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By Tom Cushing

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About this blog: The Raucous Caucus shares the southpaw perspectives of this Boomer on the state of the nation, the world, and, sometimes, other stuff. I enjoy crafting it to keep current, and occasionally to rant on some issue I care about deeply...  (More)

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Solving Medicare: Short and Long-term

Uploaded: Jan 9, 2013
On the assumption, perhaps dubious, that sanity may prevail and the House will take the debt-ceiling hostage gun from its own head, let's look forward to other matters. I just can't stand the thought that tea-who-shall-not-be-named would self-inflict that wound, again. I'll even bow to the doubtful proposition that Medicare, solvent until at least 2024, is a more urgent focus of our policy attention than the plight of the currently jobless. So, let's zero-in on solving the program that is wildly popular with its recipients, and remarkably efficient (3% administrative cost, vs. 10-20% for your health insurer) -- almost to the point of perpetual motion.

The Medicare Problem is that the combined symptoms of Boomer demographics and sky-rocketing health-care costs would make it The Program That Ate the Entire Federal Budget, if left untreated. Not tomorrow, or before 2024, but inevitably. Fortunately, there are short-and-long-term fixes available, if not easy to achieve.

The first thing to understand about Medicare is that it, like Social Security, is Trust Fund-based; money that comes in today as payroll taxes goes out tomorrow as benefits, with surpluses accumulating in the Fund (yes, Virginia, there has been surplusage!). It's not like a pension fund, where you have an account in your name that accumulates value over time. That's also why you can't tap into it for a dread disease you acquire in your 20s, and why it's never part of your estate. The Fund is like a reservoir that's in reasonable balance, but has been requiring a lot more upstream pumping-in to stay that way -- and downstream demand is still growing out-of-control.

The Boomer problem is that the payroll-tax-paying population base is smaller than it was when our parents were so prolific – hence the tax rates have risen dramatically. The cost problem feeds into the fact the Americans pay 18% of GDP for health care (and rising!), and get No-Better-Results than Europeans paying-in 9% of theirs. You could look it up.

So – what to do? Staying with the flow model, it's a "raise the upstream flow" and/or "lower the downstream demand" solution. The primary means by which to increase the upstream flow would be either or both of further payroll tax hikes or raising (removing, even) the income ceiling against which those rates are applied. That feeds more flow into the Fund. Regardless, it's clear from the numbers that this solution alone won't work.

So, one way to reduce downstream demand would be Mr. Ryan's famous vouchers, which were always, let's face it, a ploy to reduce benefits. Fewer dollars paid-out per Boomer = fewer total dollars required. Everybody but Mr. Ryan's mom seems to have figured-out that that would mean more out-of-pocket cost for seniors. Another way, probably more palatable politically, would be to raise the eligibility age for recipients, or to "means test" beneficiaries – thereby directing more care to lower income seniors. The problem with simply raising the age is that apparently the government then would end-up spending even more money treating uninsured, uncovered seniors, making overall savings illusory.

For my money, as it were, once I reject vouchers as a cruel ruse (and I do), a combination of means testing applied to age eligibility seems to make most sense on the economics and the ethics. I'm willing to assume that lower-paid workers as a population are prone to more geriatric illness, sooner, than their higher-paid counterparts, such that bringing them under the Medicare umbrella sooner makes sense. Is it a transfer – a subsidy -- from higher income seniors to lower? Yes – and if you disagree with that policy, please put yourself in-charge of strapping Grandma to that ice floe.

Regardless of what near-term solutions are chosen, if we stop there we will have engaged in the time-honored kicking-of-the-can-down-the-road. The real solution lies in bringing the gargantuan, metastasizing, fire-breathing, many-headed, un-managed but hopefully not unmanageable monster of a US health care system to heel. I'm not referring to doctors' bills, or just convenient whipping-boys like tort lawyers (even the Wall Street Journal zealots couldn't ascribe more than a few % to them), or "defensive practice," but systemic incentives to treat, but not prevent, to own under-utilized and very expensive equipment, uncoordinated records kept archaically, multiply hide the ball on actual costs, foot-drag on legitimate claims, end-of-life care focused on prolonging the organism but not its essence, etc., etc., on-and-on, ad-nearly-infinitum. Therein lies the solution that relieves the burden on everyone, including the Medicare reservoir.

Say, perhaps we could put all the unemployed folks to work on that?

Comments

Posted by spcwt, a resident of Danville,
on Jan 9, 2013 at 4:21 pm

Once again, Tom's solution to our problems includes raising taxes, this time making all wages subject to Social Security and Medicare taxes. Once again, I'll make the argument that 50% of my wages is more than enough. Too much. That's what many of us are paying and it's not fair. Trying to keep half my wages doesn't make me a terrorist.

The problem, of course, is that Boomers paid too little taxes during their working years, such that today, the average retiree collects about $100,000 more in Social Security benefits than they paid into the system. Web Link

Boomers squanders the inheritance given them by the Greatest Generation. After Boomers got their excellent public school educations, nearly free college tuition, etc., they under-invested in schools, infrastructure, development, incurred massive debts, etc. (They also divorced in record numbers, putting the screw job on their kids, but I digress). They gave themselves massive tax cuts that conveniently were set to rise in 2010, i.e. only AFTER they were about to retire. And now that the system is going broke, they want the young people to toil endlessly for them to pay for their retirement, knowing full well that the Ponzi scheme will most likely collapse when it comes time for today's youth to retire.

It will be interesting to see who gets the last laugh.

BTW, the "hostage" rhetoric has got to go. The image is horrible, especially given recent violent events. It would be nice if Obama and others toned it down a bit.

It is also not a fair representation of what's going on. Democrats want to raise taxes and borrow endlessly, Tea Partiers don't. If they can't reach agreement, why is one party taking "hostages" and the other not? Seems both sides refuse to budge in order to get their way.


Posted by Balkleva, a resident of San Ramon,
on Jan 9, 2013 at 11:19 pm

I can't wait to see what Cushing has to say about the new proposed gun laws once they come out. Should be juicy.


Posted by Tom Cushing, a resident of Alamo,
on Jan 10, 2013 at 7:38 am

So, S-P, glad you're back. I was afraid, after that ridiculous thing you wrote equating Social Security and Medicare to pension funding, that you'd gone completely off the the deep end.

First-off, I don't think I advocated raising taxes in this piece, only identifying it as an insufficient option by itself. That said, in my 46 years of paying-in, I've seen payroll taxes skyrocket as I helped pay for my grandparents, mom and dad, aunts and uncles, and now folks about my age, and it wouldn't surprise me if further increases are part of the 'fix.'

As to the Generation War you want to foment, your $100K number relates to the Social Security program and we're talking Medicare here, and your views on divorce are also irrelevant (and, I must say, weirdly skewed). I'm surprised you didn't also claim we Boomers selfishly failed to adequately "go forth an multiply." If you want to say the inter-generational Bush tax cuts were a mistake, as, remarkably for you, you seem to, then hallelujah -- we agree on something.

Now, I know you like to play this rate game with 50% (gasp) tax rates, but nobody pays a rate -- we pay dollars. And we who know you also know you've bragged about not paying anywhere near that rate applied to your actual income. So cry me a river, Taxguy.

Finally, sadly, the hostage metaphor works -- as the debt ceiling idiocy is not at all democracy-as-usual. EVery invoice that will be covered by that debt ceiling increase has been duly incurred in the past, by majority vote. To vote 'no' on its extension is to disavow paying debts -- is your back less stiff on the issue of paying one's proper obligations?

Nope, on the merits, this is an attempt by a minority to get a redo on spending they wish hadn't been incurred. As such, it's dirty pool. I'd have used the 14th Amendment gambit against it last time, and I'd certainly do it this time, lest our country's credit rating take another ridiculous hit, that costs us real dollars.


Posted by spcwt, a resident of Danville,
on Jan 10, 2013 at 8:42 am

I meant to say that the average worker who retired in 2010 will receive around $100,000 more in Medicare benefits than they put into the system. Web Link

A lot of people will get A LOT MORE than that. For example, a husband who earned the average wage and wife who earned 45% of the average wage will receive around $300,000 more in benefits than they put into the system.

People want more government than they're willing to pay for. Bush's tax cuts for the poor and middle class exacerbated this problem.

You're correct that I don't pay 50% tax on my investment income. But I do pay around 50% on my wages. It's nearly impossible to shelter wage income from tax.

My comments about Boomers was partly tongue in cheek. But let's face it, Boomers were a bunch of self-centered spoiled brats. And their best rock & roll wasn't even American, it was British (Stones, Zeppelin, Beatles, Pink Floyd). And look at their kids and grandkids!!! All those gross tattoos and those earring things that make your earlobes real big. WHAT A BUNCH OF LOSERS!!

You think those guys are going to pay for your retirement? Out of what? The $10 a hour they get for working at Starbucks??

Good luck with that.


Posted by San Ramon Observer, a resident of San Ramon,
on Jan 10, 2013 at 11:06 am

San Ramon Observer is a registered user.

Tom,

I have a lot of things to say about Medicare, some of which I've already said in a past blog on the San Ramon Express. Web Link

Obama missed the opportunity to reform health care and save Medicare at the same time by simply making Medicare for all ages. But then he would have be labeled a Socialist, Communist, and Muslim (Oh,wait, he already is).

I hope whoever is President in 2016 dumps Obamacare and expands Medicare coverage to everyone. I don't know why politicians need to haggle over stupid stuff when there's a perfectly good solution right in front of them.

Roz


Posted by Wendy, a resident of another community,
on Jan 10, 2013 at 11:22 am

Hey, MISter Finance Man -- before you get Too high on your horse, remember this: that burger-flipper actually Makes Something. All you do is move stuff around, and hide some of it.


Posted by Tom Cushing, a resident of Alamo,
on Jan 10, 2013 at 12:45 pm

Hi Roz: thanks for your note.

Yeah, Medicare is the dreaded single-payor system that every Prez who tried to reform/rationalize the health care system, including one prominent 2016 possibility who was deputized to try, stubbed their nose-on when they tried to generalize it.

Our current Centrist-in-Chief, fond as he is of his nose, looked around and went instead with a version that had been conceived and championed by a GOP think tank. I mean, who in their right minds could possibly call such an approach Socialist/Communist/Muslim(?) or worse, if there is worse, right? Right? Bueller?


Posted by spcwt, a resident of Danville,
on Jan 11, 2013 at 1:58 pm

Obamacare is off topic, but since Ferris's teacher brought it upů

Obamacare takes $200 billion per year from rich people (via new taxes) and gives it to poor and middle class people in the form of free health insurance vouchers and free Medicaid coverage. As such, it is a classic wealth transfer scheme.

Tom likes that because he believes in spreading the wealth. I don't like it, because I have to pay those taxes. I don't believe in free lunches. Tom does.

Obamacare is different from the European healthcare systems, which are largely financed via VAT taxes that everyone pays. Everyone pays, everyone benefits. Likewise, Medicare and Social Security are financed by payroll taxes that everyone pays.

Unfortunately, as Europe has discovered, there isn't enough money to pay for all the promised benefits.

Likewise, Medicare is facing an imminent crisis. A system that gives most people $100,000, $200,000, $300,000 or more in benefits than they put into the system is unsustainable. Hopefully, we can put enough duct tape on it to keep the Ponzi going until after I'm gone. When it collapses, those kids with the neck tattoos can try to figure out what happened.


Posted by Tom Cushing, a resident of Alamo,
on Jan 11, 2013 at 6:04 pm

Yup, you're right, S-P -- it IS off-topic and SO last March. You're in danger of becoming a one trick pony, and as always you're a lousy mind reader. Here were two columns from back then specifically dedicated to ObRomneyCare:

Web Link

and

Web Link

Maybe post these urges there?

Now, we Could talk about our mutual disdain for tattoos. I can admire the intricacy and artistry, and it can't be easy, because I've seen them done badly, but why? (Oh, Why??) How can the wearers possibly know what designs they'll like in even five years, much less where that tat will be in ten? I recall a cartoon where one inked oldster says to another: "I see you were an idiot back in the '60s, too." The only one I ever thought was clever involved a lawn mower and cannot be further elucidated here, but even those styles change.

Fortunately, Spawn 1 limited her rebellion, I think, to removable piercings that were seen as particularly hip (hep?) among her contemporaries, but that are now blessedly gone with only a mild legacy. And Spawn 2 designed her own very personally meaningful and relatively small, tasteful and secluded model, to which she maintains a fierce loyalty. So far, so good.

I just don't know, S-P. Can we bridge the Great Red and Blue Divide here? Got any links for us on This topic?


Posted by Tom Cushing, a resident of Alamo,
on Jan 13, 2013 at 7:48 am

Here you go, S-P: an article about Boomer hard-times that'll warm the cockles of your cold, cold heart.

Advisory: in later pages, it does recount several individual tales of redemption, against those long odds.

Over 50 and Under No Illusions (NYT) Web Link


Posted by Citizen Paine, a resident of Danville,
on Jan 15, 2013 at 8:42 am

In this TED Talk, Kathryn Shultz regrets HER tattoo, but she doesn't regret regretting it. Web Link


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