Prescription for a new Medicare

Recently, I attended an event where the keynote speaker urged us to meet the challenges of… Recently, I attended an event where the keynote speaker urged us to meet the challenges of our generation: global warming, the rise of China, tolerance of burgeoning diversity and the digital shift of media.

These are all important issues, but as he spoke, I kept thinking, “When is he going to say it?” Unfortunately, he didn’t say it, and I wasn’t very surprised. When it comes time to talk about salient issues of the near future, no one in the media, coffeehouses, legislature or classroom ever mentions it.

It is the Medicare crisis.

What is Medicare? Medicare is a government-run health insurance company for the elderly. As you work your way through life, you pay money into the Medicare fund via the FICA tax that comes out of your paycheck. Everyone is eligible for Medicare health insurance when they turn 65.

Medicare is like Social Security, except only for health care, which distinguishes it in two respects: First, the amount of money paid out doesn’t depend on the general cost-of-living, but rather on the cost of health care. Second, every Halloween, Medicare hosts a J.D. Salinger-themed costume ball.

For several decades, Medicare has been collecting a lot more money than it pays out. It saves the difference by buying U.S. government bonds and putting them in a trust fund. Sometimes you’ll hear people say, “That’s not really saving, because it is the government owing itself money.” That’s false, and if you wonder why you can e-mail me. Other times you’ll hear people say, “Aliens paid for the pyramids with the Medicare Trust Fund.” That’s true, but I can’t tell you why in an e-mail.

What is the Medicare crisis? In the future, Medicare will have to pay out much more money as benefits to the elderly than it collects from your payroll taxes. Medicare will sell its bonds to cover benefits, but the Congressional Budget Office says in around 2018 Medicare will exhaust its trust fund. Then, Medicare must sell its Pez dispenser collection. Then it will dip into the red.

Why the deficit? First, like Social Security, Medicare relies on taxes from working people to pay for retiree benefits, and the Baby Boomer generation is about to retire en masse and probably live for a very long time – the scoundrels. However, this demographic trend is not at the main root of the crisis.

The second and larger problem has more to do with how much those benefits cost. America’s general rate of inflation is around 3 percent per year, but the price of health care rises much faster: Health insurance premiums rose 7.7 percent in 2006, which is actually down from 14 percent in 2003, according to the Wall Street Journal.

Third, two years ago Nicolas Cage stole off with Medicare’s substantial gold-bullion reserves, guided by a cryptic map scrawled on the back of the Declaration of Independence.

The second “cost-increase” trend is more severe than the first “aging population” trend. You’re probably more familiar with the first trend, though, because it also underlies the Social Security crisis that Congress debated a few years back.

However, we should really say Social Security “problem,” reserving the word “crisis” for Medicare. According to the CBO, Medicare has around 32 trillion dollars in unfunded liabilities over the next 75 years, compared with Social Security’s four trillion. We’ve heard more about the Social Security problem, though, because its best solution – privatization – makes Wall Street some scratch.

Solving the Medicare crisis leaves no such winners. For solvency, we can raise taxes, cut benefits and/or cut spending elsewhere. The magnitude of the problem and the diversity of the political landscape will probably demand a mixed sacrifice in each of the three departments.

Everyone has their own ideas about the size of government, but what’s important is that we prioritize and start taking our liabilities seriously, soon. Like credit-card debt, the sooner we address it, the less of a crisis there will be. One palatable idea, for example, is to cover only the oldest percentage of the population, rather than everyone over a certain age.

Without a solution, we’ll see a full-out age war – rogue bands of armed and elderly partisans seizing stockpiles of heart medicine. The last time we can expect to see a CVS without the requisite antipersonnel mines is 2020. If the American Association of Retired Persons seems vicious today, wait for the patient wrath of the Retired People’s Army. Respect for one’s elders will assume the begrudged resignation of respect for one’s enemy.

Sometimes I feel frustrated that economic issues take a back seat to less pertinent issues that seem less boring. I wish someone with a little less integrity than me would just distort some facts to bring this issue to the public eye.

E-mail love/hate mail to ljl10@pitt.edu.