The typical husband and wife who reach age 66 and qualify for Social Security, receiving the average benefit, will begin collecting a combination of cash and health-care entitlement benefits that will total $1 million over their remaining expected lifetime.
The benefactors will be a generation of younger workers who are trying to support themselves and their families while paying taxes to finance the rest of government spending. We cannot even remotely afford to make good on these promised benefits.
Social Security and Medicare were the result of natural human impulses to create safety-net programs to prevent poverty in old age and to help needy senior citizens with their medical bills. But the programs are flawed.
To fix Social Security, Congress should start by limiting the increase in benefits of future retirees to the rate of inflation. Congress should then gradually raise Social Security's normal retirement age.
To fix Medicare, we must move away from the current system of fee-for-services and low copayments. First and foremost, copayments should be increased significantly. Medicare recipients need to have more skin in the game if they are to become cost-conscious medical consumers. Competition among providers, not government-administered prices and government boards of experts to determine coverage, is the best way to ensure high quality and reasonably priced health care.
Many of the million-dollar couples believe they rightfully deserve the benefits they have been promised. They have, after all, spent all of their working years paying into Social Security and Medicare. And true enough, the typical 66-year old couple and their employers, on their behalf, have contributed nearly $500,000 in payroll taxes (in today's dollars) toward these benefits during their working careers.
But regardless of how much they have contributed, the hard reality is that the federal government has already spent it. No matter how deserving they are, it is younger generations of workers who have to come up with the money.