Friday, May 13, 2011

Medicare. Social Security and the Facts!

The WSJ has an article by Cogan which states:

According to my calculations based on government data, such married couples will begin receiving monthly Social Security checks that will, on average, total about $550,000 after inflation. They will receive health-care services paid for by Medicare that, on average, will total another $450,000 after inflation. The benefactors will be a generation of younger workers who are trying to support themselves and their families while paying taxes to finance the rest of government spending. 

 Let us deal with the facts, the basis of the facts and then deal with Cogan who somehow has distorted the facts!

1. First go to the CMS data site, that is where the data is Mr Cogan, so let's deal with the facts. We do not want to deal with your calculation we want to deal with the facts. The total Medicare expenditures in 2009 were $502 billion. Now people paid into that fund and if we look at the actuary reports, say for 2009, we find on p 194 the fact that per beneficiary in 2009 we have the annual costs per beneficiary as:

Part A: $5,319
Part B: $4,686
Part D $1,885
Total $11,890

Now not everyone gets Part D and many do not get Part B. Only Part A is mandatory. Now if we look at their projections we have:



Part A Part B Part D Total
2010 $5,374 $4,569 $1,915 $11,859
2011 $5,577 $4,622 $2,031 $12,230
2012 $5,823 $4,849 $2,139 $12,811
2013 $6,111 $5,053 $2,254 $13,418
2014 $6,483 $5,362 $2,396 $14,240
2015 $6,493 $5,375 $2,573 $14,441
2016 $6,734 $5,716 $2,736 $15,186
2017 $7,003 $6,087 $2,953 $16,042
2018 $7,301 $6,502 $3,177 $16,981
        $127,208

Or a total of $127, 208 for 9 years. The average life from 65 is 77 for a male so if we add that on we get just shy of $150,000. But as we have shown before the average, not the lowest paid, but the average worker contributed in net present value terms at 65 $180,000. In NPV terms at 65 the amount paid is less than $130,000! So where did the money go? And where does Cogan get his numbers! Facts, they are really difficult to face. That is why China, run by engineers, is eating the US lunch run by lawyers and economists!

2. Now for Social Security! Where in God's name does he come up with his logic. Yes SSI payments are close to that but we have been doling out 15% of our gross income for 45+ years! Does that not count?

He concludes:

So today's seniors need to consider how they want the script for "The Millionaire" sequel to be written: There's a knock at the door. We now know that on the other side there's a check for a million dollars. When the door opens, do we really want to see our children, under the commanding gaze of Uncle Sam, presenting us with that check?

 Excuse me Sir, but the money was paid, now time to pay the piper! And he served in the OMB, what a surprise! How about wiping out that Stanford pension, you never really earned it, right. The right and left seem to demonize those over 65. Why, well, the "silent generation", those of us not baby boomers, quietly paid year after year while the folks in Washington "borrowed" the money we paid and now they are screaming that we should not be honored! Why did they not do that to the banks, we paid them trillions, and they screwed up! This is true generational warfare, and no one really suspects that killing off granny will really change anything, just wait till they become granny.

It is a real shame that all of these economists and academics have a total disregard for the truth, the facts shall we say. That is why China is winning! Engineers cannot disregard facts, the bridge will fall. In China if you build a bridge without the facts and it falls, your family pays for the bullet.