Issues with "The Coming Generational Storm"

[Zoocat]

I know this book has provoked some discussion already. But it ("The Coming Generational Storm" by Kotikoff and Burns) raised some issues with me so I thought I'd bring it up again.  The author says that there will be a huge demographic shift that includes about 600K centarians, lots of the old old, etc. which will swam social security and medicare. 

My reaction is this: if the country will not be able to sustain these benefits, especially Medicare, and inflation hits,  what makes him think that people will still be able to survive to these old old ages?  With substandard medical care as a result, people will become sicker and die earlier. Hence, the elderly population will not end up as great as he projects. Is there some logic I'm missing here?

Also, his projections of what it will cost to fund these programs does not take into account that very likely taxation of SS and Medicare will become increasingly progressive with people receiving fewer benefits as their income increases just as happens now except even higher taxes.

Also, he didn't take into account the housing deflation, which may very well destroy a large part of people's "retirement savings."

Another thought:  this "generational storm" might not result in just a financial but a social storm too. I have heard younger people already complaining about supporting people on social security. If the economy goes south because of huge entitlement liabilities, I wonder how younger people will react to living in poverty to support a huge population of us oldsters?

The author has several suggestions for action people can take:  Opening a HSA and maxing out the ROTH.  And owning your own home. He also has some investment suggestions.
Also, he recommends some government policy changes which, to me, sound reasonable, but difficult, given the political climate which is so devisive.

I wonder how many early retirement plans have taken this "generational storm" into account?


Here's links to the video talk if you don't want to read the book
The Video: http://mitworld.mit.edu/video/202/

 

[modlair]

My reaction is this: if the country will not be able to sustain these benefits, especially Medicare, and inflation hits, what makes him think that people will still be able to survive to these old old ages? With substandard medical care as a result, people will become sicker and die earlier. Hence, the elderly population will not end up as great as he projects. Is there some logic I'm missing here?

Maybe.

The truth is America spends too much on healthcare. There are numerous studies and there is now no longer any doubt that health care expenditures do not correlate to increased lifespan.

The studies are for 1st world countries of the same standard of living (not places like Thailand with its very low cost medical care and low cost of living) that show medical spending totals do not correlate with morbidity.

People go to the doctor too often in the US. More diagnostic tests are ordered than need to be. There is no average increased life expectancy derived from this.

 

[Martha]

Maybe.


People go to the doctor too often in the US.  More diagnostic tests are ordered than need to be.  There is no average increased life expectancy derived from this.

Do we know this to be the case?

We do know that in the US we spend a disproportionate amount on adminstration, approximately 30% of our healthcare dollar.

See studies cited here:  http://angrybear.blogspot.com/2006/01/us-health-care-system-administrative.html

As far as the "coming generational storm," I suggest we try not pitting one generation against another, but instead try to work on improving our systems. Everything in the media seems to have to be presented as a contest with winners and losers.

 

[Nords]

The author says that there will be a huge demographic shift that includes about 600K centarians, lots of the old old, etc. which will swam social security and medicare. 
My reaction is this: if the country will not be able to sustain these benefits, especially Medicare, and inflation hits,  what makes him think that people will still be able to survive to these old old ages?  With substandard medical care as a result, people will become sicker and die earlier. Hence, the elderly population will not end up as great as he projects. Is there some logic I'm missing here?
Also, his projections of what it will cost to fund these programs does not take into account that very likely taxation of SS and Medicare will become increasingly progressive with people receiving fewer benefits as their income increases just as happens now except even higher taxes.
Also, he didn't take into account the housing deflation, which may very well destroy a large part of people's "retirement savings."
Another thought:  this "generational storm" might not result in just a financial but a social storm too. I have heard younger people already complaining about supporting people on social security. If the economy goes south because of huge entitlement liabilities, I wonder how younger people will react to living in poverty to support a huge population of us oldsters?
I wonder how many early retirement plans have taken this "generational storm" into account?

Remember when the Greatest Generation was retiring en masse and crashing the stock market? That seemed to work out OK. I have Burns' book on the stack with the authors who've predicted DOW 36,000 and DOW 5000. I think the missing logic is that... they're wrong.

SS & Medicare face a troubled future, but only the worst scenario gets the media's attention. Other arguably workable scenarios include the "rosy stock market" and the "muddle through" versions. People are being encouraged to work longer before retirement ("You'll be so bored & unfulfilled!") and their efforts may haul the programs out of danger by dint of their payroll taxes alone. Other analyses ignore the effects of continued immigration and creeping means testing.

As far as housing deflation goes-- has anyone seen a trend toward smaller houses? I prefer the Two-Income Trap logic where dual-income families slave away to buy nice homes in nice neighborhoods with nice schools for their nice kids... and are willing to bid up real estate to ridiculous values to achieve that goal. I don't see human nature changing that phenomenon anytime soon.

As far as the intergenerational societal conflicts go... that won't be much of a conflict as long as 78 million Boomers find the voting booth. Since our parents' heyday I'm not aware of any other demographic group that's as big or that has as high a percentage of voters. And I think Congress is still overwhelmingly packed with Boomers too! Future generations will have to continue to avenge themselves in the traditional manner-- by choosing their parent's long-term care facilities. So go hug a slacker today.

As far as retirement portfolio planning goes, I'll continue to move toward index investing. I suspect the demographics will move returns toward healthcare, leisure, & financial services... pretty much as they've been doing for the last 25 years.

 

[haha]

I know this book has provoked some discussion already. But it ("The Coming Generational Storm" by Kotikoff and Burns) raised some issues with me so I thought I'd bring it up again.

I don't like Burns. He is just another know-it-all, who has decided to ride this particular theme of generational conflict.

The corollary of the idea that there should be some fixed ratio of workers to retired workers is that a lot of technological improvements are bad. Every time we replace an overpaid, hung-over auto worker with a robot, we are condemning some retiree to penury.

Huh? Just figure out a way to spread the tax burden more widely and stop playing with imaginary buckets.

Ha

 

[modlair]

People go to the doctor too often in the US. More diagnostic tests are ordered than need to be. There is no average increased life expectancy derived from this.

Do we know this to be the case?

We do know that in the US we spend a disproportionate amount on adminstration, approximately 30% of our healthcare dollar.

I encountered this info a long time ago and filed it in my brain as a significant conclusion, and now, of course, finding a real good quality source is proving hard.

The glib quotes of this kind of thing all seem to relate life expectancy of countries to healthcare expenditures in those particular countries -- which of course does not control for a cleaner environment, better genes, lower stress, etc.

One pretty good study is this below, and I'll warn you it is hard to get through, and if you do spend that time, the relevant data seems only to be in a cited work, not this article itself:


http://faculty.maxwell.syr.edu/whorrace/publications/SEJ2005.pdf


The author (Peltzman) cited in that article tried to control for many variables and constrain to pharmaceutical expenditures. His finding was that for a man age 40, with 30-40 years of drug taking yet to occur, had an almost insignificant increase in life expectancy. The numbers said a doubled pharmaceutical expenditure over that time period resulted in 1 more year of life expectactancy. Frankly, I couldn't understand the methodology so maybe there were uncontrolled variables for it, too.

The complexity of the problem is that measuring life expectancy is a bi-modal thing. The vast majority of advances in it over the last 100 yrs occurred because of reduction in childhood disease. So when one is trying to add life to people 50 yrs old or older, diminishing returns kick in powerfully. Also, the studies seem to be saying that it's also hard to examine the effect of expenditures simply because older people spend more on healthcare.

So if you're trying to measure the amount of additional time gained by $$$ spent, you are clobbered by the explosion of expenditures in the last week of life. The bang for the buck, as it were, becomes swamped out by the reality . . . that the guy's time was up.

Anyway, I will withdraw the above statement in that I find it is very hard to find the studies I must have seen referenced to form that opinion.

 

[Martha]

Anyway, I will withdraw the above statement in that I find it is very hard to find the studies I must have seen referenced to form that opinion.

Man, Rodmail, you sound like a lawyer.

I'll read the article.

 

[youbet]

Everything in the media seems to have to be presented as a contest with winners and losers.

Of course, that is the definition of "the media."

 

[Caroline]

The truth is America spends too much on healthcare.  There are numerous studies and there is now no longer any doubt that health care expenditures do not correlate to increased lifespan.

That may well be true, and I can imagine that some efforts to extend life despite cancer, etc. make the end of life more painful and stressful than it might otherwise be.

Still, I wonder if increased lifespan is / should be our only measure of healthcare success. What do we know about pain reduction, prolonged independence, prolonged functionality, and other quality-of-life issues throughout people's lives and prior to their deaths? Any studies come to mind on these factors, do you know?

 

[Rich_by_the_Bay]

Still, I wonder if increased lifespan is / should be our only measure of healthcare success. What do we know about pain reduction, prolonged independence, prolonged functionality, and other quality-of-life issues throughout people's lives and prior to their deaths? Any studies come to mind on these factors, do you know?

I think you are correct. Serious thinkers in the ethics field mostly agree that at some boundary, the cost of longevity is outweighed by the sacrifices in both cost and quality of life. It's a very difficult area to study academically because of the subjective personal and cultural beliefs surrounding the active decision to stop prolonging life. Additional complications include distinguishing (or not) between discontinuing tube feedings versus pulling the ventilator versus euthanasia.

Yet, these decisions are a daily event in any hospital. Sometimes I sense that everyone involved wants it to be "over" but no one wants to live with the perceived consequences of making that call. I try to help by carefully framing that alternative as one of several generally acceptable and compassionate choices (assuming it is acceptable for the patient and family in question), that is, by keeping that decision on the table for consideration. In the right situation, I'll violate a longstanding custom about not sharing personal experiences with patients: I'll share that I made such and such a decision when my parents died, etc. -- not to say that it is the right decision, but just that it is acceptable to me if that is their choice.

I doubt that quality versus longevity will ever be a societal issue, but rather will remain a personal one. The big exception may be rationing care such as dialysis through legal or reimbursement channels when the system finally runs out of money.

 

[Mr._johngalt]

I think you are correct. Serious thinkers in the ethics field mostly agree that at some boundary, the cost of longevity is outweighed by the sacrifices in both cost and quality of life. It's a very difficult area to study academically because of the subjective personal and cultural beliefs surrounding the active decision to stop prolonging life. Additional complications include distinguishing (or not) between discontinuing tube feedings versus pulling the ventilator versus euthanasia.

Yet, these decisions are a daily event in any hospital. Sometimes I sense that everyone involved wants it to be "over" but no one wants to live with the perceived consequences of making that call. I try to help by carefully framing that alternative as one of several generally acceptable and compassionate choices (assuming it is acceptable for the patient and family in question), that is, by keeping that decision on the table for consideration. In the right situation, I'll violate a longstanding custom about not sharing personal experiences with patients: I'll share that I made such and such a decision when my parents died, etc. -- not to say that it is the right decision, but just that it is acceptable to me if that is their choice.

I doubt that quality versus longevity will ever be a societal issue, but rather will remain a personal one. The big exception may be rationing care such as dialysis through legal or reimbursement channels when the system finally runs out of money.

It's very interesting to me observing the variation in people's
"quality of life" views. For example, I know people personally
who are living with conditions I wouldn't tolerate myself and are
outwardly cheerful. I suppose a lot factors into the equation.
Personally, I view suicide (I've posted about this before) as a
quite acceptable and honorable exit strategy.

JG

 

[MasterBlaster]

Personally, I view suicide (I've posted about this before) as a
quite acceptable and honorable exit strategy.

Well, just maybe I agree with you if that person is of sound mind and physically able to do the deed.

However, What happens when there are not enough hospital beds to go around? What if doctors, or government officials, or cousin Vinny who wants and will get the nest-egg stash start making decisions on who lives and who dies. That's a pretty slippery slope.

One solution to the SS/medicare crisis is to send anyone over 50 to the destruction chamber. There, problem solved.

 

[Zoocat]

I doubt that quality versus longevity will ever be a societal issue, but rather will remain a personal one. The big exception may be rationing care such as dialysis through legal or reimbursement channels when the system finally runs out of money.

If events come to pass as outlined in the "Generational Storm" then it would appear that "quality vs longevity" might truely become a societal issue.  The numbers of elderly who cannot afford quality of care could definitely affect longevity. That would be an awful turn of events and would definitely be an issue for anyone of conscience.

It's very interesting to me observing the variation in people's
"quality of life" views. For example, I know people personally
who are living with conditions I wouldn't tolerate myself and are
outwardly cheerful. I suppose a lot factors into the equation.
Personally, I view suicide (I've posted about this before) as a
quite acceptable and honorable exit strategy.

JG

I agree that many live with quality of life issues which from the outsider appear to be intolerable. That is certainly a philosophical and spiritual issue. At my son's wedding, I had a discussion with the minister. She is of the "science of mind" persusasion. Anyway, a lot of her work is end-of-life ministering. She told me that very often relatives of the dying said they would commit suicide rather than go through the dying stage. She is rather dismayed by that attitude, as she believes that as spiritual beings, it is of tremendous value to us to experience the dying process. I agree with her.  I suspect, as times go on, this discussion will arise more often in public discourse.

 

[Khan]

She told me that very often relatives of the dying said they would commit suicide rather than go through the dying stage. She is rather dismayed by that attitude, as she believes that as spiritual beings, it is of tremendous value to us to experience the dying process.

Explain the 'tremendous value' of 'the dying process'.

I take my animals to the vet to spare them 'the dying process'.

 

[SteveR]

... I think the missing logic is that... they're wrong.

...As far as the intergenerational societal conflicts go... that won't be much of a conflict as long as 78 million Boomers find the voting booth.  Since our parents' heyday I'm not aware of any other demographic group that's as big or that has as high a percentage of voters.  And I think Congress is still overwhelmingly packed with Boomers too! ...

Bingo!

He who votes and stacks the political deck, wins (or at least loses less).

Doom and gloom sells books and keeps these folks bank accounts well funded. Being right is not a requirement to selling books to sheep.

 

[Zoocat]

Explain the 'tremendous value' of 'the dying process'.

I take my animals to the vet to spare them 'the dying process'.

Many people believe that dying is painful. My limited experience, having been at my mother's bedside during her last week while she was dying of cancer, is that dying is not always an unbearable process.  Another point is that people going through terrible events in their lives, including terminal conditions, often find deeper places in themselves than they had known existed and often experience a spiritual awakening. Again, this is second hand knowledge., although I have had one serious medical condition that lasted three months and it was definitely a growing experience for me. Obviously, though, it didn't kill me. 

Again, let me emphasize that I haven't experienced war or any terrible catastrophe, so I'm only expressing my opinion based on my spiritual experience and beliefs.

 

[Nords]

Many people believe that dying is painful. My limited experience, having been at my mother's bedside during her last week while she was dying of cancer, is that dying is not always an unbearable process.  Another point is that people going through terrible events in their lives, including terminal conditions, often find deeper places in themselves than they had known existed and often experience a spiritual awakening.

My second-hand experience watching my mother die of breast cancer (metastasized to bone cancer) was that it was extremely painful. She was a registered nurse from the time she graduated high school until she died at age 49.

Her comment on breaking her leg was "I'm not going through that again". A week later she had herself checked out of the hospital. Within the second week she'd managed to stop eating and drinking and so she essentially killed herself by the third week. She was no longer responsive when the word got to me, but she held on long enough for me to fly out and be with her for about 12 hours.

I don't think humans find that type of motivation from being in a "deeper place".

Speaking of pain, when we were cleaning the house we discovered that she was never more than six feet from a bottle of Demerol. We must've collected over two dozen partially-filled bottles of the stuff. Seems pretty painful to me.

 

[Zoocat]

I don't think humans find that type of motivation from being in a "deeper place".

Speaking of pain, when we were cleaning the house we discovered that she was never more than six feet from a bottle of Demerol.  We must've collected over two dozen partially-filled bottles of the stuff.  Seems pretty painful to me.

Point taken. I'm bowing out here, as I know that spiritual belief is very personal. I'm sorry for your loss, Nords.