March 25, 2023 7:01 am

Ebenezer Scrooge lived a really hard life. Abandoned at Christmas at his boarding college, Scrooge discovered to reside for himself.

This method to life led to fantastic monetary good results. But Scrooge was reviled and had no buddies. And the future, properly, the future was even darker.

We know all of this due to the fact a single Christmas Eve Scrooge was visited by 3 specters. 1 his previous, a single his present and the final his future.

What scared him the most was his future. So, he asked the ghostly specter, was this future set in stone, or could it be changed?

Our nation’s future appears burdened by the increasing expenses of entitlements. Social Safety, Medicare, and Medicaid will want to be funded by a shrinking base of workers.

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So, we ask, is this future set in stone, or can it be changed? There are a lot of policy wonks sounding the alarm on entitlements. There have also been some politicians.

I say “have been,” as in the previous tense, due to the fact appropriate now these politicians are operating from their previous words.

In his State of the Union address, President Biden mentioned some Republicans wanted to reduce Social Safety and Medicare. This was instantly met with a shout of “liar” and different attempts to appear shocked and disgusted.

This show suggests that Social Safety appears to be the third rail of politics. And but, with no transform, the specters have shown us what the future appears like.

President Biden himself has recommended a single transform. Wage earners spend six.two% of their incomes to social safety and 1.45% to Medicare. Their employers do the similar.

Self-employed people today spend 12.four% and two.9% of their earnings for the similar bring about. Each sorts of earners do not want to spend the six.two% or 12.four% above an earnings limit.

The president has recommended eliminating the earnings limit. He crossed his heart and hoped to die if he raised taxes on these earnings much less than $400,000, so this added tax would apply only when earnings exceed $400,000.

This creates a “donut hole.” The tax ends at a specific level of earnings, and then returns at $400,000. “Hole” earnings are exempt.

But this would nonetheless be a six.two% or 12.four% tax enhance for higher earners. That may possibly be a second third rail.

Other people have recommended raising the eligibility age for Medicare, and the “full” retirement age for Social Safety. Just after all, they say, people today are living longer.

Turns out that lately, Americans have not been living longer. And the Medicare commence age may possibly be increasingly critical provided challenges to locating economical overall health care.

But we need to do anything! 1 method that gets surprisingly tiny interest outdoors of assume tanks is bending the curve on overall health care expenses.

Politicians like to inform us that the United States has the greatest overall health care method in the globe. The truth is that it does not. Americans get decrease good quality heath care at larger expenses than the rest of the created globe.

Projections of a bankrupt Medicare and Medicaid assume no transform in the future development of expenses. Altering this assumption is a possible game changer.

There is anything known as the rule of 72. By dividing 72 by a development price, a single can ballpark how lengthy it requires for anything to double in worth.

If overall health care price grows at eight% per year, it doubles in 9 years (72/9). That signifies quadruple in 18 years and development to 16 occasions in 36 years.

At development of six% per year it will double in 12 years and develop by eight occasions in 36 years. A development of four% will double in 18 years and quadruple in 36 years.

So if we project overall health care entitlement expenses out 36 years, the development in price can variety from 4 occasions existing expenses to 16 occasions just by altering the annual development assumption from four% to eight%.

What can America do to halve the annual enhance in overall health care expenses? The capacity to answer this query may possibly be the distinction in between a solvent Medicare and a Scroogian disaster.

The greatest beneficiary of Scrooge’s changed heart was not Scrooge himself, it was Tiny Tim. Possibly some inventive options to our future overall health care expenses can save a lot of far more.

Jim Hamill is the director of Tax Practice at Reynolds, Hix &amp Co. in Albuquerque. He can be reached at