[Speed Gibson,
Monday February 13, 2006 at 10:55pm]
Ownership Society
Policy Guy, quoted a Wall Street Journal artice, wonders if our retirement and health care plans are at a tipping point. Traditionally, these have been "defined benefit" (e.g., pensions, HMO's) plans from employers and government. There has been a major shift In the private sector at least, the shift to "defined contribution" for retirement sayings (e.g., 401K's) is well-accepted and popular. Many Americans are now asking how at least some of their Social Security taxes could also become a tangible retirement asset. Some fear for Social Security's solvency, some dislike the "you must be present to win" payouts, and everyone wishes the return on investment was at least comparable to private plans.
Medical coverage has gone through the transition from fee-for-service to mostly HMO (health maintenance organization), but is still basically "defined benefit" in nature. The best "defined contribution" equivalent is the Health Savings Account (HSA). The money your employer would otherwise pay the HMO is instead "given" to the employee to manage. The employee must purchase catastrophic coverage from an insurance company for major maladies like cancer and appendicitis. The balance is for the small expenses such as exams, prescriptions, treating accidents, etc. What you don't spend is yours to keep or carry over.
This is what President Bush calls the "Ownership Society" meaning that we own our retirement and health care, not the government, and not the employer. You can change jobs much more readily, and our high-tech society means, yes, we will change jobs several times throughout our career, even change careers.
These trends should continue, for as PolicyGuy notes:
The Federal Government set up the Pension Benefit Guaranty Corporation (PBGC) in 1974 to "insure" private corporate and union pension plans. It charges premiums that provide the additonal assets needed when taking over underfunded plans. Large bankruptcies and market conditions have significantly strained this program, and guess what Congress wants to do? Raise the premiums, in effect a tax increase paid through higher prices.
Meanwhile, both Social Security and Medicare have trillions of dollars in unfunded liabilities, not to mention all the public sector pension plans and Medicaid that are also in trouble. With Democrats applauding their own inaction and obstruction on bringing Social Security into the 21st century at the last State of the Union, further tax hikes seem inevitable.
Much as bloated government-run public schools preclude many parents' ability to choose alternatives, we may just find ourselves unable to take full advantage of any of 401K's and HSA's in the future.
Medical coverage has gone through the transition from fee-for-service to mostly HMO (health maintenance organization), but is still basically "defined benefit" in nature. The best "defined contribution" equivalent is the Health Savings Account (HSA). The money your employer would otherwise pay the HMO is instead "given" to the employee to manage. The employee must purchase catastrophic coverage from an insurance company for major maladies like cancer and appendicitis. The balance is for the small expenses such as exams, prescriptions, treating accidents, etc. What you don't spend is yours to keep or carry over.
This is what President Bush calls the "Ownership Society" meaning that we own our retirement and health care, not the government, and not the employer. You can change jobs much more readily, and our high-tech society means, yes, we will change jobs several times throughout our career, even change careers.
These trends should continue, for as PolicyGuy notes:
"Simply put, government and corporate policy have for a long time fostered a corporate cost structure (and government cost structure) that cannot be sustained any longer."But things could tip another way.
The Federal Government set up the Pension Benefit Guaranty Corporation (PBGC) in 1974 to "insure" private corporate and union pension plans. It charges premiums that provide the additonal assets needed when taking over underfunded plans. Large bankruptcies and market conditions have significantly strained this program, and guess what Congress wants to do? Raise the premiums, in effect a tax increase paid through higher prices.
Meanwhile, both Social Security and Medicare have trillions of dollars in unfunded liabilities, not to mention all the public sector pension plans and Medicaid that are also in trouble. With Democrats applauding their own inaction and obstruction on bringing Social Security into the 21st century at the last State of the Union, further tax hikes seem inevitable.
Much as bloated government-run public schools preclude many parents' ability to choose alternatives, we may just find ourselves unable to take full advantage of any of 401K's and HSA's in the future.