What’s Up with Medicare?

2010 and 2019—these are 2 very important numbers in your head. The first represents the year where we will start paying out more money than we take in. Those of you who did those rates of change problems in Calculus know that it won’t take long for the money tank for such a system to empty—which brings us that second number—2019, where the Medicare system is expected to be bankrupt. What’s scary is that the current candidates left in the Presidential race aren’t speaking about it.

From the LA Times:

Sen. John McCain of Arizona, the presumed Republican presidential nominee, had little to say when the latest numbers were released projecting Medicare going into the red by 2019 and Social Security following in 2041. The Democratic contenders, Sens. Barack Obama of Illinois and Hillary Rodham Clinton of New York, also sidestepped the issue.

Most of the people who read this are not planning to lean to heavily on Medicare anyway, resorting instead to building a strong 401(k), work benefits plan, or IRA to provide them with the needed funds to handle medical expenses in their old age. At least I hope so. But your parents and grandparents most definitely will. And the Medicare program is in serious trouble, even more so after the Part D prescription plan was added in 2003.

Expect the candidates (except maybe for McCain) to adopt the populist solution:

Tax “The Rich.”

Social Security operating in the red? Tax the Rich.

How about that Universal Health Care? Roll back those tax cuts on The Rich.

How to keep Medicare solvent? You got it.

But no one talks about the outlays (the cost). Rolling back the rich folks’ tax cuts (which means any person, family or business making 200,000+) won’t cover all of this. Which brings us to two solutions: either admit that everyone will have to shoulder an increased tax burden, or admit that some of these programs will unfortunately have to go or benefits will have to be sliced.

Let’s be frank: if the operators of Medicare and Social Security were a private business, investors would be running scared from them. Now imagine if the US Government forced you to own shares in the business… Now I know that these entitlement programs have been around for awhile but they were never meant to fund your retirement—it was simply meant as a supplement to retirement income. At some point some tough decisions will have to be made. Taxes will need to be raised. On everyone. Benefits will need to be cut, especially for younger Americans who have the opportunity to own and fund 401(k) accounts…or IRAs…or start successful businesses—like we always have.

So keep your eye out for Medicare, Social Security, and the coming burden of Universal Health Care. One would hope we can have these things and not pay for them, but if we want them, we will have to pay one way or another.

Your Thoughts?