Social Security, Medicare Shortages Hurt W.Va.
Article appearing in The State Journal, Thursday, May 28, 2009.
Story by Ann Ali
CHARLESTON -- The trust funds powering Social Security and Medicare are running dry, and one West Virginia economist says it's a national problem that won't single out the Mountain State and its high percentage of older residents.
Social Security is largely a pay-as-you-go program, according to information from the Social Security Administration, which paid benefits to about 54.7 million people in 2007. Recent numbers show Social Security will run out of funding by 2037 and Medicare will be broke by 2017.
"It just means we will have to pay the whole amounts out of current revenues, and that of course is all being exacerbated by the current recession, because any time unemployment goes up, these taxes go down," said Cal Kent, vice president of business and economic research at Marshall University. "That's why the level of concern has gone up with these funds."
Kent said the dwindling funds mean people who are working will likely be taxed further to pick up the expenses.
"This is a national program, so it's not a situation of where we are going to suffer because people live in West Virginia," he said. "What it could mean very much is higher taxes on the people that are working in West Virginia.
"There may be moves to increase further the retirement age so people may have to work until they're 68 or 70 before they become eligible for full benefits."
Kent said he hasn't heard any talk of the retirement age being changed for Medicare services, but stated that any effects would be the same in West Virginia as they would be across the nation.
"We've known that the current levels -- payments and revenues -- were not sustainable when the baby boomers hit the pay-out phase," he said. "That means that there's going to have to be pretty high taxes or very significant reforms."
Matt Ballard, president and chief executive officer of the Charleston Area Alliance, said for the first time in history, his generation and those after are planning for a future that may have no Social Security benefits, or benefits that are very different from previous generations.
"We've known for a long time, but there still hasn't been a lot of work done, in my view, on a national level to keep funds solvent and make sure it's there for future generations," Ballard said.
"Young people now have to be even more educated on the types of investments we make in retirement or individual stocks, with a financial adviser, to plan better and make strategic investments so we'll be prepared when that time comes."
Ballard said young people have a hard time juggling their finances when they enter the work force because of student debt and immediate payments for cars or housing.
"It makes it very difficult for the first few years in the career world," he said. "How do you save when you're trying to rent or buy a home, you probably need a car, and then you've got student loan debt, so what portion of your income is left to save?"
Kent said other than increasing the eligibility age, he hasn't heard any serious discussion of changes to benefits.
"Of course, we're waiting to see what the Obama administration's single-payer health plan is going to look like, and that may have a lot of implications," he said. "What's really breaking the system right now is the sky-rocketing medical costs.
"The problem with that is we can say we'll just pay lower reimbursements, and all that happens is the cost just gets shifted on."
Kent said talking about Medicare and Social Security benefits raises public misunderstanding and public fear.
"The problem has been around for so long, and they've done so little because it's such a political hot potato," he said. "As we get closer to 2017, somebody is going to have to do something, and one just hopes they're going to do the right things rather than the wrong things."
