Another Reason to Hate the Boomers

Building on my well-documented issues with baby-boomers, my friends at the John Locke Foundation alert me to a report that IDs boomers as the stumbling block to Medicaid reform too, placing boomers at the intersection of all three major federal entitlement cluster-humps.

The idea is that since Medicaid now functions as a kind of long-term care catch-all for seniors, especially for costly nursing home care, the program has become inheritance insurance for baby-boomers. One possible fix: Require seniors with real estate assets to first draw-down their home equity with a reverse mortgage before they can be considered needy enough to enroll in Medicaid.

The sound you just heard is all the boomers crumpling up their inheritance-fueled vacation home plans.

Comments

[Mark Draughn]

The sound you just heard is all the boomers setting up real estate trusts for their children.

[Ken Shultz]

"One possible fix: Require seniors with real estate assets to first draw-down their home equity with a reverse mortgage before they can be considered needy enough to enroll in Medicaid."

...Um...I don't think putting this in bold gives it enough emphasis, so please try to picture me jumping up and down and screaming when I say that...

This is a really bad idea!

There are practical questions such as what to do with surviving spouses--are you going to cart an old woman off to a nursing facility that will accept MedicAid/MediCal after her dead husband blew the reverse mortgage money on a triple bypass and a pacemaker?

...But the basic objection is one of simple justice. The state grinds old people into poverty by stealing the fruit of their labor their whole lives under the pretense of providing them with a pension and health insurance in their old age. Now you tell them that in order to get it, they have to bankrupt themselves first?

I can't remember, what was the name of the horse in "Animal Farm" that they carted off to the glue factory? Once again, the elderly have paid for MedicAid/MediCal.

The ultimate solution to a pyramid scam is not making it harder for people on the bottom to collect--the ultimate solution is a system that isn't set up like a pyramid scam. Requiring the elderly to choose between their homes and health care does nothing to address the underlying problem.

[sage]

Hey Ken, maybe someone forgot to tell you: Life isn't fair.

[Jennifer]

Sage-
Life is indeed unfair, but I don't think codifying that unfairness into law is a legitimate function of government.

Ken-
The horse's name was Boxer.

[Ken Shultz]

"Hey Ken, maybe someone forgot to tell you: Life isn't fair."

Maybe somebody forgot to tell you that solutions that don't fix the problem are an enormous part of the problem.

...We need the government to stop grinding the elderly--that's all of us by the way--into poverty. This proposal just greases the wheels in that grinder.

...Oh, and, on a side note. Long before Social Security, old people were buying big houses or apartment buildings, living in them and renting out rooms--think Fred and Ethel. Even today, residential real estate is good passive income for people who are too old to work--and forcing such people to reverse out of their means of non-SSA income is counter-productive that way.

[TJIT]

If people would buy a single premium, long term care insurance at a young age a lot of this problem would disappear.

[Louis Varnson]

Surprise, surprise, the Medicare Drug Bill for seniors is going to cost about double what the administration said it was going to. Recent estimates place the figure for the next ten years at around $1.2 trillion dollars. I hope the government loves me this much when I am old!

[Richard]

TJIT,

No it wouldn't. Young people don't think like that, and even if they did, what about today's elderly?

[Gilbert Martin]

"The ultimate solution to a pyramid scam is not making it harder for people on the bottom to collect--the ultimate solution is a system that isn't set up like a pyramid scam."

And just how do you transition from one to the other without somebody getting the shaft?

"We need the government to stop grinding the elderly--that's all of us by the way--into poverty."

Most of the elderly aren't being ground into poverty. They are the wealthiest demographic group there is. A lot of them have been getting the benefit of a higher return on social secirty for years than will be the case for those coming along afteward. The FICA tax rate was much lower during their working lives when they were on the paying in phase of their lives and benefits have been increased for them now that they are on the taking out phase of their lives.

[Ken Shultz]

"The ultimate solution to a pyramid scam is not making it harder for people on the bottom to collect--the ultimate solution is a system that isn't set up like a pyramid scam."

I think you have to fund your commitments more or less as they were when people became eligible for the program. I think you have to let people opt out of the program, and I think you have to fund the difference with tax receipts, borrowing and budget cuts.

"Most of the elderly aren't being ground into poverty. They are the wealthiest demographic group there is. A lot of them have been getting the benefit of a higher return on social secirty for years than will be the case for those coming along afteward."

The last time I checked, more than half of the average person's income is swallowed by taxes, a huge portion of which is used to fund social programs like SSA, Medicare and MedicAid/MediCal. If the average person didn't have to bear that burden, then the average person would own their home, put themselves or their kids through college, finance their retirement, buy health insurance, etc.

...If people could keep the money they're paying in, they wouldn't need SSA and Medicare.

"A lot of them have been getting the benefit of a higher return on social secirty for years than will be the case for those coming along afteward. The FICA tax rate was much lower during their working lives when they were on the paying in phase of their lives and benefits have been increased for them now that they are on the taking out phase of their lives."

I admit to not having looked at this statistic in a while, and, of course, the payout depends on what kind of illnesses you have, how long you live, etc., but when last I looked, the people in my grandmother's generation--she passed away at the age of 94 a few years ago--got around a 1% return on what they paid in. People in my generation--Generation X that is--will get a lower return, no doubt, but if you ask me, getting a 1% return on average is still a very raw deal.

[Gilbert Martin]

"The last time I checked, more than half of the average person's income is swallowed by taxes, a huge portion of which is used to fund social programs like SSA, Medicare and MedicAid/MediCal. If the average person didn't have to bear that burden, then the average person would own their home, put themselves or their kids through college, finance their retirement, buy health insurance, etc."

No argument from me on that. However, you are talking about people who are not yet elderly. Those who ARE elderly are the wealthiest demographic group there is. Part of that is due to the transfer of wealth to them via those programs you just mentioned.

"I admit to not having looked at this statistic in a while, and, of course, the payout depends on what kind of illnesses you have, how long you live, etc., but when last I looked, the people in my grandmother's generation--she passed away at the age of 94 a few years ago--got around a 1% return on what they paid in."

I would like to see some statistics on that, since I find that hard to believe. FICA tax rates were quite low for a long time and benefits have been raised quite a bit subsequent to the retirement of many of those drawing SS benefits.

[MayDay72]

Life is indeed unfair, but I don't think codifying that unfairness into law is a legitimate function of government. -Jennifer

Would you equate "fairness" with "equality"? What if fairness may be incompatible with liberty or freedom? I'm not sure how relevant any of this is to the issue at hand...It is just that "unfair" and "fairness" are a few of the words that tend to make me a little bit skittish because sometimes in public policy we must make difficult choices between "fairness" or "equality" as measured against the whole of civil society and "freedom" or "liberty" of the individual.

[Anvilwyrm]

I have trouble feeling sympathy for Boomers. They promised themselves a payout for putting money into the system, then voted for people to take all that money and spend it on programs they wanted, but didn't want to pay higher taxes to have.

They spent the same money twice, and want us to fix it for them. While saving for ourselves, and raising families. And paying for the programs they liked.

I am *SO* looking forward to paying for my 1/2 a retiree.

[Isaac Bartram]

They promised themselves a payout for putting money into the system, then voted for people to take all that money and spend it on programs they wanted, but didn't want to pay higher taxes to have.

They spent the same money twice, and want us to fix it for them.

I am a Boomer and I don't have any sympathy for Boomers either.

But the fact is that the law, created by the parents of the Greatest Generation (who were its major benificiaries), always took all that money and spent it on other programs.

The "trust fund" has never been anything but Treasury bonds. The Treasury has no mechanism to "save" money, and the SSA has no authority to hold any other kind of financial instrument.

I am *SO* looking forward to paying for my 1/2 a retiree.

That's the fault of the SS scheme not boomers.

[Anvilwyrm]

That's the fault of the SS scheme not boomers.

You mean the scheme which has been a known problem for decades, but one Boomers would vote out anyone who threated to change?

Saying "it's the law not the people" seems to betray a lack of understanding of how laws are made.

Ask AARP.

[Ken Shultz]

Gilbert Martin,

I found a table showing the average return on FICA by demo at this link:

http://www.concordcoalition.org/facing_facts/ff_fax35.html

It shows a vast difference between people who retired in 1975 and people who retired in 1995, but as far as Single Males go, and I suspect that may have been the source of the 1% number I was thinking of, Boomers aren't likely to do much better than Generation X.

Males retiring in 1995 get a 1.8% return, retiring in 2010 get a 1.2% return and in 2030 get a 1.0% return. Females do better--probably because they live longer--and Two-Earner Couples--well--they get about twice as much I guess.

I was wrong about Grandma--she did a lot better than I thought--but I stand by the idea that Boomers aren't going to do as well as many seem to assume. Sure, 1.2% is better than 1.0%, but not by much. They'd all have done a lot better if they'd been able to keep their money rather than flushin' it down the government flume.

To the rest of you jokers who seem to think that fairness shouldn't matter--the idea is to fix the problem. I suspect the AARP and AMA are two of the most powerful interest groups in the country, if your solution doesn't take their member's interests into consideration, then you're just belching into the wind. Unless a significant number of people want to opt of the system--and that option will probably come at a price--any solution that doesn't pay out everyone who has already paid in isn't going anywhere.

...I think there are some objectivist sites where they talk about how we can finally fix government once everyone in America lives by reason and embraces atheism. Relatively speaking, I suppose a proposal to cut benefits to seniors is more likely than that scenario, but not by much.

[R C Dean]

Ken, I don't see anything fair about paying welfare to people who have substantial assets and can damn well afford to pay for their own care.

I don't see anything fair about taxing the poorest segments of society (the working poor who pay payroll taxes) to subsidize the wealthiest segment of society (the elderly).

[MayDay72]

"To the rest of you jokers who seem to think that fairness shouldn't matter--the idea is to fix the problem." -Ken Shultz

I guess that I'd be one of the "jokers" in question. It isn't that fairness doesn't or shouldn't matter. It is just we need to be very sensitive to the possibility that we may be trampling over the economic and social freedoms of individuals in a quest to create or maintain a system that is "fair".

"I suspect the AARP and AMA are two of the most powerful interest groups in the country, if your solution doesn't take their member's interests into consideration, then you're just belching into the wind. --Ken Shultz

So...Public policy should be decided by the wishes of the most powerful special interest group(s)?

[Isaac Bartram]

You mean the scheme which has been a known problem for decades, but one Boomers would vote out anyone who threated to change?

This has been a known problem for decades only to people like you and me*. The first time it was widely known among the general public that there was any trouble was the early 1980s when the Greenspan fix was made.

It is retirees not boomers who have been resisting change to SS. Every time anyone has suggested tinkering with SS it has been current recipients who have howled, even when every effort was made to assure them that their benefits would not be affected. And the Democrats have never failed to exploit the fears of the elderly. If anyone had seriously suggested reforming SS in the late 60s, early 70s most boomers would have had no problem. However as part of the true gospel revealed to St Franklin of Roosevelt it was considered heresy to change one word of the holy writ.

I'm not finding fault with your anger and frustration. It's just that boomers have been as misled about this Ponzi scheme as everyone else.

Only the youngest members of AARP are boomers. And no boomers are actually collecting SS retirement benefits yet.

When I get solicitations to join the Association of Aged Rich People I file them in the circular file. 🙂

*and your making statments like "They spent the same money twice, and want us to fix it for them." indicates that you have an incomplete understanding of the problem.

[Isaac Bartram]

I don't see anything fair about taxing the poorest segments of society (the working poor who pay payroll taxes) to subsidize the wealthiest segment of society (the elderly).

Statists seem to have figured out a long time ago that there's no money in taxing the rich (there aren't enough of them, and there are diminishing returns on tax rates). Now there's lots of poor and middling people out there but it's politically unpalatable to burden them with taxation.

Then some genius figured out, "hey, I know, let's promise them a benefit that many will never live to collect, and for those who do there will be plenty of youngsters to carry them."

The best way to understand the Social Security fraud is to view it as a taxation plan not a pension plan.

[Gilbert Martin]

"I was wrong about Grandma--she did a lot better than I thought--but I stand by the idea that Boomers aren't going to do as well as many seem to assume. Sure, 1.2% is better than 1.0%, but not by much. They'd all have done a lot better if they'd been able to keep their money rather than flushin' it down the government flume."

I never said the Boomers were going to get a high return on SS - I said those who're already been retired for a good while were getting it. It only stands to reason that if you paid FICA taxes at a lot lower rate for most or all of your working life and then got benefits that were boosted to a higher level after you retired that you would be getting a lot better deal than those who came along after the fact.

Indeed the discrepancy is even larger than the figures you cited since those meager future return rates are predicated on benefit levels as they stand now - which are most certainly due to be cut back so that for many, the future return rates will be negative.

Like all Ponzi schemes, someone has to get left holding the bag sooner or later. The only way that someone can get out more than they put in is if someone else winds up getting out less. Guess who those people are going to be?

[curious]

Why are we as a society required to support the stupid? I'm not saying that all people getting SS are stupid, but it was put in place for people who were too stupid to save for their retirement, right? Or too stupid to get a good job or keep their skills up or be friendly to co-workers.

I guess in the 1930s you could be laid off and not have a job when you were in your fifties, but shouldn't people start saving well in advance of their 50s for retirement? They didn't have to pay for their kid's college education.

Am I totally wrong about this? I can see disabled folks getting a check, but the taxes on that wouldn't take up as large a percentage as SS does.

Just wondering.

[Gilbert Martin]

By the way for all those Democrat hacks squawking about Bush trying to dismantle the legacy of FDR (whon they seem to regard as some kind of God), FDR himself said in a speech in 1935 that social security should only last about 30 years or so in the form it was created and then it should be replaced by an individually funded annuity system.

So Bush is actually moving in the direction FDR advocated rather than dismantling his "legacy".

[Ken Shultz]

"So...Public policy should be decided by the wishes of the most powerful special interest group(s)?"

I didn't intend to suggest that public policy should be decided by the wishes of the most powerful special interest groups, I meant to suggest that public policy is decided by the wishes of the most powerful special interest groups.

...I want to get rid of SSA and Medicare, but if reform doesn't serve the interests of the people who are represented by the AARP and AMA, then reform is nothing but a pipe dream.

[Ken Shultz]

Ken, I don't see anything fair about paying welfare to people who have substantial assets and can damn well afford to pay for their own care.

I didn't go to public schools and I won't send my kids to public schools. Can we start means testing public education? 'cause I don't think it's fair that I should have to pay for the education of other people's children.

...How viable is that reform?

"I don't see anything fair about taxing the poorest segments of society (the working poor who pay payroll taxes) to subsidize the wealthiest segment of society (the elderly)."

That must be a joke.

I don't have to pull out the chart that shows the upper two percent of income earners paying almost forty percent of the income taxes, do I? I don't have to pull out the chart that shows that the upper twenty percent of income earners pay almost eighty percent of all income tax receipts, do I?

...Because we're already clear on that point, right? The suggestion that the rich are soaking the poor for tax revenue is a joke, right?

[Phil]

I don't have to pull out the chart that shows the upper two percent of income earners paying almost forty percent of the income taxes, do I? I don't have to pull out the chart that shows that the upper twenty percent of income earners pay almost eighty percent of all income tax receipts, do I?

Um . . . you might want to take into consideration the income cap on FICA taxes when you whip out that chart. Bill Gates pays no more in FICA taxes than I do.

You also might want to understand that there isn't a one-to-one correspondence between demographic comparisons of wealth and percentiles or deciles or quintiles of income. People 65 and older can, as a group and on average, be wealthier than people age 35 and younger without a single one of either group being in the top 2% of income earners.

[Ken Shultz]

"Um . . . you might want to take into consideration the income cap on FICA taxes when you whip out that chart. Bill Gates pays no more in FICA taxes than I do."

You're not one of those "lock box" people, are you?

"You also might want to understand that there isn't a one-to-one correspondence between demographic comparisons of wealth and percentiles or deciles or quintiles of income."

I think that's a slight change of subject, but I think it's safe to say that Boomers, generally speaking, have been working longer and paying in longer than Generations X and Y. I think it's also safe to say that wealthier people pay more in income taxes than poorer people. Considering both, it's probably safe to say that poorer people are not disproportionately paying for the Medicare and Social Security benefits of wealthy people.

"People 65 and older can, as a group and on average, be wealthier than people age 35 and younger without a single one of either group being in the top 2% of income earners."

I don't understand why that's relevant here.

[MayDay72]

"I didn't intend to suggest that public policy should be decided by the wishes of the most powerful special interest groups, I meant to suggest that public policy is decided by the wishes of the most powerful special interest groups [...] I want to get rid of SSA and Medicare, but if reform doesn't serve the interests of the people who are represented by the AARP and AMA, then reform is nothing but a pipe dream." -Ken Shultz

I realize that you're trying to make an argument for politcal compromise with special interest groups...But I think that your words above unintentionally make a much stronger argument for reforming a flawed democratic system. Flawed in that the system allows well-funded and narrowly-focused groups to redirect the wealth of individuals into the wallets of specially protected politcal classes.

"[A democracy] can exist only until the voters discover they can vote themselves largess out of the public treasury." -Sir Alexander Fraser Tyler

[Jonathan Swift]

Let's just do what the Eskimos do--throw the old folks out on the ice. Or kill them and let the poor eat them, thus eliminating the need for both Medicaid *and* food stamps.

[MayDay72]

"Let's just do what the Eskimos do--throw the old folks out on the ice. Or kill them and let the poor eat them, thus eliminating the need for both Medicaid *and* food stamps." -Jonathan Swift

A modest proposal?

Since we're doing satire: We're all too stupid and greedy to save up enough for retirement or medical care. We need government to make wise and long-term plans for us. But why stop at Social Security, Medicare and Medicaid? We should send 100% of our money to Washington. Then smarter people than us can tell us what to eat, where to live, how many children to have, where to work, what sort of transportation to use, what doctor to see, etc., etc., etc...

Please excuse me now...But I must go and cash my meager paycheck (from my temporary, part-time, non-union job that is due to be out-sourced in a week) at the Check-N-Go (which charges immoral amounts of fees for those of us who aren't smart enough to have bank accounts) so that I can spend all of my money on dope, booze, hookers and gambling on some cock fights. Please tell Barbara Boxer or Ted Kennedy that I need their assistance ASAP if you happen to see them...

[D Anghelone]

Let's just do what the Eskimos do--throw the old folks out on the ice. Or kill them and let the poor eat them, thus eliminating the need for both Medicaid *and* food stamps.

Incorporate an Adopt-a-Boomer program into the Adopt-a-Highway program and place them along the roadsides. Any not adopted can become prostitutes as in Germany.

[Phil]

"People 65 and older can, as a group and on average, be wealthier than people age 35 and younger without a single one of either group being in the top 2% of income earners."

I don't understand why that's relevant here.

Because in the context of an argument that Social Security is a transfer payment from poorer young people to wealthier older people, the tax burden of the top 2% of income earners doesn't matter, as you appeared to be suggesting it does; the demographic tax burdens and income levels do.

[Randy]

I hope the government loves me this much when I am old!

I think the government will be loving you long time, actually.

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