Thursday, March 25, 2010

Health Care a Government Time Bomb

If health care extends everyone’s life an extra 10 years, figure that could double the amount of money needed to fund Social Security. With a longer life, you’re probably going to consume more pills and Medicare. More exotic life saving operations will become available to extend our lives.

Cigarettes use to be the old equalizer. You paid into Social Security and at the same time, were taxed on every pack and died before retirement. This was the FDR plan. The planned retirement back then at age 65 sounded great. Most people didn’t live long enough to get that old, but it was a benefit worth contributing towards. It was tax dollars coming in and virtually nothing going out. Democrats view this from a historical point of view and remind everyone that FDR changed the way we look at retirement. In reality, it was a lottery ticket that had a very slim payoff. It brought in revenue. 

Kaiser Wilhelm II back in the 1889 offered the first government retirement plan. Retirement benefits were to be paid at age 70; average life expectancy was age 45. So the first attempt at a retirement plan was very well thought out as to the future entitlements to be paid out.

When FDR was president, there was no real income tax. Our government raised revenues from import duties, liquor and tobacco taxes etc.  Social Security was a successful attempt to register workers and tax them.  FDR gets credit for the benefits we pay out today. His actual plan was to raise revenue by taxing labor. How was he to know, that people would start to live longer, it had never happened before.

At the end of WWII, we now had penicillin and other miracle drugs. The retirement laws didn’t change, but the length of life changed. All of a sudden entitlement got a tad bigger. From there more and more got added on to the benefits. Government entitlements in FDR’s time were about zero, today they are about 60 percent of the declared budget.

Then we went to Medicare in1965. The quadruple bypass, Knee and hip replacements and kidney transplants were not even thought of. Modern medical science took huge leaps. Now Congress has passed health care. The question arises, who is stupid enough to believe that we can pay the bill as a country?

The US can reasonably afford to start retirement benefits at age 75. And probably be able to come up with $5,000 per year in Medicare payments for ages 65 on up. Reality has to set in or we will be taught a very severe lesson. There is no free lunch, the elderly will expect the government to fulfill their desires at the expense of the young taxpayers as promised . Of course we all get old so it equals out doesn’t it? We will all eventually get to feed at the trough, won’t we?

Yesterday Social Security announced that the fund will pay out more this year than it takes in. Last year, it was stated that this present condition would not occur until 2016. Hmmmm.

This was part of their news bite:
Its so-called balance is, in fact, a history of its vast cash flows: the sum of all of its revenue in the past, minus all of its outlays. The balance is currently about $2.5 trillion because after the early 1980s the program had surplus revenue, year after year.
Congress spent that money and gave the Social Security people an IOU certificate. Bernie Madoff was doing OK until people wanted cash, he didn’t have it, he had spent it--our government is in the same boat. Think I am kidding?  Here is a link Link A hat tip to Cancel our Debt Blog

We have proof that the money was collected and proof that it was borrowed and spent by Congress.  Plus we have a bunch of Social Security employees that claim the fund has money; "We have all of these Treasury certificates-------------"  (God help us!)

Our new health care entitlements program could consist of one pack of Roll-aids and a tube of Preparation H. The thing that irritates me, is that we might have to wait in line to get it.


Shift said...

The whole debate about health care should have centered on cost containment from day one. I think the Republicans should take a lot of blame for playing games and refusing to seriously shape the debate. The GOP just wanted to play gotcha and say silly things about death panels and socialism without recognizing that the current system is not working and is not sustainable.

Now we have a law that shifts health costs but does not do enough to cantain those costs. There ARE some good things in the bill, but I am afraid that the issue of cost containment will still need to be addressed. We will need to see how the costs play out. Currently, the penalties -coupled with the requrement for insurance companies not to consider existing conditions- cause the cost analysis for most companies and individuals to be such that non-participation makes a lot of sense. I imagine that the penalties will go up substantialy in the future.

One thing that I do know: Cost containment WILL be achieved. This will occur, if for no other reason than that we will eventualy run out of money (and ability to borrow). We have simply shifted a large portion of the most critical aspect within the health care debate to some future date. It was important that the oposition party raise these issues.

The Democrats were able to shape the debate of how to reform our health care system because the Republicans thought the debate was about whether the system should be reformed at all.

In the end analysis, the republicans understood neither, the actual, nor political, reality regarding the US health care system. Because of this break with reality, we have the situation we are currently in.

It is perfectly OK to be an oposing party in obstructionist mode IF and only IF it is successful. Otherwise, it is opertunity lost.

What a waste.

Shift said...

Here is the start of a rant:

I have no party affiliation. I do not like the Democratic or Republican parties.

The sorry state of affairs: The Republican party is salivating at the opportunity of picking up seats in the next election. This is what party politics is all about: picking up seats. It is a big deal. Pick up some seats. Woo Hoo!

It has always been this way and always will be. This is the nature of the partisan beast: play games; stir the pot; pick up seats; grab more money; go to more parties; look important; puff out your chest, and get in the spot light. This is how it is.

What we can do: Do not affiliate yourself with any political party. We can, instead, vote along lines that we feel are best for ourselves and our country. We can try to look beyond the silly games.

We have some serious financial problems that need to be discussed. At the center of these problems is health care costs, state pension systems, and our Vegas style financial industry. It is time to look at these issues. The time is Now. Not tomorrow. NOW! We are running out of time.

Do not let yourself be swayed by blind ideology. We need workable solutions to our problems. This will require that the two parties work together.

Here is an idea: If the two parties refuse to start fixing our very serious problems then we can fire them all. Every one of them. Then, if things do not get better, fire that group. Eventually, these guys will get the picture and stop wasting our time with party politics.

It is time that we stop demonizing one particular party. Demonize them all! The inherent nature of party politics is not worthy of our respect. It seems to be a necessary evil that we should simply tolerate.

End rant.

Rob in ns said...

For the issue to be centered around cost containment from day one death panels needed to be discussed. The reason they weren't and won't be is obvious to me. The term death panels is inflammatory on purpose anyway so as to stifle any meaningful debate.


Anonymous said...

This is frightening

Jim in San Marcos said...

Hi Shift

I think you and I are on the same page.

On your rant, I don't think that government can fix this mess, it has to play out. The Democrats and the Republicans can fight it out, and that will go nowhere.

This whole mess will fix itself, but it will take time. Both parties will want to take credit for it.

Here is a link for a neat program that checks your spelling when you do Internet posts posts.

Install the program and then highlight the typed text and right click "check spelling" Works great for me, try it.

Thank you for your comments and the rant. Take care.

Anonymous said...


I don't like posting links but this one seemed somewhat on topic.


Shift said...

Sorry about my horrible spelling. Thanks for the suggested program, but I am running a Linux box and can not run ie.

I do not see how we can expect the financial industry to fix itself. That is just not realistic. We have recently seen that the government can not handle watching the bankers suffer. Moral hazard is very high right now. It is now the governments place to fix this. One way that the government can fix the situation is to make some sort of law that makes it illegal for the government to bail out any company and then when the time came for a large financial to go down, have the guts to watch it fail. (That isn't gonna happen.) Currently, it is implicit that the government will make sure that "To Big To Fail" (TBTF) survive. This amounts to an implicit guarantee of those deemed
TBTF. This situation will come back to haunt us later down the road unless the government does something about it.

Health care is not going to fix itself. The government is fully installed as a major participant. To deny this would be to deny reality. The latest health care bill just made the government MORE important to the issue of cost containment. If wait for containment to come by way of our being too poor to pay more, than I don't think we can say that anything has been "fixed" (just flat-broke busted).

The government has a large role to play in fixing these financial problems that we face. To beleive otherwise is silly.

Jim in San Marcos said...

Hi Shift

The one problem I see, is; where does our government get the money to do all of this? If they had saved for a rainy day and had big cash reserves saved up, I could see them being part of the solution as you suggest. A big tax increase to pay for saving us, is in order, and the timing for that isn't very good either.

Printing money allows government or who ever they give it to, the right to consume without working.

You can't print food or gasoline. Our government is broke. I don't see a white knight riding to our rescue.

Most financial crisis of the past (like the Panic of 1907) were done and gone inside of six months without government intervention. The bubble would collapse and everything gets marked to market and the banks start over again.

Jim in San Marcos said...

Hi Anon 6:47

I don't think that that company could even sell one policy in the state with rates that high.

Something is amiss there.

Jim in San Marcos said...

Hi Rob

Thanks for the link. 26 weeks for a hip or knee replacement in Canada is a pretty good wait. Great Britain has an 18 week wait. I can hardly wait to find out how our plan will perform.