Medicare Reform Now or Bust Later

The insanity continues - this administration has no idea what is going on in our economy and more importantly to all of us, they don't care as this is the foundation of "fundamentally changing America" agenda Obama said he wanted before the election.

Our president demonizes anyone that tries to change Medicare, Medicaid or Social Security as not caring whether people live or die, old or young. These mandated institution are broke but Obama believes by expanding them to 34 million more people will be beneficial and save money.

Insane you say? Correct! Who are these people?

Is Medicare a Ponzi Scheme?
Source: Christopher J. Conover, "Is Medicare a Ponzi Scheme?" The American, October 25, 2011.

Most Medicare recipients receive more in benefits than they paid through their payroll taxes while they were members of the workforce. However, because few Americans recognize this truth, efforts to reduce payouts in Medicare are perceived as attacks on the retirement savings of individuals.

Yet by looking at the average amount that taxpayers pay in payroll taxes and the average amounts received in benefits, it becomes clear that only a small fraction of American taxpayers pay into the system as much as they receive. For the rest, Medicare is a Ponzi scheme, says Christopher J. Conover, a research scholar at Duke University's Center for Health Policy.

The average Medicare recipient now receives between two and six dollars' worth of benefits for every dollar that they put into the system. Meanwhile, in regard to Social Security benefits for retirees who turned 65 in 2010, the average beneficiary receives between 89 cents and $1.51 for every dollar they paid in it.

For Medicare, only those recipients who averaged an income over $130,000 for at least a 42-year career ($5 million in lifetime aggregate income) will have paid as much into the system as they receive.

These figures explain that, compared to the Social Security financial, Medicare is far more of a Ponzi scheme. Aside from a small fraction that have lifetime earnings in excess of $5 million, the entire population of Medicare beneficiaries will receive more in payouts than they put in.

The biggest changes to the Medicare system are to be implemented in 2013 with the enactment of the Patient Protection and Affordable Care Act (PPACA). Among its most significant reforms, the PPACA will increase the payroll tax for individuals making over $200,000 (and couples making over $250,000).

Yet this is the equivalent of raising taxes on the only portion of the retiring population that was already paying its fair share. The Medicare system cannot be saved by simply raising rates on those who can most afford to pay.