Paul Ferraresi

I experienced this with a close friend. We will call her, “Marg.” She is 72 years old and had a double mastectomy done about 20 years ago. She has recovered wonderfully and lives a full life. Every two years she goes in for a special test to determine if any cancer cells have developed in her body. The test costs about $2800 to $3000 per exam. Medicare usually covers the majority of the expense except for her office visit costs and a deductible.

She recently had the test done. When the bill came in, it stated…“the test costs are no longer covered under “Obama Care. You will have to pay the bill in full.”

So look at this convoluted Government thinking…. If she cannot pay for the test out of her own pocket, then, she will not find out if she has cancer. Now the treatment will be covered if cancer is detected, but if she does not pay for the tests, she will never know if she has cancer. Looks like the old Abbott and Costello routine, “Who’s on First?”

Do you see this sleight of hand? They laughed at Sarah Palin when she said the plan has “death panels.” The way these new rules are set up…sure looks like “death panels.”

There are so many wonderful options that could be instituted to cover people with health insurance at a lower cost but the Government won’t allow it. You have seen how all Government programs like AmTrack, the Post Office, Social Security, Medicare, and Medicaid work. They are all losing money and are insolvent. This program is in the same league and will follow the same route. It is slated to go before the Supreme Court. Contact your representatives to let them know how you feel.

I bring this to your attention to help you (1) plan for increased costs for your insurance when you retire, and (2) better plan in your budget to help pay big money for your parents’ health insurance retirement needs.

(Here is an excerpt from the September 19, 2011 issue of Barron’s Magazine. It is a sobering article written by Frederick G. Marks, co-founder of Cheviot Value Management in Santa Monica, CA. I suggest you go online to read the entire article.)

Medicare provides open-ended, unfunded promises to pay benefits, bank-rolled partly by a dedicated payroll tax and mostly by general-fund taxes and borrowing.

In contrast, insurance companies employ actuaries and underwriters to estimate future expenses and charge appropriate premiums to ensure that money is available to provide the benefits promised.

But in Medicare, the insurers are the taxpayers, with the government administering the program. Medicare has no assets other than future obligations of taxpayers. Medicare’s trustees report that the program faces $38 trillion in unfunded future liabilities ($330,000 per U.S. household).

Medicare’s dire financial condition is due to its design and operation. Medicare payroll taxes are far too low to fund the benefits promised. And fraudulent claims account for 20% to 30% of Medicare expenditures. Medicare’s payment methods allow abuse by way of repeated charges for unnecessary procedures and supplies. Private insurance companies experience far lower losses from fraud and abuse.

Cutting payments to hospitals and physicians is no solution for the financial woes of Medicare. The program already pays less than the costs of hospitals and many physicians — who then try to shift the unreimbursed costs to privately insured patients. That is one of the major causes for the alarming escalation in the price of private insurance, which has been rising 12% a year. Many physicians refuse to accept new patients if they are on Medicare. Cutting payments to physicians will further limit access to their services.

Medicare specifies 467 medical conditions for which it will pay. Unfortunately, Medicare doesn’t allow much payment for a primary-care physician spending quality time with a patient to evaluate his condition, decide on treatment, or make appropriate referrals to specialists.

Insurance companies and Medicaid follow Medicare’s lead. Consequently, primary-care physicians earn about half the average for other physicians, and they work about 80 hours a week. No wonder the number of primary-care physicians is shrinking, as they leave that field in order to retrain in a specialty or to retire early….

According to advice to the U.S. government from the International Monetary Fund, Medicare benefits cannot be paid over the long-term future unless benefits are cut in half or taxes are doubled. Such benefit cuts would greatly damage health care for senior citizens and such a tax increase would thrust an unsupportable burden on younger people.
- – - – - – - – - – - – - – - – - – - – - – - – - – - – - – - – - – - – - – - – - -
Better prepare to pay substantially more healthcare costs out-of-pocket for yourself and your parents.

Will Social Security be there for you when you need it? Will the total amount be taxable income to you? Presently, up to 85% of the Social Security payment is taxable to most people.

The Social Security system is a “Ponzi scheme” system. That is, present workers have money deducted and said funds are sent immediately to the recipients. So, the trick is you need more and more workers into the system to pay the retired ones. There is NO money set aside in a “lockbox” as Al Gore promised many years ago. Congress over the years has taken excess monies in the Trust Fund and used it for other purposes, depositing an IOU into the Trust Fund.

So let me get this straight…you had Social Security tax money deducted from your paycheck to supposedly have it set aside for your retirement, but instead your money was sent to a retired person (Social Security is not set up like a pension or 401(k)). Now, since there is no money in the account for you when you retire, the Government’s system is that any payment you get will be taxed in order to pay back the IOU that Congress took out without asking your permission. If any other person or company did this scam, they would be in prison…Let’s see…Bernie Madoff, the Keating Five, Enron executives – on and on! Now, tell me again why you voted for these legislators?

Congress has known that Social Security is in a mess, but they have not had the guts to tell you. Yet, you are told every year that things are bad when you get your annual Social Security statement.

Here is a paragraph from the front page of my statement dated February 18, 2009:

“…Now, however, the Social Security system is facing serious financial problems, and action is needed soon to make sure the system will be sound when today’s younger workers are ready for retirement.

In 2017 we will begin paying more in benefits then we collect in taxes. Without changes, by 2041 the Social Security Trust Fund will be exhausted* and there will be enough money to pay only about 78 cents for each dollar of scheduled benefits”… (*These estimates are based on the intermediate assumptions from the Social Security Trustees’ Annual Report to Congress.)

Now look one year later at the February 12, 2010, statement:

“…Now, however, the Social Security system is facing serious financial problems, and action is needed soon to make sure the system will be sound when today’s younger workers are ready for retirement.
In 2016 we will begin paying more in benefits then we collect in taxes. Without changes, by 2037 the Social Security Trust Fund will be exhausted* and there will be enough money to pay only about 76 cents for each dollar of scheduled benefits”… (*These estimates are based on the intermediate assumptions from the Social Security Trustees’ Annual Report to Congress.)

In just one year, from 2009 to 2010, notice that the payout in benefits versus tax intake drops by one year; the fund become exhausted four years earlier, and the payout drops from 78 cents to 76 cents.

Social Security has been printing these reports yearly. So, some years in the future when there is no money to pay out to you, or you have reduced benefits…you can’t say…”but no one told me.”

I remember George W. Bush trying to push Congress and Americans to do something about Social Security in 2005, but everyone rejected his ideas to privatize part of the system, and 10-15 other remedies that he proposed.

As for your planning…well, I have all my clients develop their own “social security plan,” with their own money that they control.

Do not count on this system for your retirement.

The Washington bureaucrats continue to not come clean with the American public. The Social Security system can not continue if the program is not radically changed.

When FDR started this “pay as you go” system of income transfer and distribution (sounds a little like the old Socialist “manifesto”) it was designed for the truly indigent to provide a base retirement benefit. In 1933 there were 72 contributors paying for each recipient. Eligible participants received benefits starting at age 65, yet, life expectancy was age 62. The system became flush with cash. Wanting to insure votes Congress provided more benefits and expanded benefits. Presently, 1 out of every 4 Americans receive some form of benefits (the retirees are among the smallest percentage getting benefits). Life expectancy has risen to the mid eighties. There are less than 2 contributors for each beneficiary. The baby boomers are now approaching retirement. Does anyone see this massive collision course in front of them besides me? Sure, there are some in Washington that see it. For one, President Bush tried in vain, to present it, but, the media, certain congressmen and other lobbyist did want to lose their power by allowing change. I also throw a lot of blame on the American public as they were so apathic. Americans are not good at planning long term, especially financially.

Instead, the American public will allow for the system to go broke and be faced with MASSIVE changes to the system. A small change now could avert the coming doom.

Unfortunately, the Bush administration is rumored to be ready to cut a deal with the Democrats. (This has been in the works for a long time). Future benefits would be means–tested; the cap on income currently being taxed ($97,000 in 2007) would be lifted or eliminated (just like Medicare); the age in which beneficiaries can draw benefits would be lifted to 70 or 75; and future indexed benefits would change. Instead of allowing private accounts Congress would allow Super IRAs.

These proposed programs are a disastrous plan for you. Instead of worrying about when the system will go broke, Americans should own their Social Security retirement plans, not Washington politicians. Our country is wealthy enough to cover current beneficiaries as well as those entering the system in the next ten years.

The debate: What should be done for young workers. American workers should own their own retirement plans just like most Americans should own their own homes (have you ever seen a government owned and operated housing project? Get my point?). When the government owns anything there is no accountability.

A comprehensive plan set out by the American Institute for Full Employment (www.americaislistening.org) called the 7.65% solution is worth considering. The bold plan calls for the entire portion contributed by you, 7.65%, would go into your private retirement and health account. It has sensible restrictions on how the money can be invested. In addition the remaining monies in the fund would really be placed in a trust fund and could not be spent on congressional pet projects.

The system would give you choice. When you retire you can choose to get benefits from the traditional Social Security System or use your own account. Yes, you could take the greater of the two.

If you are not financially independent, are over 25 years old, and are making your retirement plans contingent on some benefits from social security, then you better contact your representative now. Tell them you want your own private retirement account instead of social security.