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The Looming Medicare Crisis: A Realistic Long-Term Solution

December 2013 -- In future decades, Medicare costs will bankrupt our nation.

On its current course, Medicare is not sustainable. The overarching problem is that the current numbers of Medicare recipients, now about 40 million, will more than triple to 130 million (and perhaps more) by the year 2100

In the current Senate-House Budget Committee, there are basically two proposals. The Democrats offer short-term fixes (band-aids); the Republicans want to replace traditional Medicare with vouchers to be used to purchase health insurance. Neither approach will save Medicare.

Short-term band-aids delay, but do not prevent, the looming catastrophe. Vouchers will shift costs to individuals but eventually will still cost the government trillions of dollars each year.

We must have a viable long-term solution. I propose we pre-pay Medicare. When fully implemented, this will permanently guarantee the fiscal integrity of Medicare while providing even more benefits.

Here’s how it could work. Every child born in the United States, about four million a year, would be given by the government $1,000 a year for 18 years, to be placed in an untouchable trust account that would grow by age 65 to more than $300,000 and, if not used until age 75, to more than $500,000. This would be each person's healthcare fund (including long-term care), to be used for no other purpose. After death, any unused monies would be recycled back into the program. Potentially some of the recycled monies could be used to support the small percentage who would legitimately exceed the amounts in their healthcare funds.

The program initially would cost, at most, $72 billion annually and would require periodic adjustments for healthcare inflation, but after 65 years, most of the current Medicare payroll taxes and Medicare premiums (over $200 billion annually) could be abandoned.

Radical? Not really, especially when you consider the long-range impact of the plan. The pre-payment of Medicare would have a much greater potential for permanently solving the Medicare crisis than the array of band-aids or vouchers currently being debated by policymakers. To make sure pre-paying Medicare works as planned, it will still be necessary to correct some of Medicare's most egregious problems, including the need to markedly increase efficiency and coordination of care while reducing profoundly the fraud and waste that, in some cases, borders on the unbelievable.




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