By far, the most important issue affecting the future prosperity of America is entitlement reform.  The Big Three entitlement programs: Social Security, Medicare, and Medicaid – eat up nearly $1.5 trillion of the federal budget (almost half).  Young Americans don’t consider entitlement reform an important issue because they are unaware of its growing cost and won’t receive any benefits from these programs for decades.

  However, if nothing is done Young Americans will have to pay trillions in new taxes just to keep these programs operating.  Over $50 trillion in obligations to these programs is not paid for.  The Big Three must be reformed as soon as possible to stop it from drowning future generations with higher taxes.

All American workers, including Young Americans, pay for Social Security and Medicare.  It is paid through the FICA tax, which is levied on individuals and employers.  Approximately 7.65% of each paycheck is taken to fund these programs.  In fact, over 70% of Americans pay more in FICA than income taxes.

As the baby-boomers grow older and retire, they will add to the cost of these programs.  In the next few decades, trillions of dollars will be taken from Young Americans to pay for programs that will likely collapse long before they see any benefits.  For example, Social Security is expected to be insolvent by 2037.  Medicare may collapse within the next ten years.

Politicians in both parties have failed to address the entitlements issue for years.  Millions of older Americans rely on Social Security and Medicare.  Whenever politicians discuss possible changes to Social Security and Medicare it makes older Americans nervous that their benefits will be cut.  For example, some refer to Social Security reform as the “third rail” of American politics.

All Americans, but particularly Young Americans must be more vocal in discussions about entitlements and demand immediate action from the federal government.  There are practical solutions to the entitlement problem, but we need politicians with the courage to confront the problem.

The most high profile proposal to entitlement reform has been put forward by Wisconsin Congressmen Paul Ryan.  It is called the Roadmap for America.  The Roadmap addresses Social Security, Medicare, and Medicaid with common sense solutions.

Social Security is the largest item in the federal budget, costing over $700 billion next year alone.  It provides retirement income to over 30 million Americans.  As baby-boomers retire, it will provide income to millions more.  The program will soon pay out more than it collects from workers forcing it to dip into its reserve.  It is projected that Social Security Fund will be completely empty by 2037.  At that point, the federal government must either cut benefits or raise taxes.

The Roadmap proposes a number of reforms to Social Security.  First, it proposes increasing the return of the Fund by allowing workers younger than 55 to shift a portion of their FICA to a personal retirement account, chosen from a group of investment funds approved by the government.  Investment funds give a much higher return on investment in comparison to social security and would help close the funding gap.

Second, the Roadmap proposes shifting the basis of payments from average wages to average consumer price index.  Wages have been increasing at a faster rate than consumer prices, which have pushed up the cost of the program.  Switching to a price index will slow the unsustainable increase in benefits promised to future retirees.  Without this change, the Social Security Program will continue to make promises to retirees it cannot possibly keep.

Finally, the retirement age will be increased from 65 to 67.  Combined with other smaller reforms, Rep. Ryan’s Roadmap would return Social Security to solvency over the long-term and bring its increasing costs under control.

Medicare is a program that provides health insurance to retired Americans.  Due to retiring baby boomers, this program will explode in the coming decades.  Currently the Medicare Program costs exceed the revenue it receives from FICA taxes.  By 2019 it will be partially insolvent.  The dramatic rise in healthcare costs and the program’s fee-for-service system essentially pays no matter the cost.  In addition, the program is ridden with fraud.

The Roadmap again does not propose changing the system for those 55 and older.  For those 55 and younger, the Medicare system will shift to one that makes payments directly to a health plan designated by individuals.  If there are any funds left over, individuals can choose to invest it in a Medical Savings Account to pay for other medical expenses.  This system sets a clear amount to be paid out (the Roadmap suggests $11,000 per recipient per year) and makes adjustments when necessary.  Essentially the program sets the amount it will contribute to individuals to buy insurance rather than just paying bills from physicians and hospitals.

Medicaid is a health care entitlement program for low-income and indigent individuals.  The program is outdated, expensive, and provides poor services.  Medicaid patients receive only the most basic treatment they require with payments to doctors and hospitals set by bureaucrats.  The lower the Medicaid payment the less willing physicians are to accept Medicaid patients.  As a result, Medicaid patients struggle to find a doctor and often times simply go to the emergency room.

The Roadmap proposes an end to designating patients as “Medicaid” patients.  The plan will provide direct financial assistance to individuals that can be applied to health costs.  Overall, this system ends the stigma that is applied to Medicaid payments and gives them greater access to healthcare from any physician rather than just those that accept Medicaid.  It also keeps costs under control by setting a payment amount to individuals rather than cutting back payments to doctors and hospitals.

Rep. Ryan’s Roadmap for America is just one set of solutions.  There are other proposals as well.  The problem is not that the entitlement crisis is too difficult to solve, it is that politicians are inherently fearful of taking on issues that will get them defeated in the next election.  To solve the crisis, America needs responsible leaders that are prepared to take on the problem.  If we ignore entitlement programs, we will never control the deficit or bring the national debt under control.

Young Americans must be more aware of the entitlement issue.  While Young Americans see no benefits from these programs, we are on the hook for trillions.  If nothing is done, these programs will collapse and the economy will be crushed with huge tax hikes.  Young Americans must protect their futures by demanding that the federal government move to reform the Big Three.  If the U.S. succeeds in reforming entitlement programs, it will gradually ease the strain on the federal budget, eliminate the need for higher taxes, and protect the promises made to all Americans by the federal government.