Greenspan on SS & Medicare

[Mysto]

In Fortune Q&A, Greenspan answers critics, defends legacy - Sep. 17, 2007

What should we be worried about most right now in terms of the economy?
Strangely enough, I think it's politics. We have a dysfunctional political system in the sense that there are very serious fiscal problems out there, most importantly Medicare. As best I can judge, when the baby boom retires, we are going to have to either raise taxes very sharply or cut benefits by half. No politician wants to confront this. And this is a very sad event because what's at stake here is the fiscal stability of the American government.
How will it be resolved ultimately?
Probably the least politically difficult is essentially to make it akin to a welfare program, but those who are supporting social insurance think that is anathema. The problem is that the arithmetic is inexorable here. I don't see how you get around that.
Prudent policy would be to adjust the longer term now, not when it becomes a serious problem for people who have already retired and are told after the fact that they will not be getting the real Medicare that they expected. Tell them now, when they're still not retired and have the choices of working longer or doing other things to adjust.
I think it's unethical and immoral for a government, when confronted with these types of events, not to take action. What do we elect people for?

 

[maddythebeagle]

He was on 60 minutes last night....what a party animal

 

[TexasGal]

Good grief! I am 60, just retired, and counting the years/months until I can begin Medicare. Doesn't sound like I am going to be able to count on it for much. I will be paying a hefty bill for medical coverage every month for the next 5 years and that might just be the tip of the iceberg as I age??

What do the rest of you think? When will action be taken and how far will they go? Is it possible than in another 5 years Medicare benefits could be made available only to those seniors practically living in poverty? Interesting subject, and for those of us who do not have several million in the bank, this is somewhat scary although it is not new information to me. We have all been hearing for quite a while that Medicare is in bad shape, worse than social security.

 

[FinallyRetired]

We have all been hearing for quite a while that Medicare is in bad shape, worse than social security.

IMHO we can't fix Medicare without fixing the entire broken US health care system. The problem is that costs are out of control and, although Medicare tries its best to cap expenses, it's at the mercy of ever escalating costs. Instead of throwing Medicare further in the red, we need to revamp the overall health care system. We may then have a sustainable system for everyone, not different systems for those under and over 65. So, to respond to your valid concern, I'm not as worried about Medicare going away, because I think the overall system will change. But there will certainly be gargantuan challenges in doing this.

 

[ziggy29]

Good grief! I am 60, just retired, and counting the years/months until I can begin Medicare. Doesn't sound like I am going to be able to count on it for much. I will be paying a hefty bill for medical coverage every month for the next 5 years and that might just be the tip of the iceberg as I age??

Personally I think you're close enough to eligibility age that any sweeping changes to SS and Medicare won't screw you, but those in your children's and grandchildren's generation.

 

[youbet]

Personally I think you're close enough to eligibility age that any sweeping changes to SS and Medicare won't screw you, but those in your children's and grandchildren's generation.

Emmmmm...... possibly. But my personal opinion is that folks currently at or near 60 will find themselves being means tested to determine their Medicare premiums by the time they are 70. Folks with generous retirement incomes will wind up paying a whole lot more than folks just getting by.

Anyway, that's the scenario I have written into our budget.....

 

[haha]

Emmmmm...... possibly. But my personal opinion is that folks currently at or near 60 will find themselves being means tested to determine their Medicare premiums by the time they are 70. Folks with generous retirement incomes will wind up paying a whole lot more than folks just getting by.

Anyway, that's the scenario I have written into our budget.....

This is a very safe bet, as it is already the case. I am on Medicare, and my premium is determined by my "Adjusted AGI" 2 years prior.

Ha

 

[MasterBlaster]

Emmmmm...... possibly. But my personal opinion is that folks currently at or near 60 will find themselves being means tested to determine their Medicare premiums by the time they are 70. Folks with generous retirement incomes will wind up paying a whole lot more than folks just getting by.

Anyway, that's the scenario I have written into our budget.....

The means testing with Medicare payments have already started. The spread in payments isn't that much...for now.

I agree withe the comments that a comprehensive overhaul of the US medical system would go along way towards solving this problem. I also think that the system we will move to will limit care available and the options people have. So the boomers should expect some amount of care. It just won't be nearly as good as what is available today.

 

[Bikerdude]

I also think that the system we will move to will limit care available and the options people have. So the boomers should expect some amount of care. It just won't be nearly as good as what is available today.

I agree. We will move to a single payer government system that will be a cover story for "rationing". I would expect a VAT or some other form of sales consumption tax along with means testing.

The good news is normal preventative care will probably be good. However as you age the access to aggressive life saving procedures will be severely limited or denied.

 

[SamHouston]

Is it just me, or has Greenspan gotten a lot smarter since he's retired and has a book to sell?

 

[chinaco]

Sounds like Hillary is pushing a new Universal Health Plan. It sounds like all of the candidates have some sort of plan.

IMHO - Something needs to be done. And it is not just about cost of coverage... medical inflation (cost ) is out of control.


One thing is for sure... with the current system, we all pay for it through government programs, subsidies, and cost shifting. Might as well have a formal plan cause we are paying for it anyway.

 

[youbet]

This is a very safe bet, as it is already the case. I am on Medicare, and my premium is determined by my "Adjusted AGI" 2 years prior.

Ha

Ha...... You remind me of DW. You know exactly what I meant but are calling me on what I actually said! Sorry 'bout that, my mind got way ahead of my typing.

My emphasis was meant to be on my words "Folks with generous retirement incomes will wind up paying a whole lot more than folks just getting by."

MEDICARE PREMIUMS AND DEDUCTIBLES FOR 2007

"In 2007, approximately 4 percent of Medicare Part B enrollees with higher incomes will pay a higher Part B premium based on their income. The income-related Part B premiums for 2007 will be $105.80, $124.40, $142.90, or $161.40, depending on the extent to which an individual beneficiary’s income exceeds $80,000 (or a married couple’s income exceeds $160,000), with the highest premium rates only paid by less than 1 percent of beneficiaries whose incomes are over $200,000 (or $400,000 for a married couple)."

At the realtively high income threshold of $160K for a married couple and with the delta at the first level, being only $18.60/mo per person, I wouldn't make any special budgeting adjustments to account for it. But I believe that the income threshold will fall dramatically and the incremental premium will rise dramatically in the future. For lack of anything better, I swagged $1.2K/mo medicare + medicare supplement policy for DW and myself combined beginning when we turn 65 in 5 years. And that might be too low....... If I'm wrong, the surplus will go into the travel budget where there is room for infinite funding.

So, yeah, you're right, there is means testing going on today, although it begins at a relatively high threshold and is relatively cheap. I think the real "means testing" lies ahead of us and could have a real impact on mid-level RE lifestyles if not planned for.

 

[haha]

Ha...... You remind me of DW. You know exactly what I meant but are calling me on what I actually said! Sorry 'bout that, my mind got way ahead of my typing.

For your sake, I hope she has redeeming qualities.

So, yeah, you're right, there is means testing going on today, although it begins at a relatively high threshold and is relatively cheap. I think the real "means testing" lies ahead of us and could have a real impact on mid-level RE lifestyles if not planned for.

I should point out that I don't feel alike any sort of high income person, but I am already paying the increased amount, and I am doing some tax planning to try to avoid popping into the next higher bracket for 2009. And I believe that these brackets are not inflation indexed- so a good inflation pop might put anyone with anything into the penalty zone.

Ha

 

[FIRE'd@51]

I should point out that I don't feel alike any sort of high income person, but I am already paying the increased amount, and I am doing some tax planning to try to avoid popping into the next higher bracket for 2009. And I believe that these brackets are not inflation indexed- so a good inflation pop might put anyone with anything into the penalty zone.

Widows and widowers will be especially impacted, since they will be treated as single filers. Also, RMD's and delayed SS will probably exacerbate the situation.

 

[youbet]

For your sake, I hope she has redeeming qualities.

Well yes.....yes she does!

I should point out that I don't feel alike any sort of high income person, but I am already paying the increased amount, and I am doing some tax planning to try to avoid popping into the next higher bracket for 2009. And I believe that these brackets are not inflation indexed- so a good inflation pop might put anyone with anything into the penalty zone.

Yep, agree. I guess it's just terminology. The 200+ bux annual penalty you're paying right now due to having an AGI over $80K is indeed a nuisance. Sadly, my projection is for "means testing with teeth" to hit within just a few years and that 200+ bux will be chump change. Picture, for example, being guaranteed access to medicare but at your income level being required to pay the full, unsubsidized cost. I feel it coming.......

 

[Gearhead Jim]

...
So, yeah, you're right, there is means testing going on today, although it begins at a relatively high threshold and is relatively cheap. I think the real "means testing" lies ahead of us and could have a real impact on mid-level RE lifestyles if not planned for.

This sounds like perhaps an argument for converting IRA's to Roth, and taking SS sooner rather than later. Comments?

 

[FIRE'd@51]

Actually the means testing is more onerous than the above discussion has suggested:

Kiplinger's Retirement Report

"In 2008 and 2009, the surcharge will swell because the full bite is being phased in over three years. In 2008, for example, the 13.3% surcharge will double to 26.6% of the base Part B premium. (You'll use 2006 modified AGI to figure out whether you'll get snared.) In 2009, the minimum surcharge will reach 40%, and you'll use 2007 income to determine if you're hit and, if so, how hard. One small piece of good news is that the income levels will be indexed for inflation."

And since the surcharge is figured as a percent of the base Part B premium, it will increase at the same rate as the base premium after 2009.