January 3, 2012

Fix Medicare, ignore scare talk

Updated: January 3, 2012 2:09AM

I’m old enough to remember when cars came without seat belts, when a gallon of gasoline could be had for a little more than two bits, and when a stamp cost a nickel. My first full-time job after college paid $100 a week, a nice sum in 1965. My first new car was the hottest chariot of its day — a 1965 Ford Mustang (seat belts accenting its sporty character) with a price tag of $2,500. And 1965 was the year Congress enacted Medicare.
These numbers should remind us that the promises made to the elderly — soon to encompass huge numbers of baby boomer retirees — were made at a much different time. Costs were lower. People didn’t live as long. Unavailable were today’s revolutionary — and usually quite expensive — medical treatments and tests.
I’ve contributed to Medicare every year of its existence. Yet, it’s a myth that seniors have paid the costs of their Medicare services, as demonstrated by the research of economists Eugene Steuerle and Stephanie Rennane of the Urban Institute think tank.
Their study showed that a two-income couple earning $89,000 a year would pay $114,000 in Medicare taxes during their careers but could expect to receive $355,000 in medical care in retirement. They could get prescriptions, doctor visits and hospital services valued at three times their contribution to Medicare.
Medicare combined with Medicaid and Social Security add up to an entitlement time bomb — they’ll consume all tax revenues by 2052, according to a Heritage Foundation analysis — for the people who’ll be stuck with the bill: working Americans. In 1950, there were 16 taxpaying workers for each retiree; by the time the baby boomers all retire, there will be two workers for each retiree.
Entitlement reform has to happen. House Budget Chairman Paul Ryan (R-Wis.) proposed a common-sense approach last year, moving people under age 55 to a premium support program. Those over 55 and approaching retirement would stay with the current system. Democrats responded with demagoguery designed to scare senior voters, accusing Ryan of advocating a voucher plan that would kill Medicare and saddle seniors with an expensive, unreliable system of private insurance.
Nonsense. A voucher program would give retirees money to buy any insurance, be it from a reputable company or a fly-by-night fraud. Ryan’s plan calls for government support for premiums paid only to insurers meeting stringent standards. What’s more, the government would pay more for the very sick and the poor and less in support for the rich. Competition among insurers would lower costs. That’s what happened with a similarly designed program for retiree drug benefits — it came in 40 percent under projected costs.
Last month, Ryan teamed with moderate Democratic Sen. Ron Wyden of Oregon to offer a revised plan to let future seniors choose between traditional Medicare and private insurance under the premium-support system.
The White House responded to this bipartisan compromise with renewed demagoguery, charging it would let Medicare “wither on the vine.” Republican presidential candidate Mitt Romney called the Ryan-Wyden announcement a “big day for our kids and grandkids” by offering a way forward to resolve the looming entitlement crisis. Should Romney win the GOP nomination, voters will face a clear choice on Medicare reform — Romney’s support of common-sense compromise or Obama’s political Mediscare rhetoric.

Are You Paying Your Fair Share for Medicare?

Tuesday January 11th, 2011   •   Posted by Craig Eyermann at 8:02am PST   •   4 Comments
share1 0
Medicare Trust Fund Bankruptcy (Source healthreform.gov)Just in time for the end of 2010, the Associated Pressreleased a story suggesting that retired Medicare beneficiaries are being promised way more in medical care than what than they’ll have paid for during their working careers:
What you paid in Medicare taxes shows up on your W-2 income tax form every year. So when you retire, you want your money’s worth.
That’s how most Americans see it. In an Associated Press-GfK poll nearly 6 out of 10 said they paid into the system so they deserve their full benefits — no cuts.
But a newly updated financial analysis shows that what people paid into the system doesn’t come close to covering the full value of the medical care they can expect to receive as retirees.
Two researchers at the Urban Institute, Eugene Steuerle and Stephanie Rennane, ran the numbers:
Consider an average-wage, two-earner couple together earning $89,000 a year. Upon retiring in 2011, they would have paid $114,000 in Medicare payroll taxes during their careers.
But they can expect to receive medical services — from prescriptions to hospital care — worth $355,000, or about three times what they put in.
The estimates by economists Eugene Steuerle and Stephanie Rennane of the Urban Institute think tank illustrate the huge disconnect between widely-held perceptions and the numbers behind Medicare’s shaky financing. Although Americans are worried about Medicare’s long-term solvency, few realize the size of the gap.
“The fact that you put money into the system doesn’t mean it’s there waiting for you to collect,” said Steuerle.
That would be the key difference between a real investment and a government “investment,” which works much differently from how most people may think it does:
Many workers may believe their Medicare payroll taxes are going for their own insurance after they retiree, but the money is actually used to pay the bills of seniors currently on the program.
That mistaken impression complicates the job for policymakers trying to build political support in coming months for dealing with deficits that could drag the economy back down.
That misconception has real consequences, especially as the working population whose taxes will have to support the now beginning-to-retire Baby Boom generation is so much smaller in comparison, with 2.3 workers to each Medicare beneficiary in just 20 years, down from today’s ratio of 3.5 workers per Medicare recipient.   Steuerle provides the bottom line:
“With Medicare, we are all still making out like bandits, shoving all those costs to future generations,” said Steuerle. “At another level, we know that this system is totally unsustainable.”