03 December 2012
Adjusting Medicare's and Social Security's Financial Soundness
Here are some specific recommendations for Congress for correcting and protecting the financial health of Medicare.
- Either cost-share or entirely fund Medicare from the Social Security Trust Fund;
If the Social Security Trust Fund were made whole, it should be able to support part or all of the Medicare/Medicaid plus Social Security retirement benefits.
- Retire/pay back funds borrowed from the Social Security Trust Fund by the Treasury in past years;
Almost every person in the United States has a Social Security "participation account" by law. Some governmental organizations at the state or local level had the option to be excluded from Social Security and opted to fund their own retirement benefits. I do not think this opt-out is possible today. (I'll not be addressing the issue of counterfeit cards and fraudulent accounts or cards in this issue.) In the enacting legislation of 1935, a separate fund was established for federal revenues from the new employment tax intended to pay for all future Social Security retirement benefits. Each employer paid a portion and the employee's portion would be paid via payroll deduction that the employer would remit to this special and distinct revenue fund.
The FDR Administration and Congress intended for the Social Security revenues to pay for the benefits due to retired contributors, their surviving spouses, surviving minors, and later the payout was expanded to disabled individuals who could not work for reasons verified by physicians. This SS Trust fund has its own trustees who are charged with safeguarding the integrity of the fund.
Unfortunately, three Presidents-- George H.W. Bush, Bill Clinton and George W. Bush--with the collusion of Congress (and I would assume the trustees) allowed the Treasury Department to borrow operating cash from the Trust Fund, to be repaid at some future date. Otherwise, the Government would run out of operating cash because its other spending was outstripping its tax and fee revenues. This budget allocation funding method also kept the shortfall issue within the walls of government. No new debt issues by Treasury and the interest payments owed to the Trust Fund could be deferred until Treasury repaid the principal.
The result was an depletion of the Trust Fund that is intended to support current and future Social Security benefits.
- Eliminate the salary cap on FICA and establish a graduated means test to receive Social Security and Medicare benefits for all taxpayers with an Adjusted Gross Income (AGI) exceeding $500,000 and review this approach every five years with a public member on the review commission;
