Medicare is Bad Medicine for Young America

Paul Ryan is the champion of young America.  His budget proposal "The Path to Prosperity" of April 5th is the first serious attempt to derail the out of control train that is big government spending.  Reforming the government's old age assistance programs is the heart of his budget but in the land of Washington, that can be like touching the third rail; mess with social programs and have your political career crash and burn.

Since the release of his budget with its fundamental proposed changes to Medicare, the response from both sides of the aisle has been emphatic.  Most of the political commentary last week regarding the proposal suggested that Mr. Ryan's budget will punish older Americans by reducing benefits and increasing costs. 

Demagoguery surrounding Medicare is nothing new.  Some have even gone so far as to suggest that the election last month of democrat Kathy Hochul in a traditionally Republican New York Congressional district was a referendum on Ryan's proposed changes to Medicare.  More likely, the special election was a referendum on sleazy politicians, in this case a Republican, who send lewd photos to women other than their wives.

Rep. Ryan's plan makes no changes to Medicare for those currently receiving benefits or those ages 55 or older (see this excellent video of Ryan describing his plan).  His plan provides the rest of us a choice between guaranteed coverage options so we can determine what is best for us and our families -- similar to the plans offered to Congress.  Certainly his plan will provide less for future generations but the plan manages costs so that Medicare might actually exist for younger Americans.

Some in the media will confirm that when changes to Medicare are debated, the response from the audience is more abrupt than almost any other topic.  Angry Americans call or write in afraid that they'll lose their health benefits; the most common response?  "I'm only getting back what I paid in."

This "getting back what I paid in" mentality has long been fostered by our paternalistic government and is difficult to argue with unless you know that it is absolutely false.  Whether Americans receiving or soon to be receiving Medicare know it or not is inconsequential; those receiving Medicare benefits receive back significantly more than they pay in!

In January of this year, C. Eugene Steuerle and Stephanie Rennane of the Urban Institute published an update to their earlier work "Social Security and Medicare Taxes and Benefits over a Lifetime."  The chart below illustrates their findings and shows the huge discrepancy between lifetime Medicare taxes paid and Medicare benefits received.

 

This graph shows that the average man and woman (average defined in the study as average income over their working lives and living to the average life expectancy) who start receiving benefits in 2010 get over 3 times more in benefits than they pay in to the system!  Of importance, the study accounts for inflation by calculating all past taxes and future payments in 2010 dollars to provide an accurate comparison. 

If the notion that Medicare recipients are simply "getting back what they paid in" is false then where is the money coming from?  Simply, the excess received is being borrowed from younger generations and the cost is more than we can bear. 

We are constantly reminded of the government's inability to manage a budget under the arbitrary debt ceiling (raised 80 times since 1940) and that the national "on budget" debt is over $14T.  The debt conversation all too often omits the "off budget" debt that includes underfunded liabilities to Social Security and Medicare which is about $110T according to a Forbes article; totaling more than $900K per working American.

This hulking mass of debt, which is largely attributed to Medicare, is by far the largest burden to future generation and greatly threatens our economic and societal well-being.  Worse, the government's old age assistance programs are nearly defunct.  Each May, the Social Security and Medicare Board of Trustees publishes their report on the financial state of their programs.  The 2011 report predicts that the trust fund will be totally exhausted in 2036 (five years earlier than the 2008 report) and a full 11 years before the first members of Generation Y reach eligibility for the programs. 

As the Medicare debate continues, the lines will be more definitively drawn, and if you support changes you will be labeled cold-hearted for being indifferent to the needs of senior citizens.  Remind yourself that those who resist change are being inconsiderate of everybody else.  Without fundamental changes to Medicare there will likely be tremendous inter-generational strife.  Still, with leaders like Paul Ryan championing the cause of lower government debt levels and strong fiscal discipline, maybe we can kick that can a little further down the road.

Brenton Stransky is co- author of The Young Conservative's Field Guide and can be contacted through their website at www.aHardRight.com.

Paul Ryan is the champion of young America.  His budget proposal "The Path to Prosperity" of April 5th is the first serious attempt to derail the out of control train that is big government spending.  Reforming the government's old age assistance programs is the heart of his budget but in the land of Washington, that can be like touching the third rail; mess with social programs and have your political career crash and burn.

Since the release of his budget with its fundamental proposed changes to Medicare, the response from both sides of the aisle has been emphatic.  Most of the political commentary last week regarding the proposal suggested that Mr. Ryan's budget will punish older Americans by reducing benefits and increasing costs. 

Demagoguery surrounding Medicare is nothing new.  Some have even gone so far as to suggest that the election last month of democrat Kathy Hochul in a traditionally Republican New York Congressional district was a referendum on Ryan's proposed changes to Medicare.  More likely, the special election was a referendum on sleazy politicians, in this case a Republican, who send lewd photos to women other than their wives.

Rep. Ryan's plan makes no changes to Medicare for those currently receiving benefits or those ages 55 or older (see this excellent video of Ryan describing his plan).  His plan provides the rest of us a choice between guaranteed coverage options so we can determine what is best for us and our families -- similar to the plans offered to Congress.  Certainly his plan will provide less for future generations but the plan manages costs so that Medicare might actually exist for younger Americans.

Some in the media will confirm that when changes to Medicare are debated, the response from the audience is more abrupt than almost any other topic.  Angry Americans call or write in afraid that they'll lose their health benefits; the most common response?  "I'm only getting back what I paid in."

This "getting back what I paid in" mentality has long been fostered by our paternalistic government and is difficult to argue with unless you know that it is absolutely false.  Whether Americans receiving or soon to be receiving Medicare know it or not is inconsequential; those receiving Medicare benefits receive back significantly more than they pay in!

In January of this year, C. Eugene Steuerle and Stephanie Rennane of the Urban Institute published an update to their earlier work "Social Security and Medicare Taxes and Benefits over a Lifetime."  The chart below illustrates their findings and shows the huge discrepancy between lifetime Medicare taxes paid and Medicare benefits received.

 

This graph shows that the average man and woman (average defined in the study as average income over their working lives and living to the average life expectancy) who start receiving benefits in 2010 get over 3 times more in benefits than they pay in to the system!  Of importance, the study accounts for inflation by calculating all past taxes and future payments in 2010 dollars to provide an accurate comparison. 

If the notion that Medicare recipients are simply "getting back what they paid in" is false then where is the money coming from?  Simply, the excess received is being borrowed from younger generations and the cost is more than we can bear. 

We are constantly reminded of the government's inability to manage a budget under the arbitrary debt ceiling (raised 80 times since 1940) and that the national "on budget" debt is over $14T.  The debt conversation all too often omits the "off budget" debt that includes underfunded liabilities to Social Security and Medicare which is about $110T according to a Forbes article; totaling more than $900K per working American.

This hulking mass of debt, which is largely attributed to Medicare, is by far the largest burden to future generation and greatly threatens our economic and societal well-being.  Worse, the government's old age assistance programs are nearly defunct.  Each May, the Social Security and Medicare Board of Trustees publishes their report on the financial state of their programs.  The 2011 report predicts that the trust fund will be totally exhausted in 2036 (five years earlier than the 2008 report) and a full 11 years before the first members of Generation Y reach eligibility for the programs. 

As the Medicare debate continues, the lines will be more definitively drawn, and if you support changes you will be labeled cold-hearted for being indifferent to the needs of senior citizens.  Remind yourself that those who resist change are being inconsiderate of everybody else.  Without fundamental changes to Medicare there will likely be tremendous inter-generational strife.  Still, with leaders like Paul Ryan championing the cause of lower government debt levels and strong fiscal discipline, maybe we can kick that can a little further down the road.

Brenton Stransky is co- author of The Young Conservative's Field Guide and can be contacted through their website at www.aHardRight.com.

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