Are Social Security and Medicare in trouble?

[David S]

The following excerpt is from the Office of Management and Budget at
http://www.whitehouse.gov/omb/budget/fy2004/danger.html
It projects huge shortfalls in the funding of Social Security  and Medicare in the  future (75 years).
Do you think Social Security and Medicare are in trouble? If so what should be done about it?



THE REAL FISCAL DANGER
The current system is financially unsustainable.  Without reform, the promise of Social Security to future retirees cannot be met without eventual resort to benefit cuts, tax increases, or massive borrowing.  The time to act is now.
Interim Report of the President’s Commission to Strengthen Social Security
August, 2001

Without meaningful reform, the long-term financial outlook for Medicare is bleak...When viewed from the perspective of the entire budget and the economy, the growth in Medicare spending will become progressively unsustainable over the longer term.
David Walker, Comptroller General of the United States
April 7, 2002

   As noted frequently in this document, the federal government appears likely to spend more than it takes in for at least the next few years.   Although the resulting deficits are manageable by any reasonable standard, they are cause for legitimate concern and attention.   But whatever judgment one reaches about the deficit of this year or even the next several years combined, these deficits are tiny compared to the far larger built-in deficits that will be generated by structural problems in our largest entitlement programs.  Social Security and Medicare combine to provide financial support to 39 million seniors—14 percent of our population—and account for one-third of total federal spending.  As our population ages and health care costs continue to escalate, the costs of these programs will grow enormously, in fact, so rapidly that they will threaten to overwhelm the rest of the budget.  
   Americans have often heard that Social Security and Medicare are in deep trouble financially, and the simple reason is that the benefits promised under these programs will soon far outstrip their dedicated revenues.  Over the long term, the actuaries of the Social Security Administration project that the cost of all benefits paid to current beneficiaries and promised to future retirees exceed Social Security revenues by almost $5 trillion.  The Medicare shortfall is even worse at more than $13 trillion.

[A18]

Privatize social security. It's an insult in the first place--do liberals think we should be allowed to gamble even though it endangers our financial well-being, but not decide how to invest (or not invest) our own money?

[David S]

Privatize social security. It's an insult in the first place--do liberals think we should be allowed to gamble even though it endangers our financial well-being, but not decide how to invest (or not invest) our own money?

What about Medicare? It appears to be the bigger problem.

[A18]

Abolish it (for future generations only)

[ilikeverin]

Yes... and Libertarians/libertarians and Republicans aren't helping it any

[muon2]

Medicare is the bigger problem, but both need to be addressed. Unfortunately the problem was just as well known 20 years ago, but Congress put in band-aids instead of real structural fixes. By delaying, any simple fixes like those on the poll will only be addidtional band-aids. Since Medicare looms larger, I'll focus attention there.

Here's my quote from a thread awhile back:

No to any government interference in health care.

I have to support goverment intervention, the private sector failed.  It is too hard to start up a new insurance company, so we now have a cartel of sorts that can charge whatever it wants.  I'm not mad at them, they just want to get paid and I undestand that, but we all need to recognize that a system that allows them to do this is not a good one.

... The constitution says "Provide for the general welfare". I base a healthcare system on that premise.

Pieman makes some excellent observations on the disconnect between the patients and the payers. Let me start with some comments on the patient side.

The great success of modern health care over the last 50 years have greatly raised expectations by the public. I disagree that mere economic pressure will cause the consumers of health care to become sufficiently educated in their choices. Without that, the market fails. I also agree with John D. Ford's rough analysis of the impact on business - we do pay a price in competition because companies place this extra cost on their labor. This is another example of expectations getting so high that the market fails. A draconian solution would lead to a market crash - a collapse of the health care industry and the level of care that the country expects.

An analogy that might be useful is to compare health care to police security. If there is a crime, people expect an immediate and complete response from local government. They expect the use of best technology used to its complete extent by trained professionals. They recognize the limits of a locality to provide all the latest gadgetry, but expect that keeping up with national standards remains a high priority. Local residents also know that security can be augmented with higher government agencies and private suppliers of alarms and security personnel. Large companies may find it more cost effective to make extensive use of the private sector, even as local police forces are available and come when called. Oh, and did I mention accountability - local elected officials are usually very accountable.

What if medicine followed the same model? Counties or cities (maybe some states) could support the level and types of service that is appropriate for their residents. Counties and cities frequently run health departments now. The new expanded role would be in the form of a primary payer to government or private doctors and hospitals. Federal and state support for groups like the poor and elderly would provide some balance between counties with large indigent populations. Direct private insurance and health providers would still exist as enhancements available to those who choose the extra service.

The public as a whole would get the kind of improvement they expect without having to become expert consumers.  Doctor could work in the public or private sector. The big insurers would seem to be the losers, but there would be nothing that prevents them from selling insurance products to governments providing the health care. Many governments maintain insurance for their varied activities now.

This might be an easier method to implement as well. Many existing structures would remain. Initial taxes would probably come from a mix of sources, but corporate taxes would be an important source since the goverment would be relieving the companies of the need to provide health insurance. The local nature of service allows smaller scale implementation, and avoids many pitfalls of national systems that are sometimes proposed. Even the EU doesn't provide a single health care system across all of Europe.

[The Duke]

Other-Privatize Social Security and voucher-ize Medicare.

[David S]

[

... The constitution says "Provide for the general welfare". I base a healthcare system on that premise.

Senator-StatesRights
Though I frequently agree with your posts, I disagree on this one. The question of what was meant by the "general welfare" was discussed by the founders. This is what they had to say:
   Congress has not unlimited powers to provide for the general welfare, but only those specifically enumerated. – Thomas Jefferson
   With respect to the words "general welfare," I have always regarded them as qualified by the detail of powers connected with them. To take them in a literal and unlimited sense would be a metamorphosis of the Constitution into a character which there is a host of proofs was not contemplated by its creators. – James Madison

Madison elaborates the issue further in Federalist 41 which you can find at the Library of Congress's website, if you choose. Personally though I think Jefferson's answer was short and to the point.

The enumerated powers as identified in Article 1 Section 8 include the military, the post office, the patent office, bureau of weights and measures and a few other limited duties.

[A18]

The preamble is just a statement of intent. It isn't a legal provision of its own...it's just saying, 'the text bellow will provide for the general welfare.'

[muon2]

The preamble is just a statement of intent. It isn't a legal provision of its own...it's just saying, 'the text bellow will provide for the general welfare.'

However, many state constititutions specifically list health, safety, and welfare as their responsibility. It is appropriate for state or local jurisdictions to act on health care and be in full compliance with their constitutions. The Federal role is best at coordinating plans to insure that the health care is portable from state to state, consistent with a mobile labor market and interstate commerce.

[nclib]

I am torn between Option 1 and Option 4.

[Lunar]

Yes -We should reduce benefits

Privatize PART of Social Security and reduce benefits slightly.  Good luck to any politicians advocating the second part.

[John Dibble]

Make them both optional - if you don't wish to pay into them, you shouldn't have to, but you wouldn't get benefits. Legalize marijuana(and maybe other drugs) and put a federal sales tax on it to pay for outstanding costs until such time that the systems can sustain themselves again.

[A18]

I don't even see the point to making them optional. Just honor all the payments people have already made, and future generations can do what they want.

[John Dibble]

I don't even see the point to making them optional. Just honor all the payments people have already made, and future generations can do what they want.

Isn't that making it optional? Doing what you want - going with it or not going with it.

[David S]

I don't even see the point to making them optional. Just honor all the payments people have already made, and future generations can do what they want.

The hiccup with trying to end or privatize these programs is the way they are funded. Today's workers fund today's retirees. So when the current generation of workers retires they expect to get something back for all that they have paid in. But their money is already spend so the government has to get it from the next generation of workers. Its a Ponzi scheme and its very difficult to break the cycle without some people getting badly hurt.
By the way, the real Ponzi went to jail for his "creative financing" plan.

[The Duke]

I don't even see the point to making them optional. Just honor all the payments people have already made, and future generations can do what they want.

The hiccup with trying to end or privatize these programs is the way they are funded. Today's workers fund today's retirees. So when the current generation of workers retires they expect to get something back for all that they have paid in. But their money is already spend so the government has to get it from the next generation of workers. Its a Ponzi scheme and its very difficult to break the cycle without some people getting badly hurt.
By the way, the real Ponzi went to jail for his "creative financing" plan.

Option 1: Begin privatization now, using surplus monies to fund new accounts in the shrot term rather than covering general revenue expenses.

Option 2: Use general revenue money to cover the cost of creating a new system of private accounts that is largely seperate from the current program.

In both cases, the old program will eventually be phased out.

[KEmperor]

Change "in trouble" to "are trouble" and you have it correct.

[Dave from Michigan]

social security should be privatized, and adding a 500 billion prescription drug program to medicare was a bad idea, which will just make it a bigger problem.  Does anyone think social security has a chance at being privatized.

[A18]

Alright, I changed my mind.

Make that 'let our grandkids fix it.'

[ilikeverin]

Make that 'let our grandkids fix it.'

Exactly why I'm a Democrat

[David S]

Alright, I changed my mind.

Make that 'let our grandkids fix it.'

I didn't mean to discourage you, just wanted to point out that its not a simple problem.

[David S]

I am torn between Option 1 and Option 4.

Option 4 says there is no problem. Does that mean the Office of Business and Management is just a bunch of radical fundamentalist extremist accountants?