Social Security, Medicare and reform
Copies of the trustees
This week, Social Security and Medicare trustees reported on financial problems facing their programs (as they do every year).
There are no similar summaries for the nation’s private health and retirement plans. What would it look like if there were?
• America’s 1,000 largest retirement plans lost a staggering $965 billion in value — 13 percent — during the year that ended Sept. 1, 2008, the magazine Pensions & Investments reports. That was the largest annual decline since it began keeping track 30 years ago.
• During the last three months of 2008, the plans lost another $754 billion, just under 12 percent of their remaining value.
• National health spending jumped 65 percent between 2000 and 2007. It probably will hit $2.5 trillion this year — $8,160 for every American man, woman and child. Estimates based on the nation’s 8.9 percent unemployment rate suggest more than 50 million people now are uninsured.
• Average premiums for employer-provided family coverage doubled between 2000 and 2008, to $12,680. Premiums for individual coverage rose an average of 95 percent, to $4,700.
There’s no question that Social Security and Medicare are facing significant financial challenges. That’s not surprising given what’s happened over the last 18 months.
Some 5.7 million jobs have disappeared. That has reduced significantly the number of workers whose payroll taxes support those bedrock social insurance programs.
Meanwhile, health spending has continued to rise unabated, and baby boomers are inching closer to retirement.
Social Security trustees said Tuesday that income for the program will drop below expenditures by 2016. Accumulated reserves — the mythical “lock box” of the 2000 election campaign — will be exhausted by 2037. After that, about one quarter of the program’s cost would have to be funded by general tax receipts.
That’s alarming, but small changes over the next 28 years could alter the balance sheet significantly. A 2 percentage point increase in payroll taxes, the trustees say, would bring Social Security finances into balance for the next 75 years.
More immediate concerns exist for Medicare. Trustees report that reserves for hospital care will be exhausted by 2017, after which general tax revenue would pay an increasing share of the cost. Trust funds that pay for outpatient care and prescription drugs don’t face the same immediate shortfalls.
But as we’ve seen, the problem of rapidly escalating costs aren’t exclusive to Medicare.
To some small extent, Medicare’s costs are driven by demographics. But the biggest factor by far is the cost of care that each patient receives, not the number of patients. And that’s not just a problem for public programs; Medicare’s costs per patient actually have grown more slowly than those of private insurance since 1997.
A growing body of research shows that much of the care Americans receive provides little or no real benefit. That’s why it makes sense to do more comparative effectiveness research — to study what treatments work best, and arm doctors with that knowledge.
It also makes sense to change the way doctors and hospitals are paid. They should be rewarded for providing better care, not more care.
The case for reform couldn’t be clearer. It isn’t social insurance programs that threaten America’s financial future. It’s our broken health care system.
Didn’t think there was actually any money in the SS lock box. Hasn’t that - long ago - been looted away into other [welfare] programs?
Wow, you guys are right. The private sector stinks. Let’s nationalize everything.
What’s the problem? Just soak the rich.
I haven’t read the article yet but I’m going to guess that SS and Medicare need more money, primarily coming from folks that earn a lot. I’m going to read the article and see if I’m right.
Ok I wasn’t totally correct in my assumption. They “only” want a measly 2% more to go to SS. Oh, and the social insurance programs aren’t the problem, it’s that darn broken health care system.
Geesh.
It is no accident that Ponzi schemes are illegal for anyone except the government. That nasty old mathematics will get you every time. The PD evidently wants everyone to believe that their earnings are safer in a government pyramid scheme than in their own private care. After all, ignorant working people are too inferior to know how to plan retirement as well as the elite intellectual class that controls government. Right?
So, do any of you have any useful suggestions?
Should we just scrap Social Security and Medicare, then? Let our senior citizens starve and slowly die?
If that’s what you think then I’d like to know how we’ll explain that to our parents. After all, they paid into these systems in good faith while they were working. And when it’s time for us to retire, do we just say never mind and forget what we’ve paid in?
Of course the answer is to privatize! See how well the stock market has done over the last 12 months and tell me you’d like your retirement based on that! And healthcare… 25% increases in premiums for private group plans every year! Yes… we can privatize it all, and we can still starve and slowly die. But at least we’d have the consolation of knowing that we are displaying that rugged American individualism.
Give me a break.
How much SS taxes are paid by those foreign sweat shop workers who made your shoes?? Your electronics?? Now the dummies are sending all the good paying industrial jobs overseas. How much in SS are the Canadian, Mexican, Korean, auto, steel ETC ETC workers paying??? GET IT YET????
By DUMMIES, I mean the STUPID AMERICAN CONSUMERS.
The only reason for the slower growth of Medicare costs is because Medicare squeezes doctors and other providers on reimbursement. Every time the system needs more money, it reduces the payments it makes to providers.
That’s the real force driving the US toward socialized medicine. As reimbursements decline and doctors see their income shrinking, many will leave the system and more will never enter it. Why accept low pay and long hours when you can make a better living doing a safer, more family-friendly job?
Why not show some brass and end the programs? The U.S. Constitution never empowered the government to run such ridiculous mismanaged fiascos in the first place.
Yes, retirement plans lost money last year. Now go back 5 years and see how they did. 10? 15? 20? Yup, that’s right, they MADE money.
Don’t let the morons in the nameless Editorial Board scare you. Focusing on just one year (good or bad) is a horrible way to make comment on long term investment strategy. When the economy picks up and all these plans INCREASE 25-33% in one year, will the witless, nameless Editorial Bored blog that we need to cut payroll taxes by 2% and praise the market? Of coruse not, because it won’t jive with their relentess push to socialize America and punish the successful.
Don’t be a Lazarus and think that somehow continuing this folly needs to be done because it already exists in the first place. SS is a pyramid scheme that will crash down one day. It’s no wonder that polls taken of people in their 30s show a majority don’t believe Social Security will exist when they reach 65. Why should they?