Resistance Begins at Ohm!

Thursday, June 23, 2011

medicare: Is doing nothing an option?

So, according to the 2011 Social Security and Medicare Trustees annual report, medicare is projected to pay out more than it collects in every future year (including 2011 and since 2008). But there is a reserve (read IOUs) in the fund cover the difference. The reserve is projected to be exhausted in 2024 (despite that currently, the reserves are being used up at better than 10% each year, which means more like 2019). Where does the money come from to pay out on those IOUs? The general fund, meaning the bank account that pays for everything from corn subsidies to military pay. Currently, the general fund pays about 45% of all medicare expenditures, which triggers a warning, which the President is required by law to address within 15 days.

That's all the background. When the reserve runs out, the program must reduce expenditures, meaning that the benefits will be cut. And if you look at how much it can't pay for out of revenue now, we are talking about a cut of around 50%.

Therefore, doing nothing will result in serious reductions in medicare benefits for everyone. As more people become eligible and also claim benefits, the benefits will be reduced even more. So much for keeping the promise. Look at it this way: The government has $100. It has to pass out the benefits equally to everyone who shows up. If 10 people show up, they get 10%. If 100 people show up they each get 1%. Regardless how many people are eligible for the benefits, once the reserves run out, the program can only pay out as much as it brings in. And that is only about 50% of what it pays out now.

Here are the options:
Do nothing, which will cut benefits by 50% for everyone including people in the program and even more for people entering the program in the future.

Change the program so that current beneficiaries can continue to rely on the program - because they do not have any alternatives. They don't, there just isn't medical insurance for retired people over 60.  But the more benefits you give people now, the less you have available later. Who is in a better position to adjust their retirement plans around these realities, people retired now or people retiring in 10 years?

Stop the program. I don't think you can cancel it for people who are already using it. And even if you cancel it for future beneficiaries, you still need to tax them in order to cover the current costs.

Take the revenue and give it to beneficiaries so they can get their own program (insurance, HMO, PPO) hopefully from an exchange of some sort. People will have to pay the difference, but they are going to have to pay the difference in costs anyway. At least if they have to budget for premiums, that is more predictable. You would know that you have to budget $500 a month for your medical care, instead of guessing where between $10 and $1 million you will have to pay any given month.

Some combination.

The law says the President must propose something besides do nothing and congress must act on that recommendation with some haste.

Here is the trustee's report. Read it and weep.

Sure people have been paying into this program all their working lives. You paid for a benefit that isn't going to be there. Sorry about that. Sure, it isn't their fault at least individually. If blissful ignorance is a valid excuse, neither is anyone at fault for Bernie Maddolf. But as a nation, we are responsible for our debts and this just happens to be a really really big one. We could have addressed the issue years ago. No, the (un)affordable health care act doesn't offer any help or relief. All it does is take $500 billion out of the program every year and give it to other people for their healthcare. And then they call it a savings. Yeah, right.

All I can say is cowboy up and deal with it. Whining about how much we paid, and how awful it is to get screwed is just wasting oxygen.