If Mitt Romney and Paul Ryan were really interested in maximizing taxpayer money to get the most bang for the buck, they would not push to cut Social Security and Medicare. (And, in the case of Medicare, the Romney/Ryan plan would raise health care costs for seniors on average by $11,000, with today’s 54-year old paying $59,500 in increased Medicare costs.
Rather than cutting Social Security and Medicare, they should strengthen both programs.
Since 1979, Medicare costs per beneficiary have grown cumulatively 40 percent more slowly than equivalent benefits provided by private insurers. To make this concrete, the average family insurance plan provided by employers today costs $15,000. If the private sector had managed to constrain costs as effectively as Medicare over this time, it would only cost $9,100—giving workers with family health insurance plans a potential boost to wages of just under $6,000.
Social Security saves taxpayer money because it bypasses the high administrative costs found in the private sector. In addition, writes Bivens, Social Security is cost effective because of the
government’s ability to provide actuarially fair insurance without needing the compensation that private-sector insurance providers would demand.
Then there’s that little factor of increased risk if Social Security were privatized. The private-sector solution to retirement means gambling with your retirement funds—so there’s a good chance you could lose a significant portion of your retirement investments if we encounter another market downturn like in 2008. Social Security, like Bivens mentions, has very modest administrative costs—less than 1 percent of the programs’ expenditures go to overhead. Doesn’t it make sense to increase Social Security benefits, instead of privatizing or reducing them? We need a stronger Social Security, not a riskier one.
So what about all the noise from the Romney/Ryan types who say social insurance programs are increasing portions of the federal budget?
Bivens has this false argument covered, too, noting that the increase is “because our private health system has failed to constrain these costs.”
Yet, even so,
Medicare (which provides public finance for purchasing health services from private-sector providers) has been able to blunt this failure better than private insurance.