september
September is for seniors. The weather is nice, school vacations are over, prices drop and retirees migrate along the south-north highways individually in RVs and in organized groups. Sometimes you can’t tell the difference between a particularly lavish RV or a guided bus tour. Not until the passengers start alighting. If you lose count it’s a group. Unless you are arithmetically challenged in which case you may want to peek inside. Contrary to the popular belief seeing a person offering constant narration is not a fool-proof sign of a guided tour. Some seniors just can’t stop to orate.
As a matter of government policy seniors are actively encouraged to visit national parks: National Park Service offers them a lifetime pass to parks for $10. The privilege that the rest of us have to pay $80 a year. Which by the way is still an incredible deal if you plan to visit more then 5 parks.
So the seniors come in droves, crowd overlooks, obscure views, get into photo shots - in short: annoy me to no end. Not only because they compete with me over access to nature. Those are the same people who are responsible for the way the nature looks like now. They contributed to the whole slew of dubious achievements: supplied each family with over 2 cars, expanded suburbs, eliminated railroads and so on. Is it even fair that they have time and money to tour the country?
In US the golden age starts early: a person can begin to draw retirement benefits from the social security program at 62 having worked for as little as 10 years. At the first glance it seems unfair but the pension received and the social security tax paid turn out to be equal for an average American living the standard life span of 78 years. Benefit is tied to the length of employment, so people who worked less receive less. People who paid more tax receive more pension but it is not linear: high earners pay more than they receive to subsidize people of low income.
Regardless whether the social security is just, the seniors we see in parks probably do not rely solely on it as the maximum check is $2,346 per person (for people retiring in 2010). To tour the country one must have other assets. Maybe they sold their house before the real estate bubble burst. Or they cashed out of stocks before the market crashed. Or have a private or a public pension. Maybe they just saved and invested prudently all their lives balancing periodically their retirement funds. In any case they get a big help in the form of a subsidized health insurance - medicare - and have to pay only $110.50 a month for it.
One may think that more effective alternative to the social security is often proposed shift to individually managed accounts. They would allow recipients make investment decisions instead of relying on the social security common account invested in treasury bonds. This is already practiced and in no less than two different forms: defined-benefit public and private pensions (offered respectively by government entities and some big corporations) or defined-contribution 401(k) retirement accounts. In the former the investment decisions are made by hired professionals, in the latter - by recipients themselves. Both forms make exactly the same mistake of unrealistic expectations of high market returns and consequently they either require state assistance or force participants to delay their retirement.
Out of all entitlement programs the medicare is the most pressing concern. Elderly complain about healthcare costs and the necessity to increase the subsidy to cover all kinds of drugs and treatments. And I’m sure that in each individual case it seems unfair that the sick have to spend ever increasing share of their income on medical bills. But the truth is that the amount of money collected over the work period of today retirees simply doesn’t cover the expenditures. And they, as a group, are the people who let the medical services costs to raise to almost 20% of the GDP, which is much higher than in other developed economies.
While the social security system doesn’t account properly for the increase in longevity and will become insolvent in 2037 (according to the latest report of Social Security and Medicare Boards of Trustees), the medicare hospital expenses (so called part A) ignore completely the growing costs of medical treatments and will be insolvent as of 2012. Its expenses don’t meet the inflows and the trust fund that current retirees paid into while working (thus front-loading the current expenses) will be depleted by 2029. Curiously there is far more chatter in the media about the social security being broke (or not, depending on your political leaning and ability to do the math). The medicare is barely mentioned.
Interestingly the medicare part A was supposed run out of money in 2017 in the last year’s report of its board of trustees. It’s got a new lease on life by the health care reform that mandated reduction of costs by 30%. That would be the first reduction in medical costs if accomplished. And probably the first ever reduction in cost of anything that was effected by postulating it in the law. All previous attempts of that sort were overridden by the congress afraid that doctors would turn seniors away if not compensated at the current level.
The medicare also covers doctors’ visits and tests (part B). This is the part that entails the subsidized premium. Subsidy reimburses the actual costs: only a fraction of those is covered by premiums, the rest is paid directly by federal budget. While that part cannot go broke, because there is a provision that requires budget to set aside enough funds each year, it has an obvious problem of taking bigger and bigger part of the budget as medial costs and life span grow. The medicare part D that assist seniors with prescription drugs is financed in the same way.
Opinions that the benefits granted to seniors are either too much or not enough strongly correlate to one’s age. Saddling younger citizens with underwater homes or worthless equities may deserve reprehension. Expecting workers pay more and more taxes to provide medical care may be impairing the economic growth. But on the other hand young are supposed to take care of their elders. Insurance is about sharing risk after all. Expecting the risk to be shared within generation pool (as social security and medicare part A do by front-loading) is as arbitrary as proscribing inter-generational solidarity (medicare parts B and D). Private and public pensions on the other hand push risk onto smaller group of a given pension subscriber culminating with individual accounts that dispense with risk-sharing altogether.
So we have all those experiments in benefits for elderly and none of them is truly working. Together they chug along getting patches that delay the day of reckoning: the process affectionately called kicking the can down the road by the media. It is not such insane strategy as it seems - politicians can always hope some mysterious disease will strike seniors thus solving the problem. And leaving parks empty in September.
