My dad turns 65 today. He will not be pleased that I just gave away his age. He could pass for much younger. This is no April Fool’s Day column. Dad really was born on April 1, 1941. Not too long ago, he really was taken to be the son of his not‐much‐older brother.
Today is going to be tougher than other birthdays, he explained recently. I think it’s partly because for most of Dad’s life, 65 was a lot older than it is now. Men who reach 65 today live 27 percent longer than they did when Dad was my age. The odds that they won’t live to age 75 have dropped a cool 40 percent. Dad probably doesn’t much care to be dazzled with mortality statistics just now. But from the standpoint of his wife, children and granddaughters, those trends are excellent news.
There’s also that other thing that happens at age 65. It’s time to sign up for Medicare, Uncle Sam’s health insurance program for old people. Dad was 24 when President Johnson handed former President Truman the nation’s first Medicare card. I doubt it occurred to Dad that someday one of those cards would have his name on it.
Ever the good citizen, Dad dropped the IBM major medical plan that had covered him since his first retirement and enrolled in Medicare — because if he hadn’t, Uncle Sam would have yanked all of Dad’s Social Security benefits, past and future. Happy birthday, indeed.
Dad and President Truman have something in common: they both showcase the moral complexity of Medicare. Medicare paid Truman’s medical bills despite the fact that he never paid Medicare taxes. Dad has paid his Medicare taxes from day one. Yet today’s seniors still get more out of the program than they put in. Mom and Dad will probably net over $200,000 on the deal.
The way we pay for Medicare is that young workers pay taxes to support their elders, and later generations return the favor. It looks good on paper, but breaks down in practice. Seniors have more political clout than younger generations, which means that since 1965, every generation of seniors has successfully lobbied for greater Medicare benefits. President Bush’s drug program is the most recent example.
That means the Medicare taxes that seniors paid when they were young are lower than the taxes they impose on subsequent generations. Medicare taxes have been raised some 25 times since Truman enrolled.
Couple that with an enormous generation of baby boomers who will begin enrolling in 2011, and it’s hard to exaggerate the cost of paying just for the benefits we’ve added so far. Even if we were to start immediately, it would require a tax increase equal to 25 percent of wages.
Dad says he’s been doing his part, having contributed five productive citizens to Medicare’s tax base. But the ratio of workers to Medicare beneficiaries is now just under four‐to‐one. That means that he and Mom would have had to contribute four children each to improve that ratio.
Another moral complexity: Dad and President Truman hardly make good poster children for government aid. Dad’s no Rockefeller — the cost of five college educations will do that. But he is a child of immigrants who arrived in America just in time for the Depression. Such circumstances tend to convey the importance of saving. After a lifetime of saving (money, leftovers, old shoelaces), Dad jokes that he and Mom are now “plutocrats.”
So he and Mom could perhaps do just fine without Medicare. (After all, they’ve got up to five kids they can rely on.) And dropping the plutocracy from the Medicare rolls could help tame that growing tax burden. But if that’s how we treat the savers, we’ll get fewer savers.
Economists like Harvard’s Martin Feldstein and Medicare Trustee Thomas Saving propose a sensible solution: requiring workers to save their Medicare taxes in a personal account. That would turn most workers into plutocrats — or at least enable them to pay their medical bills in retirement. The government would continue to help those who didn’t have enough to save.
The difficulty is that generations of current workers would have to pay for their parent’s Medicare benefits at the same time they save for their own. I say, let my generation bite that bullet. But let’s also invite those baby boomers to the dance.
So happy birthday, Dad. You don’t look a day older than your nephews. As for your share of that $200,000, don’t go spending it too soon.