Willis Wang
What are the possible solutions for looming entitlement crisis?

Entitlement:

Definition: Social supports that guarantee benefits or accesses to available
programs from taxpayer funds to meet the expectations of social equality

Note that the word available does not mean people need it, but rather they
should and are able to get it because they are “entitled” to it.

Greed is nowhere near bad, even though, in general, it conveys a negative
connotation.

Greed is precisely what drives humans to improve upon. It drives humans
to enhance their lives and brings advancements.

Origin of entitlements

“pursuit of happiness”

As stated in the Declaration of Independence, “We hold these truths to
be self-evident, that all men are created equal, that they are endowed by
their Creator with certain unalienable Rights, that among these are Life,
Liberty and the pursuit of Happiness.”

Government should provide opportunities as a method to fulfill the notion
of pursuit of happiness. Happiness isn’t guaranteed, but chances to reach
happiness are guaranteed as an unalienable Right.

The intention behind entitlements is to help those who undergo a
tough time economic assistance

Contradiction: If government does indeed provide opportunities to
some, it fails to meet the notion of “all men are created equal”

Differences between entitlement and welfare

Welfare, also known as Non-contributory Programs, is a type of program under
entitlement

targeted to low-income individuals and families.

Only low-income Americans qualify for benefits.

Examples:


SNAP (Food Stamp ver 2.0)

Housing Assistance

Child Care
Entitlement programs are also known as contributory Programs

Participation through paying payroll tax is mandatory


If one is too poor, he or she does not need to pay

Apply for all Americans

Examples:

Medicare

Social Security

Medicaid
Potential problems

Extraordinarily large amount of federal spending went to entitlement programs in
2014

Mandatory spending: 66 % (2/3 of federal spending was on entitlement
programs)



net interests: 7 %

welfare programs and other entitlement: 11 %

Medicare, Medicaid, and other health care programs 25%

Social security 24 %
Everything else: 34%

all other spending 13%

defense 17%

international affairs 1%

education and training 3%
In terms of every dollar


49 % major entitlement

25% on Medicare, Medicaid, and other health care

24 % on social security

20 % on income security and other benefits

18 % on national defense

6 % on net interest

3% on transportation

1 % on K-12 education

3 % on others
Trend: Entitlement has continued to increase in the federal spending. It has grown
uncontrolled.

In 1950, entitlement spending had reached 3.3 percent of GDP

In 1965 entitlement spending reached 11 percent of GDP

Medicare, Medicaid and the Great Society programs were passed

In 2010 Entitlement rate was 18 percent of GDP

In 2012 Entitlement rate was 22.9 percent of GDP

In 2014 20 percent of the nation’s Gross Domestic Product (GDP)

(REFER TO THE IMAGE ABOVE) One may argue that the deficit decreases
annually since the introduction of Budget Control Act; however, if one looks at
the percentage growth in mandatory spending and net interest, one will see that
it has the tendency to grow out of control (REFER TO THE IMAGE BELOW)

Astonishing facts:

Half of all American households currently receive transfer payments
from the government.

According to the Census Bureau, compare to the 1980s, only 30
percent of American households relied on any public assistance.

Obama administration continued the unrestrained spending, and
described the entitlement as a piece of the American Dream. Public
perceives entitlement as basic civil right of all Americans because no
parties dared to express disapproval toward entitlement

“Now, these steps will ensure that you -- America's seniors -- get the
benefits you've been promised. They will ensure that Medicare is
there for future generations.”- Barack Obama

Medicare

Medicare Trustees explicitly stated that “At its current pace, Medicare will
be bankrupt in 2030 and Social Security will go bankrupt in 2034.”

Medicare’s Annual Cash Shortfall in 2014: 308.9 billion

represents 60 percent of the federal deficit in 2014.

Medicare’s Annual Cash Shortfall in 2013 was $289.2 billion

In 2014, Medicare spent $613.3 billion on medical services for
America’s seniors but only collected $304.4 billion in payroll
taxes and monthly premiums.

Medicare’s Cumulative Cash Shortfall Since 1965: 3.6 trillion

The Medicare Trustees report covers these cash shortfalls by
“borrowing” unrelated tax revenues from other programs

The cash shortfall is responsible for over one-fourth of the
federal debt.

Annual Payroll Tax Increase Needed to Balance Medicare

Part A (hospitals): 18 percent increase

In 2014, cash deficit was $42 billion.

The payroll taxes needs to increase from 1.45 percent to
1.71 percent.

Part B (insurance premium): $3,840 increase

insurance premium: amount of money a company charges
one for coverage

In 2014, cash deficit was $200 billion

Seniors’ premiums for physicians need to increase by 405
percent from $1330 to $5387

Part D (drugs): $2107 increase

In 2014, cash deficit was over $66.7 billion.

To balance, seniors’ premiums for prescription drugs
would need to increase by 684 percent from $281 to
$1922– an increase of $1,641.

Medicare costs are going to continue to rise

At the current pace, the Medicare and Medicaid programs will
reach an annual cost of $2 trillion in 8 years.


Solutions:

The CBO report shows that entitlement reform is urgently needed.

Stop adding new ones.

Most Americans quit because they cannot find jobs; but too many entitlements
give them an incentive to leave.

It is mandatory for people to have Obamacare unless their religious
beliefs forbid them to do so.

A solution is to let the rich pay more. But should they pay more because they
have higher income?

“My fellow Americans, ask not what your country can do for you, ask
what you can do for your country.” – John F. Kennedy

Reform Social Security

Raise the retirement age.

In 1983 Ronald Reagan agreed to raise the full retirement age from 65 in
2002 to 67 in 2022, thereby extending the life of the programs.

Today’s 65-year-olds can expect to live 19.2 more years compare to 16.4
in 1980. This extension becomes a reason to extend full retirement age. It
should be extended another three years, to 70. According to CBO, this
extension can boost GDP by 1%.

Some may contend that this decision treats elders disrespectfully;
however, the government should be responsible for maintaining a
program and accept compromises

Reform Social Security’s disability-insurance programs.

APPLY FOR WHAT YOU ACTUALLY ARE: employers should pay lower
premiums when their employees have no disability issues.

Call for a more advance check on applicants’ beneficiaries in which workers are
regularly assessed to see whether their abilities match with the benefits they
receive.

According to Unemployment Insurance Extensions and Reforms in the
American Jobs Act published in December 2011, “many jobless workers
apply for disability when their unemployment benefits expire. Once on
the rolls, fewer than 5% leave.”

Focus on the maintenance of Medicaid rather than the expansion.

The Supreme Court ruled the expansion of Medicaid as optional. If
federal government pays block grants to states in terms of population and
inflation, then Washington would bear fewer burdens and at the same
time encourage states to maintain Medicaid but not expand it. States pay
companies to reward those companies for doing a good job in patients well
as opposed to pay hospitals for actually being the one that cares about
patients.

According to the Oregon Medicaid Health Insurance Experiment,
specifically, The Value of Medicaid: Interpreting Results from the Oregon
health Insurance Experiment published in January 2015, insurance
improved penitent’s financial security, but not their health.

Grant more powers to The Independent Payment Advisory Board (IPAB)

IPAB may not interpret the idea of health care, changes that raise
costs or reduce services for Medicare recipients, or restrict eligibility.

Hospitals tend to be the target for cuts.

With numerous restrictions, Medicare’s trustees do not think Medicare
would succeed in long term.

The IPAB should prioritize the maintenance of Medicare more than any
other factors.

Public needs to be aware of the plight by accepting a reduction of
benefits.
http://www.cbpp.org/research/independent-payment-advisory-board-will-help-reduce-healthcosts
http://www.usgovernmentspending.com/entitlement_spending
http://www.economist.com/news/briefing/21578385-entitlements-america
https://www.uschamber.com/report/10-truths-about-americas-entitlement-programs
http://www.washingtonpost.com/news/wonkblog/wp/2013/04/05/washington-thinks-entitlem
ents-are-the-problem-maybe-theyre-the-answer/
I will put the links in MLA format in my essay.