3 Things 2-3-25

 Thing One

Revisiting The Social Security and Medicare Issue

We've previously mentioned the ticking time bombs that are the Social Security and Medicare trust funds.  The former is projected to be insolvent by 2035 and the later by 2026.  Given the dire nature of the situation, we believe that all options for addressing the impending crises should be on the table, including means testing, which would essentially reduce benefits for well-off “older people”.  With that in mind, we share what WSJ writer, Marc Siegel said on the topic a few years ago:

“One commonly held belief about the Social Security system is that baby boomers and the generation that preceded them are making out like bandits, draining both the Social Security and Medicare trust funds and leaving little for younger generations.It is also widely believed—fervently so in some quarters—that the rich don’t pay their “fair share” of Social Security, since the earnings subject to the program’s taxes are capped each year.

Do these notions—particularly the latter—stand up? Last month I turned 70 and, thanks to my earnings, became entitled to Social Security’s maximum benefit, currently $3,500 a month, or $42,000 a year. And so, if I live to 90, I will receive $840,000 worth of (inflation-adjusted) benefits.Over the past 50 years, according to the Social Security Administration, the combined taxes paid into the system by me and my employers equaled $329,640.This sounds like a good deal—the benefits I would collect over the next 20 years are more than twice what I put in. But the benefits are only about one-third the $2.27 million I would have accumulated had the taxes instead been invested, over time, in a stock index fund.Moreover, the benefits I would collect are even less than the $1.28 million I would have accumulated if my “contributions,” as Social Security taxes are euphemistically called, had been placed in U.S. Treasury bonds. This number is particularly important, because the Social Security Administration bought government bonds with my (and others’) taxes to build up its trust funds. In effect, the government made almost one-half million dollars more on my Social Security taxes than they will pay me if I live another 20 years.What about Medicare? Over the past half century, my Medicare taxes exceeded $1 million, more than three times my Social Security taxes. That’s because since 1994 there has been no cap on the income subject to Medicare taxes. I have calculated that these taxes, invested in Treasury bonds, would now have accumulated to almost $1.75 million…”

Along with the various solutions for recalculating the benefits to be paid out that are currently being contemplated, Congress (prompted by the rest of us) should also put the idea of privatization that Mr. Siegel alludes to back on the table.  If citizens were allowed to control the accounts their contributions were put into, many would take advantage of the opportunity and, over time, they could accumulate the kind of money Mr. Siegel described.  Those people wouldn’t “burden” the government at all for monthly retirement checks or healthcare benefits.  Again, there is no single solution, so not everyone would opt in.  But that doesn’t mean all options shouldn’t be on the table.

Thing Two

Our Healthcare System Is Not Designed With The Consumer In Mind

The headline of this post is probably not a surprise to anyone who’s had to deal with an expensive illness or injury.  But if there was ever a case where stating the obvious might have some benefit, this may be it.  As to why, we offer the example of Ashley Harrison of Hazelcrest Illinois.  Ms. Harrison, who makes around $24,0000 a year, got very sick and ended up with a substantial medical bill: The Wall Street Journal provides some details:

“…Ms. Harrison’s experience started when she went to the Advocate South Suburban emergency room late on Dec. 20, 2019. Then 30 years old, she was weak, unable to eat and had difficulty breathing. She was diagnosed with a possible case of acute promyelocytic leukemia, according to physician notes, and later transferred to another hospital.

Her brief stay at Advocate South Suburban generated a big bill: $36,733.13. She had two forms of insurance—Medicaid and a private plan—but neither covered the cost. Ms. Harrison said the private plan told her the hospital was out of its network. A spokeswoman for the Illinois Medicaid agency said it retracted its payment at the request of the hospital. In a written statement, she said, “there can be lots of honest, good-faith complications with claims,” but that the patient shouldn’t have been billed…”

It turns out that as a low income patient being treated at a nonprofit hospital, Ms. Harrision had a right to be informed that there were options, other than out of her own pocket, for getting her bill paid.  See more from the WSJ below:

“Federal rules require nonprofit hospitals to disclose the aid programs and make information about the policies available on their websites. They are also supposed to include a conspicuous written notice on billing statements and offer written summaries of the policy as part of the intake or discharge process. Advocates say patients are often unaware of the option. One 2020 poll of 820 registered voters in Maryland, commissioned by a consumer group, found that 29% of all respondents, and 50% of Black respondents, weren’t aware of bill forgiveness for low-income patients.”

As perhaps a helpful tangent to this story, we ask you to recall former Defense Secretary Donald Rumsfeld who famously opined on the problems of decision-making in the face of “known knowns,” “known unknowns” and “unknown unknowns.” The famous social scientist, Steve Raynor added to that list a fourth category he called “unknown knowns” — the things we actually know but pretend we don’t. He is said to have called this uncomfortable knowledge.

The patients may be unaware but the hospitals and people working in the billing departments, are dealing with unknown knowns.  Such being the case, the patients/consumers are dealing with billing agents that are trained with scripts that purposely exclude any talk of outside financial assistance. If their rights to financial aid are disclosed at all, and in some cases they aren’t, that happens after the bill collectors have exhausted all means of getting the patient to pony up.  

This sordid setup is not likely to change any time soon.  What can change is our knowledge of it and how to deal with it.  Our suggestion in a few words is this:  Question and negotiate all your medical bills - no matter where you fall on the income scale.

Thing Three

Just A Thought 

“The big money is not in the buying and selling, but in the waiting.” – Charlie Munger