Younger people shouldn't have to support elders
My mother, Sue Coats, has been a frequent contributor to these pages. I am here in Bakersfield, the place of my birth, to visit her in her hospital bed at Rosewood. Worrying about my parents' care -- my father is still able to live in the assisted care section of Rosewood -- has redoubled my disgust with the AARP and the greed of some of our elders.
Medicare and Medicaid created huge transfers of wealth from the younger to the older generation. But the elderly on average are much wealthier than the young. How can we justify taking from the poor to give more to the wealthy? Throughout history, parents have sacrificed to provide a better life for their children. This generation of old people are demanding the opposite. And the AARP wants still more. America spends more than twice as much on health care as European countries (the next highest), with poorer health results. But the problems will get much worse.
To be clear, the health care debate now under way in the U.S. is not about government-provided medical care. No one has proposed that the government hire doctors and provide care, as in Britain, for example. The debate is about the government's role in regulating the private provision of health care and health care insurance. Some, but not all, Democrats also want to expand government provided health insurance now available to the elderly and the poor (Medicaid and Medicare), to the general population so that it competes with private insurance.
We should also be clear that the insurance debate largely concerns those who have not saved and or provided adequately for their own insurance. The debate is about what financing the government -- i.e., taxpayers -- should provide and how it should be provided.
The full scope of the problem can only be understood when we take into account the aging of America's (and the world's) population. In 1955, every retired person receiving Social Security benefits had eight workers to pay the tax that financed it. (Social Security is a pay as you go system, it is not a fully funded savings system in the manor of a private pension.) Today there are only 3.3 workers who are and can be taxed to subsidize the elderly who did not provide adequately for themselves.
The Social Security Administration estimates that the number of workers to support retired beneficiaries will drop further to 2.1 by 2031. It will simply not be possible to raise taxes enough on the young to deliver the same level of benefits the elderly now receive. The medical services for the elderly paid for by taxpayers will need to be more carefully prioritized and limited. The AARP demands an even heavier burden on the backs of our reduced number of children. Their backs will break. The world has turned upside down.
Europe has proved that you can get more for less than we do. European approaches are diverse and none are necessarily appropriate for us. The mess our system is in largely reflects incentives that encourage waste. These incentives need to be changed. Doctors are paid more for doing more, whether it is medically needed or not.
As much or most of the bill is picked up by insurance (government and or private), neither the patient nor their doctor has any incentive to make wise economical choices. Thus service rationing covered by insurance must take the form of rules for coverage given by the insurers. Malpractice litigation adds to the incentives to over-test and over-provide services. The tax subsidy to employers for providing health insurance reduces our choices of insurance policies (they are chosen for us by our employer), makes it harder to change employers and throws us to the wolves if we become unemployed.
President Obama wants to remove some of that subsidy for the more expensive insurance options. However, tax deductibility of employer provided health insurance should be eliminated totally or the same tax treatment given to individuals who buy their own insurance. The government should remove many of the other restrictions it has imposed that impede competition among insurance providers.
And we elders (I am over 65) must stop embarrassing ourselves and stop demanding that our poor children give us more of their incomes to cover our failure to provide for our own insurance. In fact, we must accept less as part over the overall reduction of huge medical services waste.
Warren Coats of Bethesda, Md., retired from the International Monetary Fund in 2003 as assistant director of the Monetary and Financial Systems department. He is the son of Warren and Sue Coats of Bakersfield.
