresponsible?
lovelysoul at August 9, 2011 7:02 AM
How can these bozos be so fiscally irresponsible?
Easily - they're not using THEIR money!
Flynne at August 9, 2011 7:33 AM
Politicians turned this into an entitlement for everybody, just to stay in power.
Not exactly. This is how it was from the get-go. Longest-running Ponzi scheme ever.
AARP is the biggest lobby working to keep Social Security sacrosanct, which is why I keep throwing out the membership offers they've been sending me for 12 years.
Rex Little at August 9, 2011 7:34 AM
Whether Medicare or fire insurance is sustainable doesn't depend on whether or not you've collected more than the premiums you've paid. It's whether or not the entire group has paid in more than the company has paid out. Everett's simplistic argument doesn't address this at all.
This is correct. Everett is using the wrong unit of analysis (individual vs. group). Medicare is facing huge deficits, but not to the level implied by his numbers. We're still going to have to address the problem that we have more older people, who are living longer, and are receiving more expensive medical care than ever before.
Dealing with this problem is going to be politically and financially painful. Older people vote more than any other demographic, and punish politicians who they perceive to threaten Medicare with cuts (see, e.g., Democrats in 2010).
Politicians turned this into an entitlement for everybody, just to stay in power.
This isn't correct. It was an entitlement for everybody, because politicians realized that if it were a benefit for only the poor, it would be far more vulnerable to being eliminated or cut than if it were offered to everyone.
But we also have a scholarship program called Bright Futures, which was supposed to help those bright kids who couldn't afford to attend college.
Bright Futures is a merit-based program, not need-based... which is why your daughter gets it even if you have the ability to fund her education through other means. It may not even be fiscally irresponsible in the long run, if it means that Florida retains a higher proportion of its talented young people who might otherwise go elsewhere for school.
Christopher at August 9, 2011 8:09 AM
If Dale Everett feels so responsible for the hole in social security and medicare, why don't he opt out?
Because he is hypocritical, his message is:
"Now that I F**** enough the system, i feel good to brag about it, and i don't care about other after me"
Again individuals may win at vegas, but the only real winner is the casino. (well explained by christopher and ron before).
By the way: I also expect to die on the job, although it is not a good policy as you are closing the door to younger generation to work.
nico@hou at August 9, 2011 8:22 AM
Retirees collecting Social Security who made astute financial plans during their working history (having a healthy savings, in other words), still pay quite a percentage of taxes on the Social Security benefits they're collecting now, if I'm not mistaken. Not sure if they'll collect more than what they paid into it, though.
But, yeah, according to my Social Security statement, I'd exceed my contributions to SS in a little over five years past retirement age -- that is, if the projected tax and benefit stay the same. Dale Everett fellow is right; it's not sustainable.
Jason S. at August 9, 2011 8:44 AM
Thanks Ron, I agree, Dale's off the mark.
I also notice that (1) he's not giving it back and (2) he waited to get paid before he decided it should be canceled for everyone else.
Gog_Magog_Carpet_Reclaimers at August 9, 2011 9:43 AM
Euthanasia. Pull the plug. Some drink, crack, dope, smoke and send them off to the big Old Age home in the sky.
BOTU at August 9, 2011 9:50 AM
Social Security was intended as retirement insurance. If you lived long enough to collect, you collected until you died.
But the retirement age and the lifespan were much closer then. Today, the retirement age is 12 years lower than the average lifespan.
And more people lived with their families in their old age then so they needed less money. Today we warehouse our old people because our 1-bedroom efficiencies just don't have the space.
And workplace safety in dangerous jobs consisted of little more than a hard hat...sometimes, so the number of contributors who survived long enough to collect was lower.
=========================
Really?
In principle I agree with you. But it's not that simple.
Should the amount be adjusted for inflation?
And what about the interest you could have been earning if you'd been allowed to keep and invest that money? Should you get interest on the money you've "loaned" the government?
And what about the people who contributed but died before they could collect? Should the government parcel out their money to the rest of us?
=========================
That's the problem.
Had the Social Security money been left alone from the beginning, it's entirely possible that there would be enough in the slush fund to handle the Baby Boom's retirement.
Had the Pelosi/Reid Democrats allowed at least a discussion of Bush's plan to semi-privatize the plan with contributor-directed investments, it's possible the plan would be on its way to sustainability (despite the turbulence of the last few days).
Conan the Grammarian at August 9, 2011 9:55 AM
"Bright Futures is a merit-based program, not need-based... which is why your daughter gets it even if you have the ability to fund her education through other means. It may not even be fiscally irresponsible in the long run, if it means that Florida retains a higher proportion of its talented young people who might otherwise go elsewhere for school."
I could see that if we were just talking about my ability to fund her college independently, but this is a case where two state programs are overlapping and both are paying the same college expenses. That doesn't make any fiscal sense. The FL prepaid program already gives the incentive to stay within the state, as it doesn't pay well for out-of-state schools.
Of course, Bright Futures is merit-based, which may encourage better school performance in kids whose college is already paid for, but, at the end of the day, when it comes to fiscal responsibility, the state shouldn't pay twice for something it's already paid for once.
I couldn't run my business this way and hope to survive. The state shouldn't either.
lovelysoul at August 9, 2011 9:56 AM
ALLENDE THE SOCIALIST PROMISED HOPE AND CHANGE AND FREE HEALTH CARE FOR ALL IN CHILE MAKING HIM A MESSIAH FIGURE IN 1970
biff at August 9, 2011 11:02 AM
Old people: "What? Me? Keep working? After all I've paid into the program? I'm entitled to get back what I've paid in!"
Young people: "What? Me? Retire? After all the money I've spent paying for everyone else's?"
Pirate Jo at August 9, 2011 11:05 AM
the state shouldn't pay twice for something it's already paid for once.
In this case, you paid the state once, and it paid once. Prepaid means that they've been able to use your money for years, right?
Christopher at August 9, 2011 12:15 PM
The current crop of legislators have decided to postpone financial judgement day into the future and basically mortgage the livelihoods of their children.
They may be sorely disappointed, when their children eventually grow up to assume control of the legislature and subsequently cancel all benefits for their parents.
David Csonka at August 9, 2011 12:28 PM
"In this case, you paid the state once, and it paid once. Prepaid means that they've been able to use your money for years, right?"
Well, yes, but why does that justify the state paying my child's tuition, AND giving her additional spending money? That's awfully sweet of them, but it's unecessary, which is wasteful.
They're basically saying, "Here's the money we would've given you for tution if you needed tuition, but since you don't, we'll give it to you anyway!"
How about they take that extra money and hire more teachers or buy classroom supplies?
lovelysoul at August 9, 2011 2:32 PM
If it were up to me I'd just cancel both programs. They're pyramid schemes as they are now, and far to corrupted to save.
Robert at August 9, 2011 2:35 PM
Using a very conservative figure, between my contribution and that of my company (and for many years of my career that was both sides) I've paid about $750 a month into Social Security. Assuming the average return rate of just 4%, after thirty years of compounding interest, that would be $500,000-$600,000. Based on my families life expectancy, if I retire at 70 and live to 90, they come out about equal (though during that 20 years, my contributions would still be earning interest, so it would actually come out on the low side.)
I see nothing unfair at all, though I'd rather the feds simply give me all my money donated to date with compounded interest and have my employers continue to add a total of 7% to my 401k PLUS me adding 17%--10% which I already do and 7% for social security replacement--and I'll be happy. I'll even voluntarily opt out of medicare if you wish.
Joe at August 9, 2011 3:13 PM
The larger point is that social security is not the issue. It is actually close to solvent; a slight bump in FICA taxes and upping the retirement age two years would correct that.
The problems are a) the federal government robbed the social security funds and b) medicare.
Medicare, medicare, medicare. That's what's killing us, not social security.
Joe at August 9, 2011 3:15 PM
Well, yes, but why does that justify the state paying my child's tuition, AND giving her additional spending money? That's awfully sweet of them, but it's unecessary, which is wasteful.
The state isn't paying your child's tuition. You did, in expensive dollars years ago.
If the program were changed as you suggest, they would no longer be merit-based, but a merit/needs-combo. And they'd probably lose some students they'd want to keep. It's a tradeoff. Some schools, notably Ivys, have only needs-based scholarships, and nothing merit-based. They are usually places where attracting and retaining top students is not an issue.
Christopher at August 9, 2011 6:35 PM
"and subsequently cancel all benefits for their parents."
But then they'd have to take care of their parents themselves, the way you were supposed to back when. No one's going to be happy with that, least of all the elderly who think SS makes them "independent."
carol at August 9, 2011 6:46 PM
Jim P. at August 9, 2011 7:50 PM
>Medicare, medicare, medicare. That's what's killing us, >not social security.
Yes, yes, yes. Exactly. Medicare should be abolished. Poor seniors will be eligible for Medicaid. Rich and middling seniors will have to become poor before they get Medicaid.
Does it SEEM cruel to force these seniors into the poorhouse before they get free care? Absolutely. But the alternative is using the state's monopoly on force to steal from working people so grandma gets to keep her house. Using force to take money is wrong, and making grandma sell her house to pay for a new hip is morally neutral. It isn't just the lesser of two evils, it's just evil.
Tyler at August 9, 2011 8:00 PM
Regarding social security, does no one ever wonder why the governemnt makes it ilegal to save too much of your money for retirement?
Why is there a limit as to how much you can invest into your own retirement?
lujlp at August 9, 2011 9:08 PM
@lujlp what? The government doesn't make it illegal to save too much money for your retirement; as long as you pay your social security and medicare taxes, you can save what you want; there are just limits to what you can save in a tax advantaged vehicle.
Christopher at August 9, 2011 10:08 PM
Obviously if you have cancer you will take more than what you put in... isn't that the point of insurance? Most people pay more than they put in, but a few unlucky ones dont?
NicoleK at August 10, 2011 2:13 PM
Jim P.,
That reminds me of the healthcare debate town hall meetings/protests. There was one where a senior citizen got into a fight with a younger guy at some protest/counter protest. The senior was anti-obama care and the young guy bit his finger tip off or something in a scuffle.
The pro government care folks made big deals out of the fact that the senior got his finger fixed and paid for by medicare. Ignoring the fact that after 65, medicare is about all you got. Unless you buy the supplemental plans (med advantage IIRC) run by insurance companies and pay extra to cover things medicare wont.
Sio at August 10, 2011 4:13 PM
@Jim P.
thanks, i did not knew about these cause-effect link betwen SSI and medicare, so my remark seems invalid.
What I wanted to demonstrate was something like this fellow Dale E. is an hypocrite since he took the money to survive (and I'll do the same, most likely), but I would be gracious enough not to brag and state publicly that this money was ill-spent on me!! I propose that when he got a remission for his cancer, the medicare officer inform him that since he overused his fund, he will not be treated again, that would be interesting to hear his new message then.
On the medical cost, don't get me started! I hate to go to the doctor/dentist/ER/nurse in this country, i have no clue what will be my bill. Even two after, i have to call back the insurance company and get back money from the doctor office. And same dentist, different insurance, price totally different. Are you kidding me if the right price for a procedure is x, how come I have paid 3x (then got a discount of 100$, cause I was a foreign student). that is ridiculous when you have to ask several dentists for a quote! (and they do a bad job to be repaired 10 months later).
nico@hou at August 11, 2011 10:20 PM
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