Senior Americans Using Short Term Loans Due to Medicare Woes

Medicare and Social Security

For the first time, senior Americans are looking to short term loans as an option to pay for health care costs. The AP reported that Social Security and Medicare are quickly decreasing in funds as a result of the recession, making their collapse sooner than previously predicted. For the first time in 2008, Medicare paid out more than it collected. Social Security is predicted to be completely gone by 2037 according to an annual report, which is four years sooner than predicted a few years ago. The Medicare trust fund should be bankrupt by 2017.

With numbers like this to face, senior and middle-aged Americans are worried. People already collecting Social Security will not receive the normal cost-of-living increase starting in 2010. Social Security commissioner Michael Astrue stated, “We should neither be casual or hysterical about the revised insolvency dates…The Social Security system will weather this recession. However, the sooner we get on with the task of reforming the system, the easier it will be to make the tough choices.”

Funding for Social Security and Medicare

Both Medicare and Social Security are funded by payroll taxes. Because of the heavy unemployment rates, cited by a loss of 5.7 million jobs, fewer taxes are being put into both funds. To further matters, aging Americans and rising health care expenses are taking their toll on the funds.

Both funds are in the form of government bonds that are backed by the U.S. government’s “full faith and credit” but not by actual assets. Much of the funds have been spent on other financial demands. To bulk up the funds once again, taxes would have to increase or the government would have to borrow in public markets.

Martha Bell, senior American in Flint, Michigan, stated, “For the first time I had to use a short term loan to get my medications. If this is any indication of the future, I don’t k now what I am going to do once I try to retire.” Treasure Secretary Timothy Geithner stated, “The most effective entitlement reform measure will be a major health reform that helps bring down the growth rate of national health care spending.”

The President has been trying to do just that, but there is no agreed-upon solution on how to make it work. Senator Max Baucus of Montana stated, “The report [on Medicare and Social Security] underscores the urgency of action on comprehensive health care reform this year…as costs continue to rise, the Medicare program so important to so many American families in jeopardy.”

Change is necessary

Critics of the current health code maintain that the U.S. cannot afford another government-run system. Senator Chuck Grassley of Iowa said, “When we can’t afford the public health plan we have already, does it make sense to add more?”

Currently, workers pay 6.2% payroll tax into Social Security on the first $106,800 of income. Their employers then match that payment. The way to increase the fund for Social Security is to increase the tax rate or the amount of earnings that will be taxed. Although currently workers can retire with benefits at 66, that age is moving up to 67 and predicted to continue to rise in efforts to hold off benefit payouts.

Senior Americans

Senior Americans are having to buckle down with the rest of America and use alternative methods of funding their expenses. Short term loans, family borrowing and combining households are all tactics people are using to make it through the recession.