1. Social Security and Medicare The Real Crisis Jim Luke LCC Faculty PD Days May 17, 2011 Econproph.com http://econproph.com/presentations/

2. THE BOOMERS ARE OLD!

3. THE BOOMERS ARE OLD! We are constantly told that: “Socialsecuritymedicareandmedicaid are busting the budget.” “WE HAVE TO DO SOMETHING SERIOUS AND CUT BENEFITS NOW!”

4. Nonsense.

5. Social Security is OK. Medicare per se is OK. Healthcare is broken.

6. Nonsense. 3 very different programs.

7. Life is risky. SS is social insurance.

8. SS not threat to gov’t. budget.

9. Who needs Social Security? 1 in 4 households 90% of people 65 –66% half or more of their income –21% all their income All of us eventually, either direct or indirect.

10. The SS Trust Fund. 2 Functions: –Cash flow (checking acct) –Pre-pay Boomer bulge. Trust fund not needed. –Current taxes = current bfts

11. Projected Shortfall: 2040-2085 28 years from now Assumes reduced taxable payrolls* Then still pay 83% of scheduled bfts –Higher in real terms

12. For Social Security to be “bankrupt” and NOT able to pay any benefits…. …GDP must be near zero and nobody is working.

13. Social Security solvency is positively correlated with more employment and higher real wage Bruce Webb. Angry Bear blog Bruce Webb. Angry Bear blog

14. Social Security Is NOT In Trouble and Does NOT Need to Be Cut econproph.com, march 6 econproph.com, march 6

15. Medicare Potential spending problem in 2020’s Medicare not really problem – Medicare is cheaper than private insurance. Other developed countries show an aging population does NOT significantly raise healthcare spending.

16. Healthcare Is The Problem US: $7,538 per person per year 2.5 x average Higher prices Higher usage per person Varied quality

17. Healthcare Is The Problem Incentives wrong: no checks-balances Admin costs: 15-30% (double others) High error rates Monopolistic pricing & wage power 1/3 of Nursing Time is Documentation

18. Medicare Is Solution 3% admin costs vs. 15-40% private Possible bargaining power Best practices If all were in Medicare: –Save $58 to $400 billion per year