2014 March 19 Wednesday
What Happens When Old Age Entitlements Crunch Comes?

Doug Elmendorf says there are 3 ways to handle it.

Elmendorf said Social Security, Medicare/Medicaid and Obamacare will be much more expensive relative to GDP in future years because health care costs are rising, subsidized health insurance is expanding, and the population is aging: "There will be a third more people receiving Social Security Medicare benefits a decade from now than there are today," he noted.

I can tell you variations on the ways to handle it.

  • Way way more taxes.
  • Needs testing. If you aren't poor you have to pay monthly hefty premiums for Medicare or not get it at all.
  • Delay eligibility. Raise the age.
  • Cut the amount of benefits you get.
  • Cut the rest of government.

The Tea Party favors cuts in everything else. The Democratic Party (or least its lower classes) favors much higher taxes on the upper classes.

Expect some combination of the above. The last item is already happening. Old folks will find it harder to get Medicare doctors (queues are a favored way to ration medical care in many countres). Some procedures won't get funded and eligibility for treatments will be based on assorted growing sets of rules.

But if declining global oil production rips the heart out of the global economy then the cuts will be much heavier and with little or no warning.

I expect a crisis which leads to cuts with little warning. So I think anyone who expects continuation of the current status quo ought to rethink their retirement plans,. Add 5 to 10 years.

Share |      By Randall Parker at 2014 March 19 08:28 PM 


Comments
Jersey said at March 20, 2014 5:15 AM:

There was a recent episode of This American Life that focused on the cost-savings that could come if end-of-life counseling were the norm (I don't know if that's the right terminology). I.e., a Medicare person comes to you if you're terminally ill and basically finds out at what point the system should stop providing care. Apparently if you just provide the care when it's crisis time people (or their families) just take it unsurprisingly, but if you provide the choice ahead of time they turn down the more extreme measures. So for instance, if there's a procedure that might buy you a few more months that won't be entirely pleasant, you'd have the option to say "no thanks" in advance. Some hospital system somewhere is embracing this approach and I guess saving a lot of money.

I know nothing about any of this, but it does have me curious as a potential sixth means of reform in your list, Randall, as a cost-control measure. Doubt it solves the fundamental problem but such an approach could help.

The problem is federal spending and American fiscal politics are fundamentally biased towards big programs that deal with the past and present (entitlements) and against smaller programs that are future-oriented (science, education, transportation). We have met the enemy and he is us. I don't know how you solve these problems until they're solved for us.

James Bowery said at March 20, 2014 5:02 PM:

Its not too late for Charles Murray's plan:

http://www.youtube.com/watch?v=skDgS5nEY6c

Randall Parker said at March 20, 2014 9:39 PM:

Jersey,

Some efforts are already made to reduce the odds that people will be heavily treated up to the end and die in hospitals. Hospice organizations get funded in order to avoid this outcome. But how do people come into contact with hospice? How do they get referred?

James Bowery,

Reasonable policies toward the lower classes require reasonable views about human nature.

James Bowery said at March 21, 2014 5:41 AM:

Reasonable views about human nature are achievable only by convincing advances in the social sciences. Convincing advances in the social sciences are achievable only through experimentation -- not the interminable argumentation to which we have been subjected for all of human history despite the modern pretensions to "science" of sociologists. What Murray's plan does is place "In Our Hands" (to use his idiom) the responsibility for social experimentation. It is particularly interesting as it is basically compatible with MLK's final advice that plausibly got him assassinated as it would have preempted the shift of liberal politics away from class conflict to race conflict embodied in Title VII of the Civil Rights Act of 1964 and the Immigration and Nationality Act of 1965. To have an AEI libertarian and virtual deity of left-liberal ideology agree on such a fundamental reform is truly remarkable.

Now, having said that, the possibly fatal flaw here is precisely in human nature -- that "the lower classes" (as one might wish to frame it despite the racial rent-seeking subsequent to MLK's assassination) will respond in the way predicted by cynics. However, if that happens, it will be wonderfully clarifying in two ways: 1) People who now are excluded by racial rent-seeking from benefits will be much better positioned to defend their interests politically and 2) The politics of immigration will be utterly transformed by a) recognition that immigration is essentially stock dilution and b) recognition that attempts to form social experiments are undermined by laws that prevent "the politics of exclusion".

Rob said at March 21, 2014 2:32 PM:

Soylent Green.


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