LTCI Watch: Future money

Maybe we should think about providing acute medical care and long-term care (LTC) for aging Americans more in terms of coming up with the housing,  home care services, nursing home beds, doctors, food and energy needed to keep old old members of the Silent Generation and later generations happy and healthy, and not focus so narrowly on monetary goals.

That thought hit me today as I was watching a video produced by Face the Facts USA that shows that — zoiks! — Medicare payroll taxes cover only 40% of Medicare program costs, and that the Medicare trust fund could be exhausted as early as 2024.

One consideration that may be a problem or may be a virtue, depending on your point of view, is that we hold down potential Medicare investment returns by insisting that Medicare invest only in government securities. If Medicare could take a little private-sector investment risk, it might do poorly during periods like the one we’re in now, but, in the long run, it could probably generate more than enough investment income (and private-sector productivity growth) to pay far more out in benefits than it collected in the form of payroll taxes.

But another huge problem is that program designers have tied Medicare benefits to a number they can’t control at all — medical inflation. If program managers had decided that Medicare would get a fixed amount of per-capita U.S. gross domestic product (GDP), some people might get less care, or worse care, but medical care wouldn’t be taking the economy over the way it is today. If you went into a small town, you might see something other than a bank, a gas station, a few restaurants and 20 medical offices.

Another problem may be that we trust our monetary system so much.

The United States, for example, has had dollars that look and feel pretty like the current dollar for so long that no one but economics majors, history majors and gold investors who are a lot more serious than I am know how those dollars came to be.

We know that the Bretton Woods system put us on the twentieth century international gold standard system in 1945, and that Nixon took us off the gold standard in the 1971. We know that the shift away from the gold standard is somehow involved in the conspiracy that has culminated in the federal government’s effort to build a system of super tunnels under the United States in an effort to fight the space aliens.

But, even if we support a return to a gold standard (I’m more into diversified baskets of commodities myself), we assume we can project how products and programs will do 10, 20 or even 75 years down the road.

That’s probably a reasonable thing to do. What other choice do we have? But I think it would be good if we tried to verify the predictions we get with financial math by doing the same sorts of analyses using estimates of how much relevant stuff, and what quantity of the relevant services, we could reasonably expect to product over the same period.