I’m at the leading edge of the baby boom, and unlike many of my colleagues, I am not eager to sign up for my Social Security and Medicare entitlements. I would like some options - and the country and seniors both would be better off if Congress offered some.
Congress members may posture about how devoted they are to senior voters and to preserving our wonderful Social Security system, of which Medicare is a part. But they do not give any specifics on what they plan to do about the upward of $50 trillion of promises made with no way to pay for them. In fact, there is nothing they can do. Government will renege on those sacred promises.
According to the Urban Institute, an average two-earner couple who retired in 2010 would receive lifetime benefits of $906,000, compared with taxes of $704,000. It’s not nearly as good a return as for seniors who retired earlier. It’s a Ponzi scheme, and such schemes pay the earliest investors well while fleecing the later ones. For the couple retired in 2010, it still looks pretty good - unless you consider that the dollars seniors put in were worth a lot more than the dollars they will take out.
Where will those benefit dollars come from? There soon will be fewer than three workers to support one retiree. Is it morally right for a retiree to take 15 percent off the top of the earnings of young people who are struggling to start families? How long will young people be willing to pay into a system they know will be bankrupt long before it is their turn to collect?
What about the “trust fund”? It has no money, only IOUs that must be redeemed from general tax revenues or by borrowing.
“We’ll take care of you,” government promised. This meant, “We’ll make you dependent on us.” My grandfather, a baker and laundry-truck driver, knew Social Security was supposed to be just an income supplement. But many elderly today could not live without their Social Security check.
The boomers have been robbed. Does this give them the right to rob to the next generation?
Seniors who can should turn down the benefit. But shouldn’t they receive some compensation - an incentive for volunteering to help relieve the strain on the system and protect the most vulnerable?
Here’s a deal I’d like to propose: In exchange for giving up Social Security benefits now and in the future, relieve me from the payroll tax on any earnings I still make. The country needs elders, especially physicians and engineers, to keep working. When we can no longer work, we will have to sell assets. So exempt us from the capital-gains tax. Most of it is, after all, a tax on imaginary gains. My house is not really worth more than it was in 1974. Like me, it is old and a little decrepit. The higher-dollar price is largely a reflection of the lower value of each dollar. The same is true for retirement accounts and other investments.
Giving up Medicare is much more frightening. Lyndon Johnson wiped out the private market for medical insurance for people older than 65 in order to be sure his program (Medicare) succeeded. It will take time to restore it. Meanwhile, most seniors without Medicare are uninsured and uninsurable. The amount saved by not paying Part B premiums usually would cover doctor bills. Hospitalization (Part A) is a much bigger problem. How about providing critical-illness coverage that pays a flat-rate indemnity - say $100,000 indexed for inflation, for a limited number of episodes of catastrophic illnesses such as cancer, heart attack or stroke? The government might not have to pay anything at all, and the program could be designed to cap liability at substantially less than Medicare’s actuarial exposure. Also, why shouldn’t Medicare-free seniors be able to pay out-of-pocket expenses, as for prescriptions, with pre-tax dollars? Benefits paid by workers’ employer-owned insurance are tax-free today.
Medicare incentives could drive doctors to facilitate earlier death. I want my doctor to be glad to see me and to want me to stay alive.
I think my proposal is a win-win for everybody - except those bent on total government control.
Dr. Jane M. Orient is executive director of the Association of American Physicians and Surgeons and author of “Sapira’s Art and Science of Bedside Diagnosis” (Lippincott Williams & Wilkins, 2005).