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posted: 1/12/2013 5:00 AM

'Entitlements' need individual solutions

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Congressmen generally use the umbrella phrase of "entitlements" as the cause and cure of our national deficit problem. Occasionally they list the three largest ones: Social Security, Medicare and Medicaid. Their sound bites do not go into specifics on what changes are needed. Regrettably, the media often follows this broad brush approach.

These are three unrelated programs with three different funding streams, and they present three different problems. They are not problems that can be lumped together.

Social Security is funded by a trust fund that has a balance of $2.7 trillion. It is solvent for the next 20 years. A simple solution to long-range funding questions would be to lift the cap on the wages subject to the FICA tax. This has long been recommended by the American Academy of Actuaries, among others.

Medicare is funded in multiple ways. Part A (hospital insurance) is funded by a trust fund whose source is a specific portion of the FICA. It is solvent until 2024. Part B (medical insurance) and Part D (prescription coverage) is funded by general revenues and premiums paid by individual beneficiaries.

Medicare solutions are more up to the political courage of Congress. Legislation effective in 1999 was an attempt to control Part B costs. Every year Congress passes temporary legislation stalling implementation largely due to pressure from the medical profession. What makes us think they will suddenly gain courage to control rising costs?

Medicaid is funded by the federal and state governments. This partnership creates a far more difficult problem (or 50 problems) that are beyond the scope of this letter.

Two issues are evident to this writer: Each entitlement program must be viewed separately rather than lumped together, and solutions should be carved by a surgeon's scalpel rather than the meat ax of a butcher.

Royce M. Blackwell


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