Philadelphia Reflections

The musings of a physician who has served the community for over six decades

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Correcting the Defects in "Pay as you go."

{William Bingham class=}

Defects in "Pay as you go." Medicare, Obamacare, Social Security, and other government insurance plans fail to re-invest premium surpluses at compound interest, as would be common in commercial insurance. Instead, using the misleading slogan of "pay as you go", unused premiums are diverted into non-medical government programs, causing incoming premiums to pay maturing claims -- a variant of a Ponzi scheme. Today's interest rates are nearly zero, but interest rates must eventually return to normal, providing pooled revenue to satisfy repeat deductibles in the Health Savings Account proposal. The economy's recovery from huge deficits at zero interest will severely deplete national credit reserves, thus inhibiting a repeat performance. Going trillions into debt at zero interest is something you probably can't do twice. As a matter of fact, it was probably a misjudgment to increase health costs by any reform proposal, during a severe recession.

Originally published: Friday, April 19, 2013; most-recently modified: Wednesday, May 15, 2019