Philadelphia Reflections

The musings of a physician who has served the community for over six decades

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Introduction: Surviving Health Costs to Retire: Health (and Retirement) Savings Accounts
New topic 2016-03-08 22:42:53 description

More on Integrating Medicare into HRSA

During all the uproar about the Affordable Care Act, the retiree population was very quiet. Even after the commotion about jamming the Act through Congress, the death of Senator Kennedy and loss of Senate Democratic control, the failure of the state insurance exchanges, and related Obamacare talk -- the retiree generation, characteristically so interested in political gossip, had almost nothing to say. In addressing Medicare-age groups about health insurance, I found they were largely oblivious to it. But let me tell you, when the discussion got around to the possibility that Medicare would be underfunded in order to pay for the new benefit, their voices suddenly became very loud. Apparently, all through the Affordable Care Act discussions, one concern had been uppermost in their minds. No one was going to take their Medicare away in order to pay for younger people. The politicians got the general idea quickly, too; no one of them was going to touch such a proposal.

No one else is showing the slightest sign of touching Medicare, either, no matter how deeply it goes into debt, and no matter what other expedients are resorted to. Everybody loves a fifty-cent dollar, and safely presumes other people feel the same. But doctors suspected it couldn't last in its present form. Even though illness still continues to threaten the last ten years of the working age group, it seems only a matter of time before severe illness will predominantly be found only in the retiree group. Right now for example, just about everyone who dies, does so at Medicare's expense. It's impossible to believe life insurance companies have not noticed this fact, and quietly made adjustments to it. The National Institutes of Health are currently spending 33 billion dollars a year on research, and Medicare itself is only spending fifty. We hear only eight diseases account for 80% of the expenditure of Medicare. It seems reasonable to suppose every few years the expenditure of 33 billion dollars would result in knocking off one of those expensive diseases. I realize that everyone has to die of something. When one of these expensive diseases disappears, it is reasonable to suppose a less expensive disease will take its place. But there remain plenty of cheap sudden ways to die, which might be replaced by expensive ones. Life expectancy will get a little longer, hospitals will need fewer beds. And so, regardless of whether Medicare spending went up or down last year, in the very long run, Medicare expenses will get smaller.

And of course retirement costs will go higher, because improvement in longevity leads to more time in retirement. At the moment, there is no provision made for Medicare surplus to be transferred to Social Security instead of into battleships, food stamps or agricultural subsidies. Medicare lengthens retirements. What you can save in Medicare becomes part of what you can spend in retirement, in actuality if not in overt shifts of finance. Right now there is no Medicare surplus, so right now there would be less resistance to changing the laws to mandate Medicare surplus become Social Security funding. It takes time for the public to adjust to any idea, and it helps a lot to have been the first mover. Passing a mandated surplus transfer (from Medicare surplus to Social Security) seems like one of the few painless things to be done about this financing tangle; once a surplus appears, competition for the money will also appear and the difficulty of mandating it will increase substantially. A related step that might even be taken is to deposit the cost-of-living increases of social security benefits, into the Health Savings Accounts of the elderly (without specifying how to spend it). That would open the way for later steps, even though many Social Security benefits would indeed be withdrawn and spent. But some would not, gathering compound income and requiring the Health Savings Accounts to remain open after age 65, which would be desirable for other reasons. The more preliminary steps of this sort which might be devised, the easier and more natural it would become to make large transfers, whenever some expensive disease does start to disappear. For example, Medicare recipients who spend significantly less than average on health care, might be said to have "earned" an increase in their retirement funds. To extend the age of HSRAs to the time of death would permit some of these deposited surplus funds to be spent on health, get a double tax deduction, and advance funding-unification another notch toward enhanced compound income.

 

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