OP-ED

Some Myths About Social Security and Medicare

It’s the season of political misinterpretations and outright lies. Websites like Politifact try to sort things out. But people still seem willing to believe the most negative things about two of our most durable social programs – Social Security and Medicare. Are they really in terrible trouble and will disappear soon?

If you are over 65, have a parent or friend who is, please read and pass along. I have written some of this before, but when we hear political candidates saying inflammatory things about these programs, it seems like a little truth-telling is never redundant.

Myth #1: Social Security is in grave financial condition and must be reformed now!

Actually, Social Security is completely funded until 2036 (that’s 25 years from now!) and even if we did nothing to fix it, it would still cover 78% of the costs after 2036. So why are the Republicans trying to make it into an urgent issue and scare everyone in the meantime? In Gov. Perry’s case, he is stuck with charges he made in his book Fed Up! and may feel he has to stay with his argument to avoid a flip flop. It doesn’t seem to be working. Bachmann and Romney and Gingrich have all risen to the defense of Social Security, but we should all be wary about the conversation, because part of their solution may be to privatize the program. Given the behavior of the stock market in the past few years, that doesn’t sound very reassuring.

Myth #2 – Medicare is in grave financial condition and must be reformed now.

This is not completely a myth. Medicare does need reform. It does not need to be turned into a voucher program, but it needs better data systems so that it can pay providers more quickly and track fraud more effectively. It also needs to get tougher on reimbursements for new treatments which are much more expensive than existing treatments but provide no greater benefit. Lobbyists for the companies that make these new treatments and devices have pretty much had their way with Medicare for years. One of the solutions in the Affordable Care Act was the establishment of the Independent Payment Advisory Board (IPAB), which was supposed to provide solutions to Medicare’s problems without undue interference from lobbyists and Congress (who rely on lobby money for their campaigns). Unfortunately, the IPAB is under fire and may not ever be implemented.

Myth #3 – We can’t change either Social Security or Medicare because they are sacred and inviolable contracts with the American people

It is true that these are programs that our seniors have come to rely on as they plan for their future. The sense of relief you have when you turn 65 and know you can’t be turned down for insurance coverage is palpable. And even for middle income retirees, that Social Security payment provides a measure of security when their IRAs look like they are heading to hell. But these programs were designed many years ago, and to say that there are not ways to make them stronger is burying your head in the sand.

Myth #4 – We will have to pay higher taxes to fix Medicare and Social Security

More likely we will have to reform our tax code to fix these programs when the time comes, but there are plenty of other ways to fix these programs at this point without raising taxes. Right now, it is true — and Politifact says it is — that 51% of American households pay NO income tax. It is also true that some of the rich pay less income tax than the rest of us. So is there enough money in our tax system to pay for these programs? Probably. Do we have the political will and support to change the fairness quotient so that burden doesn’t fall on the middle class? Not sure.

Myth $5 – Medicare is a Socialist program and must be privatized

Actually the more pervasive myth about Medicare is that it is NOT a government program. In Town Halls last year, you heard countless seniors shouting at their congressional representatives, “Keep your hands off my Medicare. Don’t let it be government run!” Well sorry folks. It already is. It’s a government administered health insurance program for seniors but it’s not socialism. Medicare collects taxes and pays private providers to treat you. Medicare does not own hospitals or doctors. Everything but the administration of Medicare is private. Because it is the “only” (or single) payer for treatments, it can save lots of money on marketing and administration. Although it’s a bit complicated to make a comparison between private insurance and Medicare (for reasons described nicely in this piece by Ezra Klein of the Washington Post), most economists would agree that Medicare does what it does for about 5 or 6% overhead, in comparison to between 12 and 20% for private health insurance plans. So Medicare would only be a socialist program if it were hiring and owning the hospitals and physicians it reimburses.

6. President Obama “stole” $500 billion from Medicare to pay for health reform.

You will hear a lot from the Republicans about what was “stolen” from Medicare to pay for health reform. It is true that there will be about $500 billion in savings from slowing the growth of Medicare OVER A TEN YEAR PERIOD to help pay for health reform. But it is NOT coming from the pockets of the beneficiaries. It will come from a variety of sources, including previous overpayments to managed care plans that provide care to Medicare beneficiaries. They have been receiving about 14% more than what Medicare pays for its traditional program, as a way to entice them to stay in the game. That game is over. Here is Politifact’s analysis of where that $500 billion comes from:

Nearly $220 billion comes from reducing annual increases in payments that health care providers would otherwise receive from Medicare. Other savings include $36 billion from increases in premiums for higher-income beneficiaries and $12 billion from administrative changes. A new national board — the Independent Payment Advisory Board — will be tasked to identify $15.5 billion in savings, but the board is prohibited from proposing anything that would ration care or reduce or modify benefits. Then there’s another $136 billion in projected savings that would come from changes to the Medicare Advantage program, an alternative to traditional Medicare that has turned out to be much more costly than expected. About 25 percent of Medicare beneficiaries are enrolled in a Medicare Advantage plan.

As for Medicare Advantage, not only have the cuts not destroyed the program, enrollment is up and premiums are down. Explain that away, doubters!!

As you listen to the political debates over the next fourteen months, do yourself and your family and friends a favor. When you hear something that seems inaccurate, google it. Or go to Politifact.org and check out the claims on your own. Sooner or later, someone will tell the truth, right?

Livongo’s Post Ad Banner 728*90

Categories: OP-ED, THCB

Tagged as: ,

37
Leave a Reply

13 Comment threads
24 Thread replies
0 Followers
 
Most reacted comment
Hottest comment thread
17 Comment authors
Medicare Supplement WomanCtown TrotterHealth Policy WonkMD as HELLPeter1 Recent comment authors
newest oldest most voted
MD as HELL
Guest
MD as HELL

The beginnig of pandering for control?

The beginnig of the end of freedom under goernment tyranny?

MD as HELL
Guest
MD as HELL

The Bismarck sank.

MD as HELL
Guest
MD as HELL

No one is more simple than I.

We must dismantle all federal benefits.

They violate in every way equal protection.

They are not sustainable.

They are a key for the Treasury vault given to every anxious beneficiary to spend limitlessly without personal consequence.

They are a total waste of public money.

They are a political slush fund for all parties.

They are indeed a Ponzi scheme.

They undermine both personal security and personal freedom.

Health Policy Wonk
Guest
Health Policy Wonk

I respectfully suggest you relocate your practice to Somalia. That country seems to have the level of (non) functioning government you seem to prefer.

Otto Von Bismarck (hardly a bleeding heart liberal) recognized the need for social safety nets for the elderly back in the 1880’s–and put them in place for the emerging German state. This wasn’t done of out a sense of beneficence, but rather because Bismarck realized that people wouldn’t accept a governmental system that threw them away like a used tissue when they were done working–that was the road to what really scared him–Marxism.

Peter1
Guest
Peter1

“SS is completely funded with IOUs from a general treasury that is empty.” Hardly Nate. Do you know where the money in your 401K is and how it will be paid? I wonder if current 401K owners would have rather put that money into SS. http://www.cbsnews.com/stories/2009/04/17/60minutes/main4951968.shtml “The “Social Security Trust Fund” comprises two separate funds that hold federal government debt obligations related to what are traditionally thought of as Social Security benefits. The larger of these funds is the Old-Age and Survivors Insurance (OASI) Trust Fund, which holds in trust special interest-bearing federal government securities bought with surplus OASI payroll… Read more »

nate ogden
Guest
nate ogden

” I wonder if current 401K owners would have rather put that money into SS.”

http://en.wikipedia.org/wiki/File:DJIA_historical_graph_to_jan09_(log).svg

No Peter1 the stock market is still the obvious place to put your money.

“The real fear mongering on SS is being done by Wall Street”

So Obama didn’t threaten the checks might not go out? Was he lying? Dear Mongering? What was Obama doing exactly

Larmanius
Guest
Larmanius

Actually, it is a matter of decided case law that we do not have any legal right to our so-called SS benefits. (Flemming v. Nestor, 1960) At least our savings and 401k’s are legally ours. Sadly, many do not invest wisely due to ignorance and greed. A portfolio of 40% bonds and 60% large cap stocks cannot be beat so far in history. And do like Bogle (of Vanguard) does: step more into fixed income over the age of 50. His rule of thumb is starting at age 50, make your age be the % of bonds in your port.… Read more »

nate ogden
Guest
nate ogden

” If it had been invested in any legitimate way in bonds or stocks of quality, it would have grown more and funded useful captial, benefitting everybody.”

If we are to have programs like Social Security I always thought it should have been managed as independent trust. SS money could have been used as the funding for student loans or SBA loans.

BobbyG
Guest

“SS money could have been used as the funding for student loans or SBA loans.”
___

In the Irony-Free Zone today, are we? You actually just wrote that?

nate ogden
Guest
nate ogden

and the Streak continues, the amazing BobbyG once again manages to post without saying anything. How many comments without any contreibution is that, I think I lost count.

Shouldn’t you be hanging out at Kos, Huffinton, or the RJ comment section, places more on your level.

BobbyG
Guest

OK, I guess I need to be more S-L-O-W-L-Y explicit for you.

Had SS money been used across recent decades as you just proffered, you’d no doubt be angrily lashing out here about such a “blatant misuse of taxpayer money” by the federal government “sheltered socialist idiots.”

“My “level”? That’s rich.

How about Nate’s level:

http://www.bgladd.com/Nate.jpg

Don’t go into a battle of wits (or spelling) unarmed, bro’.

BobbyG
Guest

“contreibution”, “Huffinton”

A Tradition Unlike Any Other.

nate ogden
Guest
nate ogden

Bobby you don’t have nearly the smarts to know what I would or would not have issue with. Someone as simple as you could never grasp it. If we are to engage in social welfare i must rather it be done clearly and openly then just another entry in our general fund. If Medicare and SS had true independent trust with independent administrators we wouldn’t be 100 trillion in the whole right now. If those independent administrators were running loan programs for student loans for example I am sure as heck they wouldn’t be loaning 100K to history students with… Read more »

John R. Graham
Guest

I can accept the author’s claim that Social Security is in better shape than Medicare (while disapproving of both programs). How can this be when SS is a generation older than Medicare?

The answer is that SS is a voucher program. The Social Security Administration does not fix prices of goods and services that seniors consume, pay for them, and give them for “free” to seniors.

So why does the author reject vouchers for Medicare?

nate ogden
Guest
nate ogden

wow, never thought of that, what a simple argument to set heads spinning.

My guess at first retort would be the classic Health Care is like nothing else on the planet. Without it we will all drop dead instantly. Don’t argue food, shelter, or water they are just different.

BobbyG
Guest

“Don’t argue food, shelter, or water they are just different.”
___

Well, exactly. They are. Food, shelter, and water expenditures are negligibly correlated with aging (in fact. there may even be a weak aggregate macroeconomic negative correlation).

Unlike health care (more properly increasingly “sick care”) expenditures.

5% of the population account for ~50% of NHE, while 50% use little to nothing per year (source: AHRQ). The rest of us are somewhere in between (and moving inexorably toward the 5%’ers as we age).

So, yes, SS materially differs from Medicare.

steve
Guest
steve

A voucher program with increases tied to the cost of living, ie, inflation. Medicare is set to the increasing costs of medical inflation, much higher. Set Medicare vouchers at current cost, then let them rise at the same rate as medical inflation and you have the same problem. Since private insurance costs drive Medicare costs, it still goes bankrupt.

Steve

MG
Guest
MG

Yup and guaranteed you see a real revised push in ’13 or ’14 if the GOP wins the presidency to introduce some type of private savings account into Social Security again with a general reform.

Last great bastion of wealth in the U.S. for the Wall Street shylocks to get their pound of flesh in the forms of fees that will be in the tens of billions annually if it was every widely implemented.

nate ogden
Guest
nate ogden

Medical inflation is based on desired consumption not the increase in core cost. An accurate comparison would be to tie Medical voucher to the cost per unit of service, i.e. the reimbursement of a 99213.

Inflation doesn’t adjust based on us eating more and buying more. It adjust on the increase in cost for a set amount over time.

nate ogden
Guest
nate ogden

“It’s the season of political misinterpretations and outright lies.” At least Linda warned us what was coming, got to give her credit for that. “Actually, Social Security is completely funded until 2036 (that’s 25 years from now!) and even if we did nothing to fix it, it would still cover 78% of the costs after 2036.” This would fall under political misinterpretations. SS is completely funded with IOUs from a general treasury that is empty. Maybe Linda never heard of this? “President Obama on Tuesday said he cannot guarantee that retirees will receive their Social Security checks August 3” Linda… Read more »

Larmanius
Guest
Larmanius

Yes, this is correct. The link to the SSA in the post SAYS THIS in the first line…that basically, SS doesn’t have enough $$$ THIS YEAR from the Trust Fund (which is full of special treasury notes) so that THIS YEAR we are paying in from the general fund to cover it. The next sentences say that this will continue and get worse up to 2036, where it will blow up completely. The “Trust Fund” is really Treasury IOU’s…which means that the interest income paid to it is coming from my current taxes. Too bad that the $$$ went to… Read more »

steve
Guest
steve

“– Working to protect taxpayers and Medicare beneficiaries, Senator Chuck Grassley today introduced legislation to get at a major factor in Medicare fraud by giving the federal government more time to pay Medicare providers when waste, fraud and abuse is suspected.” Oy. Does this mean I will have to lobby for a law, like we needed in my state, to force the Feds to pay clean claims within 60 days? As an insurer, I dont expect you to be aware of costs incurred by physicians in collecting, but they are real. Worse than the costs are the time. “This would… Read more »

SteveH
Guest
SteveH

Vito, I think you’re mistaken. Advantage payments were never going to be cut in 2011. They’re frozen at 2010 levels and that’s following the statute. No waivers here.

Adeki
Guest

Health is the right of every human being. State health support enforcement efforts ..

DeterminedMD
Guest
DeterminedMD

Umm, whenever a new author gets posted here, isn’t it appropriate to provide their credentials and perspective to their comments? I mean, if you are going to allow the most partisan commentary to be forwarded, shouldn’t the readers know this, irregardless if we will cheer or jeer it on?

It seems reality notes that neither program is going to go much further than another 5-10 years tops without serious financial consequences. For the above author to imply otherwise is just insincere, to be as fair as possible.

VITO
Guest
VITO

ummm..

the reason Medicare Advantage enrollment is not going down is that the Obama administration has put off the $132 billion in statutory cuts until AFTER the 2012 election.

Linda- please be honest and admit that the planned MA cuts have been given a “waiver” thus far.

tcoyote
Guest
tcoyote

What Medicare REALLY is is an entitlement program for providers to the nation’s “elderly”, an open bar tab. “Cutting Medicare” means, simply, cutting provider incomes. The “elderly” are hostages, not beneficiaries.

Health Policy Wonk
Guest
Health Policy Wonk

I’ve paid well over $250,000 into this program in taxes over a 40+ year working life. At any reasonable rate of compound interest, that amounts to far more than the medical care I’m likely to consume in my declining years. Even though I’m pretty healthy, there is no private company that would write me a health insurance policy I could possibly afford. Medicare is the greatest thing that ever happened to elderly Americans and no amount of rhetoric from the wing-nuts will change that. Take a look at the all the opinion polls–support for these programs is broad, deep, and… Read more »

nate ogden
Guest
nate ogden

“ve paid well over $250,000 into this program in taxes over a 40+ year working life. At any reasonable rate of compound interest, that amounts to far more than the medical care I’m likely to consume in my declining years.” Actually its no where close and thus why the system is 40 trillion in the red. The average beneficiary receives $355,000 in benefits and rising quickly. I would also wager most of your contributions have come later in life as your salary increased. Thus there has been very little time for compounding. Not to mention 1-2% interest doesn’t compound very… Read more »

Health Policy Wonk
Guest
Health Policy Wonk

The system isn’t “…$40 trillion in the red…” today. That number comes from David Walker and others who have looked at what could happen over the next 40+ years if nothing changes. It also represents the combined future liabilities of both Social Security and Medicare. As the article’s author points out, the Social Security fix is pretty easy. Medicare is much more challenging, but it’s problems stem from the underlying health care system it uses rather than anything inherent in the program (see the CBO projections on this for details). The problem with US health care lies in its unit… Read more »

nate ogden
Guest
nate ogden

“That number comes from David Walker and others who have looked at what could happen over the next 40+ years if nothing changes. It also represents the combined future liabilities of both Social Security and Medicare.” Not sure who David Walker is but the number ain’t his alone and it does not include Social Security. “The 2009 Social Security and Medicare Trustees Reports show the combined unfunded liability of these two programs has reached nearly $107 trillion in today’s dollars! That is about seven times the size of the U.S. economy and 10 times the size of the outstanding national… Read more »

Ctown Trotter
Guest
Ctown Trotter

So the average beneficiary is rec’ $2000 a month for 3 years? no way.

Medicare Supplement Woman
Guest

You are correct that it is a great thing for those 65 and older, but it is mismanaged and inefficient. It is capable of providing better service. I do want to get the best possible service form my hard earned money. I agree with the author reform our tax code and manage this baby better. I believe market competition will help bring the costs down as well.

Craig "Quack" Vickstrom, M.D.
Guest
Craig "Quack" Vickstrom, M.D.

Socialism. You keep using that word. I do not think it means what you think it means.

BobbyG
Guest

Cue Nate in 3, 2, 1…

nate ogden
Guest
nate ogden

Thank you for your invaluable contribution.

BobbyG
Guest

I live to serve.