Skip to comments.The Medicare Ponzi Scheme
Posted on 05/20/2009 9:48:23 AM PDT by SeekAndFind
Isn't it high time America did less for the elderly? A politically incorrect question for sure. But Medicare has an astounding $34-trillion unfunded liability. And because of rising unemployment, its hospital-stay program will go broke two years earlier than previously predicted.
For my recent ABC special "You Can't Even Talk About It", I spoke with residents of La Posada, a development in Florida that made Forbes's list of top 10 "ritzy" retirement communities. These folks are well off. And they get a bonus: You pay for most of their health care under Medicare.
The retirees love it. Everyone likes getting free stuff. And Medicare often makes going to the doctor just about free.
Why is this a good thing?
"What about those young people [who pick up the tab]? What kind of legacy are we leaving for them?" asks Harvard Business School Professor Regina Herzlinger. "We're really stealing from them."
Some high-school students are alarmed about the scam. "20/20" interviewed a group that is willing to help needy seniors -- they volunteer at a food bank -- but they are angry that Medicare forces them to pay for even wealthy seniors.
"This program, Medicare, is essentially ripping my generation off," Zach Hadaway said.
Policy experts say the kids are right.
"The government spends around $6 on seniors for every dollar it spends on children, and yet the poverty rate among children is far higher," said Andrew Biggs of the American Enterprise Institute (www.aei.org).
The federal government stiffs the young in favor of the old.
So I told the La Posada seniors that the kids called them "greedy geezers." They said, "We've paid our dues." Money was taken from every paycheck they earned.
But, in fact, the average Medicare beneficiary today collects two to three times more money than he paid in.
"I would argue that this is not only unfair, it's downright immoral," says billionaire Pete Peterson.
Peterson is a rarity: a senior who decided he cannot in good conscience accept Medicare. He and his foundation (www.pgpf.org) worry about the looming fiscal disaster. When Medicare began in 1965, six working-aged people paid for each Medicare recipient. Now the figure is four. It will get worse as baby boomers like me retire.
Medicare is unsustainable.
"There is $34 trillion sitting off the balance sheet, waiting for future generations to pay," Herzlinger said.
That's how much more Medicare money government has promised than it has budgeted. It's the price of about 30 Iraq Wars.
We locked up Bernie Madoff for running a Ponzi scheme. Medicare is a bigger one. Seniors think the money deducted from their paychecks was stored in a trust fund. But, in fact, it was spent immediately. The "trust fund" is an accounting gimmick.
The giant seniors' lobbying group, AARP (www.aarp.org), rarely talks about Medicare's coming bankruptcy, and it rejects reforms like means-testing or raising the eligibility age, claiming most problems can be solved simply by lowering health-care costs.
"Do things like make better use of health information technology," David Certner, AARP's director of legislative policy, told me.
The Congressional Budget Office says such reforms won't save much money.
"Well, they're going to have to," Certner said.
That sounds like wishful thinking -- not unusual among powerful lobbies that ignore basic economics. When something is free for one group, demand runs wild, pushing up prices for those who must pay for themselves and the subsidized group.
On top of that, the demographic problem Peterson emphasizes won't go away, no matter how cleverly the "fix health care" argument tries to bury it. Fewer workers per retiree means shrinking Medicare tax revenues -- period -- even if health-care costs are flat.
"Ultimately, somebody's going to have to give up some medical treatment they'd been getting," Peterson says.
Our group of seniors had second thoughts after we spoke. "I hear what the kids are saying," a man said, "When they get to be our age, there may not be any Medicare."
"Tell them to change the law," one said. "If the kids can get the votes, then they can get it done."
Fat chance. The elderly vote on Medicare.
Most young people don't even know they're getting ripped off.
Just like the SS ponzi scheme.
So the Feds steal money from my paycheck and my employer’s pocket. Then, I retire and medical insurance is priced out of sight, so it’s my fault for signing up - and paying, again - for Medicare.
Why don’t we just keep stealing the money and “Soylent Green” everyone over the retirement age? We can start in Congress.
Lyndon Johnson created the mess!
Ping list for the discussion of the politics and social (and sometimes nostalgic) aspects that directly effects Generation Reagan / Generation-X (Those born from 1965-1981) including all the spending previous generations are doing that Gen-X and Y will end up paying for.
Freep mail me to be added or dropped. See my home page for details and previous articles.
—another one of the ticking time bombs—louder and louder—
Reitrees that have more money than they know what to do with should NOT be on Medicare. If you can retire to a fancy area and live on the golf course, travel around the world, etc., then pay for your own insurance.If, like my own mother, you are a widow or widower and live on social security ONLY, then one indeed has a right to file for Medicare. JMHO
HAHAHAHA....got to send this to some geezers I know who voted for Obambi.....HAHAHAHAHA
-—Karl Marx would put it exactly that way, too—
I don’t have any sympathy...it was the dumbles who required everyone to participate in this boondoggle.
Now you get commentary like that Harvard person acting all surprised that it is working as intended.
You idjits wouldn’t let people opt in or opt out. Oh no...can’t have that...the system wouldn’t work if there was a choice, we were told.
Now you want to moan about the cost.
Exactly. People who can afford to pay for their own insurance should be able to do so.
So, you're saying that state health care - which taxpayers have been forced to pay into for decades of their working lives - should be needs-tested. Thus, someone who had paid into the fund for decades might get NOTHING, if he was relatively affluent (read: had scrimped and saved a large chunk of his disposable income), while someone else who had paid little or nothing into the system, but HAD frittered away their money, and was thus now penniless, WOULD be eligible for benefits, merely because they are now poor.
That does not jibe with my view of self-reliance and economic freedom.
I caught this on Stossel’s 20/20 episode a few weeks back. (Glad I finally got to see a Stossel report. They don’t write up usually if he’ll be featured.)
I’m so sick of the entire communist Ponzi scheme of EVERYthing.
To be fair, I think the main point was simply that if you had to choose, it’s absurd that well-off people get the benefits of something that’s supposed to be for supporting those in need in their twilight years.
Your (correct) point of view assumes they’re simply getting back what they’re owed from paying in (just like SS, which is logical). But as this story relays, the problem is they’re not simply paying back what is owed. It’s a Ponzi scheme because in reality there was no “savings account” to simply give back to those who paid in; it’s merely paid out randomly (if you will) from current monies from current payers.
The problem with means testing isn't at the ends of the spectrum, but in the middle. The very rich don't get hurt too much. And the very poor are better off.
But somewhere in the middle is the guy who now has to pay for both the poor guys medicare and save for his own medical insurance. This guy gets hit hard.
When you do means testing this way, you get absurdly high marginal tax rates at the places where the means testing starts falling off. Make a dollar more, and you get 50 cents less in medicare coverage and you now have a 50% addition to your base tax rate. What will happen is that the guy in the middle will be wise to blow his remaining money on good times, and fall back into SS & medicare once he's poor enough. What a great way to split us into rich and poor classes!
This article fails to note that the only reason most people can take out more than they put into Medicare (or SS) is that those at the top end of the scale put in ever so much more than they take out, not to mention the folks who don't live long enough to take anything out.
It's a simple actuarial fact that most people who take money out of any insurance plan, get to take out more than they take in. Between compound interest and folks not making it to the payout date, the survivors win. With the sliding rate on SS/Medicare, its the poor that win. The rich lose unless they live a very long and un-healthy life.
Yet somehow, with the rich already getting the short end of the stick, you think it's fair to further shaft them.
Thank you for your reasonable reply.
However, I would say that it is equally absurd that anyone should be forced to pay into a system, and then be disbarred from enjoying its benefits, merely because they have been thrifty throughout their lives.
Only charity should be means-tested.
The whole system does not jibe with self-reliance and economic freedom. I had much rather put the money I pay into SS into private accounts that actually draw interest and have a real retirement account. However, the ones in power will never let that happen. So with your idea, we will continue to put everyone that turns 65 on Medicare and go broke where NO ONE will have Medicare within a few years. Then what??
Is that supposed to be an answer to a serious problem? Should we just kill off everyone when they turn 60 or 50 or even 40?