THE BLOG

Some Myths About Social Security and Medicare

09/13/2011 01:06 am ET | Updated Nov 16, 2011

It's the season of political misinterpretations and outright lies. Websites like Politifact try to sort things out. But people still seem willing to believe the most negative things about two of our most durable social programs - Social Security and Medicare. Are they really in terrible trouble and will disappear soon?

If you are over 65, have a parent or friend who is, please read and pass along. I have written some of this before, but when we hear political candidates saying inflammatory things about these programs, it seems like a little truth-telling is never redundant.

Myth #1: Social Security is in grave financial condition and must be reformed now!

Actually, Social Security is completely funded until 2036 (that's 25 years from now!) and even if we did nothing to fix it, it would still cover 78% of the costs after 2036. So why are the Republicans trying to make it into an urgent issue and scare everyone in the meantime? In Gov. Perry's case, he is stuck with charges he made in his book Fed Up! and may feel he has to stay with his argument to avoid a flip flop. It doesn't seem to be working. Bachmann and Romney and Gingrich have all risen to the defense of Social Security, but we should all be wary about the conversation, because part of their solution may be to privatize the program. Given the behavior of the stock market in the past few years, that doesn't sound very reassuring.

Myth #2 - Medicare is in grave financial condition and must be reformed now.

This is not completely a myth. Medicare does need reform. It does not need to be turned into a voucher program, but it needs better data systems so that it can pay providers more quickly and track fraud more effectively. It also needs to get tougher on reimbursements for new treatments which are much more expensive than existing treatments but provide no greater benefit. Lobbyists for the companies that make these new treatments and devices have pretty much had their way with Medicare for years. One of the solutions in the Affordable Care Act was the establishment of the Independent Payment Advisory Board (IPAB), which was supposed to provide solutions to Medicare's problems without undue interference from lobbyists and Congress (who rely on lobby money for their campaigns). Unfortunately, the IPAB is under fire and may not ever be implemented.

Myth #3 - We can't change either Social Security or Medicare because they are sacred and inviolable contracts with the American people

It is true that these are programs that our seniors have come to rely on as they plan for their future. The sense of relief you have when you turn 65 and know you can't be turned down for insurance coverage is palpable. And even for middle income retirees, that Social Security payment provides a measure of security when their IRAs look like they are heading to hell. But these programs were designed many years ago, and to say that there are not ways to make them stronger is burying your head in the sand.

Myth #4 - We will have to pay higher taxes to fix Medicare and Social Security

More likely we will have to reform our tax code to fix these programs when the time comes, but there are plenty of other ways to fix these programs at this point without raising taxes. Right now, it is true -- and Politifact says it is -- that 51% of American households pay NO income tax. It is also true that some of the rich pay less income tax than the rest of us. So is there enough money in our tax system to pay for these programs? Probably. Do we have the political will and support to change the fairness quotient so that burden doesn't fall on the middle class? Not sure.

Myth $5 - Medicare is a Socialist program and must be privatized

Actually the more pervasive myth about Medicare is that it is NOT a government program. In Town Halls last year, you heard countless seniors shouting at their congressional representatives, "Keep your hands off my Medicare. Don't let it be government run!" Well sorry folks. It already is. It's a government administered health insurance program for seniors but it's not socialism. Medicare collects taxes and pays private providers to treat you. Medicare does not own hospitals or doctors. Everything but the administration of Medicare is private. Because it is the "only" (or single) payer for treatments, it can save lots of money on marketing and administration. Although it's a bit complicated to make a comparison between private insurance and Medicare (for reasons described nicely in this piece by Ezra Klein of the Washington Post), most economists would agree that Medicare does what it does for about 5 or 6% overhead, in comparison to between 12 and 20% for private health insurance plans. So Medicare would only be a socialist program if it were hiring and owning the hospitals and physicians it reimburses.

6. President Obama "stole" $500 billion from Medicare to pay for health reform.

You will hear a lot from the Republicans about what was "stolen" from Medicare to pay for health reform. It is true that there will be about $500 billion in savings from slowing the growth of Medicare OVER A TEN YEAR PERIOD to help pay for health reform. But it is NOT coming from the pockets of the beneficiaries. It will come from a variety of sources, including previous overpayments to managed care plans that provide care to Medicare beneficiaries. They have been receiving about 14% more than what Medicare pays for its traditional program, as a way to entice them to stay in the game. That game is over. Here is Politifact's analysis of where that $500 billion comes from:

Nearly $220 billion comes from reducing annual increases in payments that health care providers would otherwise receive from Medicare. Other savings include $36 billion from increases in premiums for higher-income beneficiaries and $12 billion from administrative changes. A new national board -- the Independent Payment Advisory Board -- will be tasked to identify $15.5 billion in savings, but the board is prohibited from proposing anything that would ration care or reduce or modify benefits. Then there's another $136 billion in projected savings that would come from changes to the Medicare Advantage program, an alternative to traditional Medicare that has turned out to be much more costly than expected. About 25 percent of Medicare beneficiaries are enrolled in a Medicare Advantage plan.

As for Medicare Advantage, not only have the cuts not destroyed the program, enrollment is up and premiums are down. Explain that away, doubters!!

As you listen to the political debates over the next fourteen months, do yourself and your family and friends a favor. When you hear something that seems inaccurate, google it. Or go to Politifact.org and check out the claims on your own. Sooner or later, someone will tell the truth, right?