All Entitlements Are Not Created Equal

Entitlement means "having a right to something."  You do not need to qualify for an entitlement or pay for one, either.  Most people lump together the major entitlements -- Social Security, Medicare, and Medicaid -- believing that all entitlements are essentially the same.

Entitlements in the U.S. are quite different from each other.

The Social Security Act (SSA) of 1935 "established a system of old-age benefits for workers; benefits for victims of industrial accidents; unemployment insurance; aid for dependent mothers and children; the blind; and the physically handicapped."  Subsequently, in its constant, apparently inexorable expansion, the federal bureaucracy created separate agencies for each separate part of the SSA.  You know them as Workmen's Compensation, Unemployment Insurance Agency, Aid to Families and Dependent Children, Medicaid, and CHIP, along with other spinoff agencies.

Today's Social Security Agency deals almost exclusively with old-age benefits.  The federal government empowered itself to take out a certain amount from the paycheck of every working American (legally here or not).  At retirement, those who were legal citizens then receive a monthly stipend that corresponded to how much they put in over the years plus growth.

Social Security was advertised as an old age retirement savings plan: your money saved by government and paid to you when you retire. The advertising was false.

From the start, money paid OUT to retirees was money paid IN by still working Americans. This is money that should have been set aside to pay for their retirement. Social Security was and is a classic Ponzi scheme - a government initiated and government sanctioned transfer of funds intended for future retirees paid to present retirees. Whether the name on the door is Carlo Pietro Giovanni Guglielmo Tebaldo Ponzi, Bernie Madoff, or Social Security Agency, we all know where such schemes end up.

Additionally, the funds you paid in were supposed to be kept separate from everyone else's, in an account with your name on it. This was called the lockbox concept.

But Congress passed a law allowing it (Congress) to take all the hard cash that people were paying in, open the lockbox, and dump its contents into the General Fund. They then substituted IOUs "accounting" them as though they were the same as cash.

Any accountant not employed by the federal government would shudder at such behavior. Everyone knows that cash is a hard asset, and an I.O.U act of faith.  

Washington lawmakers are magical thinkers. Because they think of something, it must be so. Because they think an I.O.U. is a hard asset, it must BE a hard asset.  

The sound financial basis on which Social Security was supposedly built was actually smoke and mirrors. The current Social Security Fund is in danger of bankruptcy.

Medicare was signed into law in 1965. It was advertised to be the same as Social Security but was another Ponzi scheme, even less sustainable than Social Security. The federal government took out a certain fixed amount from the paycheck of all working Americans just like Social security. But Medicare payouts - for old age health care services - are unlimited, unlike the fixed payouts from Social Security.

Estimates vary but best "guesstimates" suggest that the average person who works 40 years pays $115,000 in to Medicare, and will take out at least $375,000 in medical expenses.

Anyone who has ever balanced a checkbook knows you cannot spend more than you have, unless of course you are the federal government.

Further, within the first three months of Medicare's passage, 12 million Americans signed up for benefits. So like Social Security, Medicare started paying out to people who had never put anything in. 

The federal government did not even bother with the lockbox concept for Medicare. They immediately took the hard cash and comingled it with the other monies in the General Fund, replacing it with IOUs. Medicare is scheduled to be bankrupt by 2017. 

Medicaid is a true entitlement in every sense of the word. As long as you meet one of the criteria such as low income, certain illnesses, are under age, etc -- you qualify. You pay nothing and receive insurance coverage for health care. 

Now comes the newest entitlement -- the Patient Protection and Affordable Health Care Act of 2010 (PPAHCA). Per its name, PPAHCA promises three entitlements: 1) protection and high quality; 2) access to health care; and 3) care that is affordable. 

PPAHCA gives new meaning to the phrase "disingenuous bureaucratic title-in-reverse," a phrase I just made up. You know what disingenuous means: lying. PPAHCA does not protect patients: it increases medical errors and constrains learning. PPAHCA spends a trillion or more dollars we don't have. No sane person would call that "affordable." PPAHCA provides no care at all. Indeed, it reduces care. 

As an entitlement for health care, PPAHCA is a cruel joke. It cuts money that should go to care providers and gives it to the bureaucracy. PPAHCA raises the "crime" of cost shifting to a whole new level. The Bill creates six whole new federal agencies, hundreds of new organizational charts with thousands of new regulators and overseers, but not one new nurse, doctor or therapist. Meanwhile, the new Medicare reimbursement schedule of payments makes it financial suicide for a doctor to care for Medicare patients.  

The four big U.S. entitlements are all different. However, in one way, they are absolutely identical. They promise that which they cannot deliver. 

Deane Waldman, M.D., MBA is the author of Uproot U.S. Healthcare and Not Right! (January 2012) as well as Adjunct Scholar at Rio Grande Foundation.