Medicare and Social Security need to be changed

Published 12:30 pm Tuesday, February 8, 2011

Like many of my readers, I too am a senior, and a Medicare and Social Security recipient.

The reason I state this is so those who may not agree with me understand that I benefit from systems that are in serious financial straits, Medicare in particular.

I think they both need to be modified – and sooner than later.

There’s a lot of bad information being pumped into our lives about Medicare and Social Security going broke. Certainly there are some politicians who seek to reduce some Medicare benefits, but other than the $500 billion in cuts to the Medicare budget under Obamacare, there’s no clear legislation at this moment that specifies exactly what it is on the table to be cut.

What is indisputable is that healthcare costs continue to soar, and according to a recent Associated Press poll, 60 percent of those asked said they paid into the Medicare system and therefore deserve to receive all the benefits currently available and should not face any cuts in benefits.

As for Social Security, it too is facing a financial crisis, but not to the degree of seriousness or urgency as is the disaster facing Medicare.

Here’s the problem with that “entitlement” mindset and therefore with Medicare.

A recent financial analysis showed that Medicare recipients take out of the system substantially more than the amount we paid into it.

For a hypothetical example, take John and Mary Smith. They’ve averaged, as a two-earner couple a combined average income of $89,000 a year over the length of their working careers. They both turned 65 in January and plan to retire in 2011. They have paid $114,000 into the Medicare system over their working careers and they expect to have all the benefits of the program. No problem with that logic, right?

Wrong!

It is estimated, beginning in 2011 Medicare recipients can expect to receive about $355,000 in medical services ranging from doctor visits to prescriptions and hospital care during the course of their retirement. That’s three-times more than they paid in when they worked.

If we apply the same comparison of earnings to the Smith’s Social Security future, we’d find that over the course of their working lifetime they paid $614,000 into Social Security but will collect only $555,000 in benefits – so we do have a little time to address that looming crisis.

Here’s a misconception people have regarding the Medicare system.

You put money into the system all your working life, but that does not mean the money you put in is there waiting until the time you need to make use of it.

While you may believe your Medicare payroll taxes are being set aside for your use after your retirement, the truth is your Medicare payroll deductions have been used to pay Medicare-related bills of the seniors already on Medicare all these years.

The real problem is the rapid rise of costs of medical care.

Take Ms. Green, a single woman who retired 30-years ago. In 1980, having earned what might have been considered average wages throughout her career, could expect to receive medical care worth about $74,800 over the rest of her lifetime. Because of inflation and rising medical costs, if Ms. Green’s daughter, Joan retired in 2010, she can expect to receive those same services but now worth $181,000.

Congress has kicked this Medicare fix “can” down the road for decades.

We have to accept change to these systems, and it doesn’t have to be all at once.

Over a period of years we can moderate costs, reduce spending, lower expectations, phase back or eliminate some entitlements and save the heart and substance of the Medicare system for future generations. Failing to do this will result, at some date in the near future, a sudden and drastic cut to the system, or in the worst case, a total collapse of Medicare.

It’s like the tagline in that old FRAM Oil Filter commercial: “You can pay me now or you can pay me later.” I prefer to take my medicine before it becomes far too bitter to swallow.

Ron Kauffman is a Geriatric Care Manager and Certified Senior Advisor. He is the author of “Caring for a Loved One with Alzheimer’s Disease,” available at www.seniorlifestyles.net. He can be reached by email at drron407@bellsouth.net.