US Social Security and Medicare System Danger of Insolvency Essay Example

back to the Committee on Economic Security (CES) who were responsible for devising a plan to furnish income for the elderly and disabled.

Initially, retirement provision was the duty of either family members or government. However, President Roosevelt acknowledged a requirement for a nationwide system. The CES formulated a program proposal for the president in January 1935, which eventually evolved into the Social Security Act (SSA). Congress approved this act on August 14, 1935.

As per The CPA Journal, the original purpose of the Social Security Act was to provide a monthly benefit to those who were 65 years or older and no longer employed. The amount of this payment relied on their payroll tax contributions and was paid to the main worker upon retirement. Additionally, the SSA provided financial support for unemployment, dependent children, and state medical care through grants. To implement a system for registering workers, reporting earnings, and collecting payroll taxes, it was necessary to establish the Social Security Board. Today, an estimated average annual benefit of about $15,000 is payable.

According to Brian Riedl's March 2008 report, individuals who live long receive greater benefits from the system compared to what they contributed. Conversely, those who pass away at a young age can only leave minimal benefits for their heirs or no contributions at all. It is worth noting that Medicare was established in 1965.

The Federal Government provided healthcare coverage for the first time in history to a specific group of Americans. The plan was initially proposed by the Johnson administration as limited hospital coverage but eventually expanded to include part A hospital coverage, part B physician coverage, and Medicaid. President LBJ was surprised

by the growth of the plan and humorously stated that he would "go get his brother." In his memoirs, LBJ recounted a story about an intelligence test for a railroad switchman involving two trains traveling in opposite directions at sixty miles per hour.

As per the NEJM 2008, a man displayed exceptional skills in storytelling and precognition when he proposed to fetch his brother who had not witnessed a train accident before.

In 1979, there were reports indicating that the existing payroll taxes were inadequate. As a result, it was suggested that both a tax rate increase and benefits reduction take place. In response to this, Alan Greenspan proposed modifications aimed at sustaining and reinforcing Social Security in 1983. These adjustments included an increment in the retirement age as well as federal employee prerequisites. President George W., during his State of the Union Address in 2005, addressed the future of Social Security.

Bush's second term focused on the significance of improving Social Security and the potential bankruptcy that could arise without significant reforms. He emphasized the 20 increases in OASDI since its establishment in 1935, noting that initially there was a maximum earnings cap of $3000 which no longer exists today. Additionally, while there were 16 workers for each recipient at inception, this number has now decreased to only three.

As a result of increased unemployment rates, the traditional approach of "pay as you go" is no longer viable since three workers now support each recipient. Additionally, individuals are living for longer periods.

The average lifespan has significantly increased since 1935, as reported by The CPA Journal in 2006. Previously, the average age of death was only 67 with

few individuals receiving benefits. As of now, around 48 million beneficiaries are receiving support as people live longer lives; averaging around 77 years old. However, elderly Americans are facing new concerns such as increasing healthcare costs and reduced accessibility to social programs. Many retirees have not saved enough for their retirement and heavily rely on Social Security and Medicare.

Due to financial struggles, a considerable portion of elderly individuals are compelled to work past the age of 65. Certain people have been in the workforce throughout their lives but are ineligible for pensions or savings, whereas others have saved funds for retirement that are inadequate to support them for an extended period, such as 20-30 years. Consequently, one-fifth of seniors in America depend solely on Social Security benefits as their main income source.

In 2009, Bob Moos from the Dallas News reported that one-third of people depend on Social Security for at least 90% of their income. The average monthly benefit for retirees in the current year is $1,153. Moos predicts that by 2050, entitlement programs will make up 18.6% of GDP, a significant increase from the present rate of 8.4%.

Brian Riedl stated in March 2008 that Congress would need to increase taxes by $12,072 per household or eliminate other federal programs to cover the additional costs compared to the entire federal budget, which is equivalent to 20% of GDP. This poses a challenge for younger generations such as Generation X who do not expect Social Security or Medicare benefits upon retirement and has resulted in a generational divide. It has even been joked that encountering a UFO is more likely than receiving these benefits.

Although some individuals

view reductions in benefits as unjust, younger generations can proactively prepare for retirement by saving even a small amount. By retaining funds in an IRA or 401K for an extended period, the value of the investment will increase and offer financial stability when employment is no longer feasible. For those whose employer matches contributions to a 401 savings plan, it is advisable to contribute the maximum amount possible. The essential element is initiating early savings and making substantial contributions whenever achievable.

It is advisable to transfer your money instead of withdrawing it when changing jobs or companies in order to avoid financial losses. Self-employed individuals should set up an IRA. To prevent financial struggles due to medical issues, Medigap plans or other Medicare supplementary plans can be researched for healthcare expenses not covered by Medicare. Finally, reducing expenses by quickly repaying mortgage should also be considered.

It's important to be cautious of schemes that target seniors and involve reverse-mortgages, as they have led many people to lose their homes. Educational efforts about financial matters would be a good starting point in addressing this issue. There are multiple ideas for resolving the failure of a program that was originally created to assist such a vulnerable group in American society, but none seem simple. One possible solution, albeit unpopular, would be to raise payroll taxes, which would likely face significant opposition. Another option could be to increase Medicare premiums and co-pays in an effort to save additional funds.

The need to promptly address the problem of waste and fraud in Medicare is crucial. Despite its apparent simplicity, no effective measures have been taken to tackle this issue. According to Hope

Yen from the Associated Press, fraudulent claims last year alone amounted to over $47 billion, a considerable amount of which was spent on medical treatments that had nothing to do with patients' conditions. As per a recent federal report, improper payments within the Medicare program worth $440 billion have surged dramatically over two decades, making it highly vulnerable to fraud and waste.

(AP November 2009) The issue of fraudulent Medicare claims has brought to light various extreme cases of misuse, such as prescriptions claimed by deceased doctors, shoes for diabetic patients who have had limbs amputated, and glucose strips for impotence. To address this problem, measures are being implemented, including the recruitment of more agents and prosecutors for detection and prosecution, improved instruction on correct billing procedures, background checks on those making Medicare claims, and stricter penalties for those committing fraud. (AP 2009) Another proposed solution for Social Security is to allow the government to privatize it by investing a small percentage of existing payroll tax revenues. This would prevent the government from using any surpluses to cover current deficits. A "lock box" would secure these funds, and increasing the retirement age may also be a viable option.

Experts suggest that President Franklin Delano Roosevelt's retirement program did not anticipate retirees living as long as they do now, resulting in higher costs than anticipated. David John of the Heritage Foundation recommends raising the retirement age to 72 or even higher to address this issue. However, Senator Chuck Nagel of Nebraska has proposed raising the age to 68 for workers aged 44 or younger. Despite its simplicity, this proposal is not popular with older Americans, who hold significant

sway in elections. Politics also appear to be a key obstacle in resolving this problem. (Gregory, David May 2005)

Lawmakers have acknowledged the unlikelihood of enacting any suggested remedies to an unsustainable situation regarding the future of Medicare and Social Security. This issue has been a prominent subject during presidential campaigns and elections, with voters expressing significant apprehension. Nonetheless, Members of Congress have mostly disregarded the impending crisis as potential reforms entail political hazards.

The implementation delays are causing the cost of reforms to increase by approximately $1 trillion each year. Moreover, there is a belief that people who are 55 years old or older should not be affected by these alterations. In March 2008, Brian Riedl declared that one-third of baby boomers had already surpassed this age limit and at a rate of 4 million per year, all would exceed it by 2019. Given the state of the economy and absence of an apparent solution, time is running out to resolve this problem. Consequently, challenging and unpopular choices need to be addressed.

Dealing with the problems of Medicare and Social Security is a challenging and time-consuming task due to their current state which has been deteriorating for almost seventy years. Unfortunately, there is no solution to the difficulties faced by Social Security that would not involve some level of discomfort.