Re: A Challenge To All Extropians/Free Martketeers

EvMick (
Tue, 28 Apr 1998 14:11:52 EDT

In an earlier post Damien Broderick voiced the opinion that there might be a
problem in the transistion period between todays market based economy and
tomorrows replicator based economy. He speculated that a type of gauranteed
minimiuim might be useful to ease the transition.

I found the following information to be interesting in that regard.



A mutual insurance model for a new Medicare system is proposed by
Sen. Phil Gramm (R-Texas), and Texas A& M University economists
Andrew J. Rettenmaier and Thomas R. Saving in the New England
Journal of Medicine.

They propose that over a 50-year transition period, Medicare be
changed from a transfer payment system to one in which each age
group -- defined as all the people born in any given year --
would contribute to an investment fund to pay for the health care
needs of that group in retirement.

o Workers in each age group would pay a set percentage of
their wages throughout their working lives for health care
in retirement.

o The annual cumulative funds collected from each age group
would be divided equally and deposited in each person's
account to grow until retirement.

o Investment account providers would be subject to
reasonable requirements with respect to the safety and
soundness of their portfolios and required to take all

o If a person died before retirement, his contributions
would be redistributed to other members of the respective
age group.

As each age group moves through its life cycle, the contribution
rate would be adjusted to take into account changes in
experience, just as other casualty-insurance rates are now

Since all workers in an age group would pay the same tax rate,
workers would subsidize nonworkers and high-income workers
subsidize low-wage earners.

Funding the transition cost from the current tax transfer system
would have a present value cost of about $1.4 trillion, say the
authors, compared to unfunded liabilities under the current
system of $2.7 trillion. Workers 43 and under would be fully
covered by the new system -- initially paying a higher tax rate
to help fund the Medicare benefits of current retirees and older

The contribution or tax rate on younger workers would fall for
each age group as they accumulated enough funds to pay for their
retirement medical expenses, and the cost of funding
benefits for a shrinking pool of retirees under the old system

Source: Phil Gramm, Andrew J. Rettenmaier and Thomas R. Saving,
"Medicare Policy for Future Generations -- A Search for a
Permanent Solution," New England Journal of Medicine, April 30,

For more on Medicare