On occasion we will read that one of our government’s “benefit” programs has a huge amount of “unfunded liabilities.” For example, Social Security has $9,600,000,000,000 and Medicare has $36,000,000,000,000 in unfunded liabilities — trillions. Now compare those numbers to the median income of workers; $51,272 . . . half the workers in the United States earn below that number and half are above that number.
Unfunded liabilities are a term used to describe future payment obligations as compared to the projected future value of their investment experience. In other words, will the current investments and ongoing contributions grow sufficiently to meet the projected payout obligations. In these two examples, the government is telling us that these two programs alone appear to fall short of meeting their payout obligations by a total of $45,600,000,000,000.
Our federal spending for this year is projected to be $4.4 trillion. This pays for every Federal government program; military, Social Security, Medicare, Medicaid, every government department’s budget, every single government pension . . . everything! Now compare that to the projected shortfall of funds needed to meet the future obligations of just Social Security and Medicare, which are over 10 times greater than what we spend for every federal government program in a year.
Now let’s take a minute or two to think this thing through. First, Social Security requires that 12.4 perccent of your earnings per year be paid into the program for your entire work life, half paid by the employee and half by the employer. People who are self-employed pay the full 12.4 percent. Using the median income figure, a person who earned that amount for their entire 45-year work life would have contributed a total of $286,098 into the plan . . . not counting any return on investment.
With numbers like that, one has to wonder why Social Security claims to have $9.6 trillion in unfunded liabilities. There are many things that contribute to that answer. First and foremost is the fact that fewer and fewer people are paying into the system for every one who is collecting a benefit. Part of that is because people are living longer.
In addition, the post-World War II “Baby boomers” created an upsurge in those eligible for benefits starting in 2008 and will continue to increase in numbers right on up to 2031. When the program started there were 15 or 16 people paying into the system for every one collecting a benefit, today there are less than three contributors for every beneficiary and soon it will less than two. And, while the government tells us there is a Social Security “trust fund,”, it appears that the government has “invested” those funds in government securities, which means that in order to pay back those funds to Social Security, the government will then have to borrow the money from someplace else; how does China sound?
The Medicare story is somewhat similar. For one’s entire work life, 2.9 percent of a person’s income is paid into the Medicare fund; half by the employee and the other half by the employer. Again, using the median wage example, the work life contribution will be about $66,900 not counting return on investment. Add to that, upon retirement the individual pays a monthly premium for Medicare insurance coverage, starting at the rate of $134 per month; per person; higher based on a person’s income. In addition, individuals usually purchase what is called “Medigap” coverage to cover medical costs not covered by Medicare, which normally reimburses the provider at only 80 percent of the allowed rate. There are a number of Medigap plans and the monthly rates vary by plan and provider. For the most part, individual premiums run in the $200 to $250 per month range, depending on the plan selected.
And, there are also what are called “Medicare Advantage” plans that combine both Medicare and Medicare Supplemental plans into one policy. These can be very cost effective as they are provided by regular insurance companies who are given the Medicare premiums and they actually pay the medical providers for both the Medicare and the Medicare supple mental charges. Very worthwhile checking out.
Take a few minutes and think about what you have just read, and consider some of what our politicians are now proposing . . .essentially, to do away with private healthcare and private health care insurance and make everything “free." These programs were developed by politicians who created an impossible situation with over $46 trillion dollars of unfunded liabilities that will come due and payable by our children and grandchildren.
What they are proposing is for the government to determine what health care you can get and when you can get it. We don’t have enough physicians and medical staff right now and I doubt that many bright and compassionate young people will want to invest an additional 12 years of time, talent, and expense, not knowing if some bureaucrat or politician is going to decide what they can do to help you overcome your illness or medical need. Our shortages will multiply and our needs will be unmet because we will be ruled by politicians and non-elected bureaucrats.
(Bob Meade is a Laconia resident. He may be reached at firstname.lastname@example.org)