Medicare, Social Security and the government shutdown

Posted By on April 9, 2011

The financial markets continue to hold their own, which considering the continued of negative news we’ve hearing is amazing. Gold and especially silver (at a 31 year high) have become safe haven investments for some investors concerned that the economy will stumble and inflation (or likely ‘stagflation’) will be what we’ll see in the second half of 2011. I’m not sure what to do, considering my retirement is tied to markets and almost necessary to stay ahead of inflation. Products that are necessary should be able to safely increase their prices and those which have squeezed waste and are efficient should still be able to make a profit … and stay in business.

silverspot104_114Oil closed well above $112/barrel on Friday and investors are flocking to silver and gold as a way to secure their dollars pushing them above and near their all time highs. One finds it hard to purchase anything reflecting silver’s move (see one year spot silver chart above), knowing the price has gone up so rapidly – doubled in 6 months.  As for the immediate concern, a government shutdown, it has been averted … for now. Unfortunately the relatively small cuts in the 2011 budget is hardly a drop in the bucket for a country that borrows 42 cents of every dollar it spends. The real battle will be over next years cuts.

Ever since posting on the new 2012 budget proposed by Rep. Paul Ryan last week, I’ve been trying to think out of the about a fair way to reduce our government’s need to borrow for those big ticket entitlement items in the coming years: Medicaid, Medicare and Social Security.

LesterHealthcare_and_ColonoscopyFirst, those charged with setting up the actuality tables many years ago, targeting how many dollars we’ll need to have for healthcare for the poor and retired is way off. Not only have senior citizens had a longer lifespan due to improved health care, but their need for expensive care and medicines were more than anyone projected. As their Medicare bills arrive (along with the poor receiving Medicaid), the taxes from each working persons paycheck  has to grow, not to mention the heavy borrowing.

Stop reading here if you don’t want to hear my rant go personal …

Although I don’t want to see change that impacts people who have planned their lives around promises … reality tells me that we can’t keep paying more for entitlements that haven’t been fully paid for by those receiving them. If the pain is going to be shared by all, then those who are currently receiving more benefits (dollars) than they have had to paid in through their lifetime, are going to have to bite the bullet too. Enter the dirty word: means testing, because it needs to be considered as a way to keep our nation solvent. On the other hand, for those who haven’t contributed significantly and haven’t been  save for retirement (or haven’t made it a priority),  they’re health care services and will need to be reduced as well. I can tell you one thing for sure, my health care services are far more expensive and have far more restrictions than ever before. In fact, we just received a letter (snippet below).


For the record we currently pay out of our pocket $6000 per year (quick calculation tells me health care cost for the 3 of us on the policy runs $20,000yr) and have so many quirky deductibles that have me wondering why we do it. Besides the insurance side, we spend over $3000 from a health saving account on deductibles, what is not covered, dental, eye care, etc.) An example: I had my colonoscopy last year which my primary care physician indicated was necessary “if I wanted him to remain my primary care doctor.” I reluctantly obeyed and had the scope rammed up you know where, and received a bill for $5000. Twice the pain! My insurance company negotiated this rate to an “in network” $1500 amount excluding facility charges and what-not … and the out of pocket amount on my end cost me $720 for this routine check. Now considering we spend a total of $20,000/year to cover my wife, son and me, having the health insurance company cover $800 while I paid over $700 for the procedure seems a bit ridiculous. Did I mention I dislike insurance companies almost as much as I dislike our government managing health care? This all has me wondering just how much our politicians, federal and state public workers are paying out of pocket … no to mention those receiving services from Medicare and Medicaid?

No doubt the system needs to be reworked, especially when it comes to entitlements and what the taxpayers are paying for public workers. Just as we are rethinking our insurance plan, they will also need to rethink their plan … it can’t continue to be as it has in the past.

On a final note … even though we’ve averted a shut down this time, dealing with the Trillions we are going to need to cut from the Federal Budget is more than likely going to shut down the government at some point. Wake up Washington DC … and deal with the problem just as those of us paying our bill do today.

EDIT added 4/10/2011:

A friend (thanks Gary) forwarded me this chart and I thought was worth adding since the numbers are enough to frighten even those who wear rose colored glasses.

“Just take this last item: In the last two years we have accumulated national debt at a rate more than 27 times as fast as during the rest of our nation’s entire history.
Metaphorically, speaking, if you are driving in the right lane doing 65 MPH and a car rockets past you in the left lane 27 times faster, it would be doing 1,755 MPH. This is a disaster.”


(1) U.S. Energy Information Administration; (2) Wall Street Journal; (3) Bureau of Labor Statistics; (4) Census Bureau; (5) USDA; (6) U.S. Dept. of Labor; (7) FHFA; (8) Standard & Poor’s/Case-Shiller; (9) RealtyTrac; (10) Heritage Foundation and WSJ; (11) The Conference Board; (12) FDIC; (13) Federal Reserve; (14) U.S. Treasury

What to expect if the Federal Government Shuts down

We will update this list as more information becomes available.

SOCIAL SECURITY: As an entitlement program funded through payroll taxes rather than annual spending bills, Social Security is likely to keep sending out checks, most analysts and government officials believe. But the White House has warned that a shutdown could affect new applicants.

MILITARY OPERATIONS: Defense  Secretary Robert Gates, on a trip to Iraq, assured troops they will be paid. “As a historian, it always occurred to me that a smart thing for government was always to pay the guys with guns first,” Mr. Gates jokingly added. Troops are typically paid twice a month, and Mr. Gates said that if a government shutdown began after Friday, troops would receive half a paycheck for the first two weeks of April. After that, troops wouldn’t be paid until a deal is reached in Washington to fund the government, although they would receive any back pay owed, he added.

Pentagon Press Secretary Geoff Morrell said on Tuesday that “we would still have the authority and the ability to continue key national security activities, including the wars in Afghanistan and Iraq, operations in Libya, and humanitarian assistance in Japan, to name a few.”

POSTAL SERVICE: The U.S. Postal Service would see no interruption in service or shutdown of post offices, since it’s funded by customer payments.

INTERNAL REVENUE SERVICE: IRS Commissioner Doug Shulman said that if there is a government shutdown, the tax-return due date will remain April 18. Mr. Shulman encouraged taxpayers to e-file returns, because those are processed automatically and refunds would not be delayed. But he said there would be delays in processing paper returns and providing refunds for paper returns.

AIR TRAFFIC: Air-traffic control continued without interruption in the prior shutdown. Transportation officials would not disclose contingency plans for a future shutdown. Passenger and baggage screening by the Transportation Security Administration would continue in a shutdown, an official said.

BORDER SECURITY: Border security is also listed in government documents as an exempted activity.

NATIONAL PARKS: National Parks and  National Forests would be closed.

FEDERAL RESERVE: The Federal Reserve, which does not rely on appropriations, would remain open with normal staffing.

GOVERNMENT WORKERS: Union representatives for federal employees estimate that a minimum of 800,000 federal employees would be furloughed if Congress can’t come to an agreement to keep the government running.

GOVERNMENT WORKER PAY: Rep. Jim Moran (D., Va.) predicts, “There will be no reimbursement” for the time those workers miss because Republicans are so intent on slashing spending and have demonized federal workers. Mr. Moran’s Northern Virginia district is home to 120,000 government employees, and he’s a longtime member of the panel that doles out federal spending.

FEDERAL COURTS: The federal court system would continue running for about 10 working days, using non-appropriated funds such as filing fees, a spokeswoman for the Administrative Office of the U.S. Courts said. If the shutdown lasted longer than two weeks then individual courts would designate “essential employees.”

Judges for federal district courts, appeals courts and Supreme Court justices would be on the job, the spokeswoman said.

Federal public defenders and federal jurors would likely see their pay checks deferred, and some probation officers might be designated as “nonessential.” The spokeswoman said in previous shut downs some judges delayed civil cases and rescheduled appeals court hearings.

A Supreme Court spokeswoman had no immediate information on how the high court might be affected. But during prior government shutdowns, the Supreme Court continued operations with no interruption, she said.

SMITHSONIAN INSTITUTION: A federal shutdown would also close the doors at the Smithsonian Institution and the National Zoo beginning Saturday morning. The Smithsonian, which receives 70% of its funding from the U.S. government, stands to lose revenue from museum shops, cafeteria and IMAX theaters. “We’re hoping it doesn’t go on for 21 days,” said spokeswoman Linda St. Thomas, referring to the three-week shutdown in 1995 and 1996. At that time, the Smithsonian dipped into private funds to keep open the Johannes Vermeer exhibit at the National Gallery.

MEAT AND POULTRY INSPECTIONS: These would continue during a shutdown, the White House Office of Management and Budget said.

OFFSHORE OIL DRILLING PERMITS: Permitting reviews for offshore drilling would not stop in the event of a U.S. government shutdown this week, according to a contingency plan sent to Interior Department employees. The document, obtained Thursday by Dow Jones Newswires, says “most offshore energy development activities, including plan reviews, environmental analysis, permitting, inspection, and enforcement work” would “remain operational” during a government shutdown.

MINE SAFETY AND HEALTH ADMINISTRATION: The White House Office of Management and Budget said regular  inspections would be halted.

PASSPORTS: Emergency passport services would continue, but normal processing would be halted.

FINANCIAL REGULATION: OMB said federal agencies would stop  stock broker inspections as well receiving and handling corporate financial disclosures. It also said routine oversight of financial markets and most enforcement actions would be put on hold.

COMMODITY FUTURES TRADING COMMISSION: The CFTC  said it would keep only 25 of its 675 staff members working in the event of a government shutdown —  to conduct a “a bare minimum level of oversight and surveillance” of markets.  The CFTC posted the  contingency plan on its website  in case f lawmakers fail to reach a budget agreement leading to a government shutdown after midnight Friday. The plan warned  that the “vast bulk of the agency’s operations will cease,” but that certain employees would stay because “the complete absence of any oversight or surveillance by the CFTC would create an imminent risk to the protection of property.”

THE RECOVERY ACCOUNTABILITY AND TRANSPARENCY BOARD: The folks who track how the economic stimulus funds are being spent would continue on the job though a government shutdown. It said in a statement that it will continue to collect recipients’ reports for the first quarter, and will post data from the reports online at on April 30.

See WSJ blog posting


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  1. lacking in consistency, constancy, or visible order, disconnected; fitful: desultory conversation.
  2. digressing from or unconnected with the main subject; random: a desultory remark.
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