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Old 05-23-2020, 07:08 PM
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What effect will Covid-19 have on social security and Medicare?


Has anyone modelled what the long term effects of of the corona virus will be on U S entitlements? Is this part of the reason that Republicans want to get rid of lock downs?

If this would do better in GD, feel free to move it.
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Old 05-23-2020, 09:34 PM
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Might be more of a debate.

But higher deficit spending and lower taxes mean funding shortfalls sooner.

I think Republicans want to end lockdowns to placate the business community but also to increase their reelection chances. If anything they'll use the virus to cut Medicare and social security
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Last edited by Wesley Clark; 05-23-2020 at 09:36 PM.
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Old 05-24-2020, 06:48 AM
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The closest we could get to a factual answer to this would be "Some experts say X, some say Y". And then we'd be debating over which experts are right.

Off to Great Debates, then.
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Old 05-24-2020, 08:03 AM
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It's going to be complicated to calculate. Certainly you can measure the loss of income from all those payroll taxes not being collected and the additional Medicare spending on those hospitalized with the disease. You have to offset those losses with the fact that people are almost always going to have their highest medical expenditures during their last months of life, I've seen estimates that as much as 12% of your lifetime medical expenditures occur during the last year of life. Here's an interesting article on the subject.

When Covid-19 kills you, it seems to do it pretty quickly, which can be an overall cost savings. I've seen data showing that smoking actually saves public health dollars, as a smoker who drops dead from a heart attack at 56 spends a lot less on medical care than a non-smoker who drags on until 95. Covid-19 may result in spending a metric buttload of money now, but save money in the long run for Medicare.
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Old 05-25-2020, 05:02 PM
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It's going to be complicated to calculate. ....
When Covid-19 kills you, it seems to do it pretty quickly, which can be an overall cost savings. I've seen data showing that smoking actually saves public health dollars, as a smoker who drops dead from a heart attack at 56 spends a lot less on medical care than a non-smoker who drags on until 95. Covid-19 may result in spending a metric buttload of money now, but save money in the long run for Medicare.
I dunno about that last (underlining was mine).

Look at the people who experience lifelong health issues as a direct result of COVID (and I know, we don't yet know whether that happens, or what percentage of those infected have such lifelong issues).

So you've got someone who loses months (or years) of earnings, and has substantially higher medical bills for months or years than s/he would have had otherwise.

We don't yet have the data on the survivors and their short-term and long-term health outcomes. I posted in another thread a study of SARS survivors and from what i recall, they did have some impairments in the "short" term (within a year or two of the original illness). I haven't seen any studies that discussed how they were doing a decade or more later.

Those harder hit also tend to be in their later years - i.e. in or near the Medicare period of their lives.

All in all, I suspect there will NOT be a net savings to Medicare.
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Old 05-25-2020, 06:46 PM
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Also, will trillion dollar bailouts and titanic deficits lead to inflation, which is horrible for Social Security? "Hey, great, here's your thousand dollar monthly check." Oh, lovely, that'll pay for groceries (maybe...)

(I don't know how inflation affects Medicare: since it's government money in and government money out, wouldn't it be relatively unaffected by inflation?)
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Old 05-25-2020, 07:34 PM
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I dunno about that last (underlining was mine).

Look at the people who experience lifelong health issues as a direct result of COVID (and I know, we don't yet know whether that happens, or what percentage of those infected have such lifelong issues).

So you've got someone who loses months (or years) of earnings, and has substantially higher medical bills for months or years than s/he would have had otherwise. (snip)
Sometimes things can be counter intuitive. You wouldn't think that smoking would save on health care costs, but the New England Journal of Medicine says that it does. If everyone quit smoking today health care costs would initially go down, but after a 15 year period they would become higher than at present as those smokers who would have died start to incur pension and nursing home costs. COVID-19 could work in exactly the same way.
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Old 05-26-2020, 12:39 PM
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Also, will trillion dollar bailouts and titanic deficits lead to inflation, which is horrible for Social Security? "Hey, great, here's your thousand dollar monthly check." Oh, lovely, that'll pay for groceries (maybe...)
Social Security payments are inflation indexed.
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Old 05-26-2020, 12:59 PM
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Sometimes things can be counter intuitive. You wouldn't think that smoking would save on health care costs, but the New England Journal of Medicine says that it does. If everyone quit smoking today health care costs would initially go down, but after a 15 year period they would become higher than at present as those smokers who would have died start to incur pension and nursing home costs. COVID-19 could work in exactly the same way.
From a purely financial POV, it is better for people to live a healthy life and then drop dead from a heart attack at 65 since that means their productive years they paid taxes but they never really consumed pensions or health care over their life.

But if Covid causes lifelong lung problems, thats going to be an issue because that could mean lowered productivity for decades, and possibly the same life expectancy as people who never had those issues.

Smoking may be good for the healthcare system from a financial POV since it kills people quickly once they get sick and kills them before they are old enough to need 10k a month in nursing home care. But other diseases like smallpox likely are not, they cause lifelong reductions in productivity and increases in medical spending.
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Old 05-26-2020, 02:20 PM
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Social Security payments are inflation indexed.
Whew! Relieved! I had thought they were based on the amount paid in over one's working lifetime.
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Old 05-26-2020, 04:51 PM
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Whew! Relieved! I had thought they were based on the amount paid in over one's working lifetime.
Gotcha? I guess? They can be (and are) both.
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Old 05-26-2020, 05:04 PM
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Also, conventional retirement investment won't be inflation-adjusted, so if inflation hits, people's savings will be devalued.

(I'm like "Lucky Ducky" in Tom The Dancing Bug: I don't *have* a conventional retirement account. Lucky me!)
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Old 05-27-2020, 09:58 AM
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Also, conventional retirement investment won't be inflation-adjusted, so if inflation hits, people's savings will be devalued.
I don't think this is true. Most pensions are inflation adjusted. Stocks and bonds and real estate are. Cash obviously isn't, which is why it's not wise to keep the bulk of your retirement savings in a bank account.
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Old 05-27-2020, 11:00 AM
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I'm expecting a huge increase in SS disab applications corresponding w/ increased unemployment, but have not as yet seen the stats on that. Of course, if folk go back to work ...
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Old 05-27-2020, 11:02 AM
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I don't think this is true. Most pensions are inflation adjusted. Stocks and bonds and real estate are. Cash obviously isn't, which is why it's not wise to keep the bulk of your retirement savings in a bank account.
I'd like to see evidence that most pensions are inflation adjusted. I'm currently collecting on two pensions, neither of which have any adjustment for inflation. I know individual experience is no substitute for data, but these are fairly large pension plans, between the two of them they cover 288,000 retirees. Both are private sector plans, which may affect whether or not they have a Cost of Living Adjustment (COLA). I know these are more common in public pensions.
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Old 05-27-2020, 11:55 AM
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I'd like to see evidence that most pensions are inflation adjusted. I'm currently collecting on two pensions, neither of which have any adjustment for inflation. I know individual experience is no substitute for data, but these are fairly large pension plans, between the two of them they cover 288,000 retirees. Both are private sector plans, which may affect whether or not they have a Cost of Living Adjustment (COLA). I know these are more common in public pensions.
I'm really only familiar with public pensions, which are generally adjusted and incorrectly assumed that private ones would be too. But you are correct that they're mostly not.

According to this page, ~15.3m people participate in a private pension, while ~14.6m participate in a public one.

According to this, 9% of private pensioners got an automatic COLA increase in a given year, while other cites indicate that public pensions are basically all adjusted to inflation. That said, the 9% number is going to undercount the number of private pensions that would give COLA increases in the event of higher than expected inflation because inflation is going to cause the pension to be overfunded by its metrics, and pensioners are often successful at converting pension overfunding into COLA.

That said, while "most" might, maybe, be technically correct if you squint at it, a much more accurate statement is "about half" of pensions are inflation adjusted. I stand corrected.
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Old 05-27-2020, 12:46 PM
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I don't think this is true. Most pensions are inflation adjusted. Stocks and bonds and real estate are. Cash obviously isn't, which is why it's not wise to keep the bulk of your retirement savings in a bank account.
Pensions, I can see. But stocks? I have a nest-egg of 300 shares of IBM, and the value increases to keep pace with inflation? How?

But a personal retirement account, that looks much like a bank account? How could that possibly increase in value to compensate for inflation?

Anyway, how likely is inflation right now? Are our trillion dollar deficits going to trigger it? It seems to me that it must...but IANAE...
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Old 05-27-2020, 03:55 PM
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Pensions, I can see. But stocks? I have a nest-egg of 300 shares of IBM, and the value increases to keep pace with inflation? How?
The same way that the price of anything increases with inflation. The products that IBM sells will go up in nominal price along with inflation, and the dividends they pay out will be paid with lower-value dollars, etc.

Quote:
But a personal retirement account, that looks much like a bank account? How could that possibly increase in value to compensate for inflation?
You might have to be more specific. A personal retirement account (like an IRA or a 401k) is just a tax-advantaged container. You can put stocks or bonds or cash or whatever in it. Of those, cash suffers in inflationary environments, but the others don't much.

Quote:
Anyway, how likely is inflation right now? Are our trillion dollar deficits going to trigger it? It seems to me that it must...but IANAE...
Hard to measure. The price of many staples is going up, but we're probably still in a deflationary environment because spending has dropped so much, even within a category. Like, the price of groceries has gone up quite a lot in a few months, but the amount spent on food has gone down (we used to spend a lot more going out to eat).

One might have thought that inflation would have gone up after the massive amounts of QE that happened in the Great Recession, but it didn't really. Mostly because banks kept the extra liquidity on their books. The banks were shored up, the money supply increased, but the actual money slushing around the real economy didn't increase much.

Will the same thing happen this time? Who knows.
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