Here’s a very simple new idea. Instead of trying to figure out how to pay for health-care costs when people are already 65, start saving early.
It has been said that 80 percent of all medical expenses for individuals occur in the last years of life.
So why not begin putting a little bit of money aside for these huge costs right at birth, investing it well, and letting it mature tax-free and undisturbed until the citizen reaches 65?
If I have done my arithmetic correctly, $1,000 invested at birth for each newborn American child would at 7 percent annual growth amount to $128,000 at age 65. It would seem to me that at that age, that amount of money would buy a lot of catastrophic medical insurance until the end of each citizen’s life (for big-ticket items), with a little left over for ordinary health-insurance co-payments.
This program is not a substitute for Medicare. It was inspired by the whole new costs being projected into the future for prescription-drug benefits, and other inevitable benefits that the good-hearted (and the cynical) will dream up later.
These new accounts would be vested in each individual, and any money not expended by them could be left in a will to that person’s heirs — if the owner died before age 65, for example.
Last year there were just over four million children born in the U.S. The investment program for that year would have cost only $4 billion. That’s a lot less than those four million youngsters are going to take from the public purse after they reach 65.
Besides, the invested funds will raise the nation’s capital stock quite nicely, year after year.
The general principle is this: The earlier one invests to allow for the costs of old age, the larger the available fund when need arises.
What about immigrants? What about those already too old to show such compounded returns? Hey! I’m not an economist nor a legislative technician. I’m only a philosopher, trying to stimulate imagination and fresh thought.
My idea is to try to solve one little piece of the problem.
At the very least, government should encourage private citizens to set up such personal old-age medical accounts. Maybe in this way we could persuade a good chunk of the population to take responsibility for their own needs. Maybe we could experience a new birth of freedom.
The government of a free people should be encouraging every possible act of self-government and providence for one’s own needs. It should not be encouraging dependence on government. That, at least, is the way conservatives (really, in the language of an earlier time, whigs and liberals) think about the actual meaning of a republic.
It may even be that it would be good public policy for the government to invest this much in each newborn child, in order to save future governmental costs. That is the way liberals tend to think about public philosophy — in the end, their reliance is on government. (Really, today’s liberals are statists, not liberals. They don’t believe that all people are capable of self-government, able to take care of their own needs. They want the state to be motherly to the needy. At times, they are correct.)
Either way, for both conservatives and liberals, this new method of proceeding seems to me wiser than what we are now doing.
Based on current demography, the welfare states of Europe have already promised their citizens more benefits than they are going to be able to provide a decade or so from now. The premise of their promises was that ever more youngsters would come into the workforce, while the elderly continued to be few. Instead, it is now the youngsters who are few, and the elderly who are many — many, and living longer, and needing ever more care.
Welfare-state Europe is heading for a social crisis of enormous proportions around 2020. The United States would be foolish to follow them down the tragic road they have chosen.
We should start saving early — not just saving medical costs. We should start saving the republic, too.
— Michael Novak is the winner of the 1994 Templeton Prize for progress in religion and the George Frederick Jewett Scholar in Religion, Philosophy, and Public Policy at the American Enterprise Institute.