Dallas, TX – Medicare is going broke faster than Social Security, according to a new study by the Dallas-based National Center for Policy Analysis. The study says the solution is doing for Medicare what President Clinton and the Congress are now discussing for Social Security: personal savings accounts.
"Medicare is in worse financial shape than Social Security," said Thomas Saving, a Texas A&M professor who co-authored the study. "While Social Security will bring in $4.3 trillion less over the next 75 years than it is supposed to dole out in benefits, Medicare's unfunded liability over that same period is $8.9 trillion – twice the size of our national debt."
According to the study, as baby boomers, who currently pay 60% of all taxes, begin to retire, they will cease being taxpayers and will start draining benefits from the government instead.
If nothing fundamental is done, by the time today's college students reach retirement age, the tax burden created by Medicare will have grown from today's 5.35% of gross domestic product to almost 14%. That means that future workers will have to pay one out of every seven dollars they earn just to cover the medical bills for the elderly.
To solve this problem, the NCPA study recommends for the first time a transition from the current pay-as-you-go system to one that is similar to most Social Security reform plans: fully funded accounts owned by individuals. The study recommends the following:
Workers could deposit a portion of their Medicare dollars into personal savings accounts managed by independent investment managers.
Workers would be able to use their accounts to purchase private health insurance for the years of their retirement.
Funds not used for health insurance could be deposited in a Medical Savings Account (MSA) to pay small medical bills and items not covered by ordinary insurance and long-term care.
For a copy of the study or to view coverage of the press conference announcing the study, go to the NCPA's web site at www.ncpathinktank.org/pub/st222