The Young Are About to Get Shafted

11/16/2009 8:47 am EST

Focus: MARKETS

Terry Savage

Author, The Savage Truth on Money

For years, I’ve been predicting America’s greatest divide would be generational warfare. Now, those predictions are coming true.

Even though I find myself on the far side of the divide, here’s a warning to those under age 50:  We older grownups outnumber you—and we vote! So beware of the new financial burdens we’re about to impose on you.

The real issue is not all those unfunded promises for Social Security and Medicare benefits—you don’t get to vote on those issues. The crux of the matter is how to pay for those promises.

The health care bill passed by the House of Representatives gives you a view of the subtle ways this burden will be loaded on the camel—today’s young beasts of burden. Congress is hoping not to reach the proverbial straw that ultimately breaks this camel’s back.

The House-passed health care bill has a provision that limits how much premiums can vary with age. Typically, if older people purchase health insurance, they pay more. Insurers defend this practice, because older people use more of their coverage.

The new bill shifts the burden to younger people in two ways. First, the House bill limits the insurance cost difference based on age to a ratio no larger than 2:1. (Since insurance is state-regulated, there are some states that allow ratios of 5:1 currently.)

That 2:1 limit means older people would pay no more than twice the amount younger people pay for health insurance. It helps seniors—but it increases the premiums for younger purchasers of health care insurance.

Also, the bill requires almost all Americans to carry health insurance. It may be a worthy goal to sweep the entire population into health coverage, but many younger workers can’t afford insurance and don’t see the necessity of full coverage. After all, statistically they’re the least likely to actually use it.

Never mind: We need a larger pool of insureds to bring in the money necessary to pay for seniors’ coverage. And requiring young people to carry insurance is the answer to that problem.  According to projections by the Congressional Budget Office, within ten years there would be 30 million people purchasing individual insurance—double the number of people buying health insurance today.

Clearly the politicians are hoping that younger voters won’t notice—or that they’ll be too apathetic to organize a protest. There’s no AARP to speak for Gen X and Gen Y. Maybe those generational names are all too appropriate: Gen X will be the losers and then next generation will ask “Y”? 

By then it will be too late to raise questions—or to find other solutions. Their parents—the boomers—will be in Medicaid-funded nursing homes, with care so meager there will be little left to cut.

I don’t know of any polls that ask those under 50 how they’ll pay for their parents’ care—just as their own kids are hoping to go to college. That’s the real curse of Generation Warfare, turning family against family.

What should we do about this? Do you think we need to start rationing care now? And, if so, who should make the decisions? Government? Please make a comment and join the conversation.

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