Anyone who lives in America and has a pulse is well aware of the fact that the most pressing issue on the political front is the national debt. As a way to punt the matter down the road a bit, during the debates surrounding the raising of the debt ceiling a few months ago, a compromise was reached. It involved the appointment of a bipartisan Congressional group that is being dubbed the “super-committee.” These individuals have been charged with formulating a plan to shave $1.5 trillion from the federal deficit over the next decade.
There are three ways to approach this. One of them would be to raise increased revenue and apply this to the debt. A lot of people are staunchly against this. Another way would be to decrease spending, and this sounds like the more agreeable course of action to many. The third way would be a combination of increased revenues and spending cuts.
Unless income is increased considerably, it is difficult to tackle this problem without taking a long look at making cuts to Medicare. Spending on Medicare and Medicaid comprises 23% of all federal spending according to the Congressional Budget Office. Add Social Security (20% and growing), interest on debt (6% and growing) and other “mandatory” spending (12%) and you have a 61% expense recipe for disaster.
This is clearly a significant chunk, but to compound the problem 10,000 people are applying for federal retirement benefits every day as the baby boomers reach retirement age. And guess what? This volume of applicants is expected to persist for the next 20 years. This is somewhat of an “imperfect storm.”
A number of different proposals have surfaced regarding how to cut Medicare spending. One of them involves eliminating the program in its present form and giving senior citizens vouchers that they can use to pay private insurance companies for health care. How far these would go toward covering the entire cost of health care insurance for seniors has not been made clear.
Another possibility would be to raise the age at which Americans become eligible for Medicare coverage. Other ideas exist as well, such as shifting more of the cost of care onto seniors without completely dismantling the program.
Regardless of your political affiliation, if you are planning for your retirement this is a situation that you want to follow closely. The super-committee has to present a plan by November 23rd, and it must come up for a vote by December 23rd.
Author, President and Founding Attorney
Parman & Easterday