You (probably didn’t) pay for that!!

One of the things I heard a politician say lately about Medicare and it’s recipients is “You Paid for it, you’re entitled to it.”  While the Medicare tax is something all employees and their employees pay during their working lives, the vast majority of medicare recipients get a lot more back than they put it. The Urban Institute has analyzed the benefits realized in comparison to taxes paid for Medicare and Social Security for a variety of income levels and familial situations. For instance, an average earning single man that retired in 2010 is projected to receive $167,000 in Medicare benefits while they would have paid $58,000 in taxes. The taxes paid are actually calculated as if they were invested with a 2% over inflation return. They are getting 3 times the benefit they paid for.  A single woman of average income will receive an estimated $185,000 worth of Medicare benefits (I’m guessing she would receive more because she will live longer).  Lower income retirees receive significantly more than that in comparison to taxes paid and higher income retirees less benefit in comparison to taxes paid.

A retired couple with one average and one above average wage earner that retire in 2010 will still receive more than twice the benefit as compared to taxes paid ($149,000 taxes paid and $351,000 in Medicare benefits). Here’s a link to the study: http://www.urban.org/publications/412281.html

May 2013 poll by the Harvard School of Public Health showed that two-thirds of people believe their lifetime taxes at least cover the cost of all their Medicare benefits.  The reality is quite different. Only high income earners pay as much, and more in taxes than the cost of the benefits they will receive from Medicare. I’ve tried to find that threshold, but haven’t found a source for that yet. I’ll keep looking. 

The Urban Institute study also compares Social Security taxes paid to benefit received. It’s a much more equitable scenario, which is why Social Security (though it has challenges) is a much more sustainable program in comparison to Medicare.

 

For the visually inclined, here is a nice graph from PolitiFactImage

Lots of implications here. We’ll get to that later…

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About dmayeranderson

Husband, father, citizen, homeowner, Realtor and real estate investor.
This entry was posted in entitlements, medicare, health care. Bookmark the permalink.

5 Responses to You (probably didn’t) pay for that!!

  1. Kathy Crisler says:

    Dave–A question: Do you know whether the $$$ amounts for benefits received represent the Medicare-adjusted amounts or some other way of calculating costs/payments?

  2. Rob Hamer says:

    Dave, I enjoyed reading your blog and hearing your perspective, particularly since we frequently have different opinions on various subjects.

    I think the issues of healthcare and income inequality are related in a general way, although income inequality is a more complicated problem than just entitlement transfers. The major entitlement programs, Medicare, Social Security, and now ObamaCare finance themselves in a similar manner. Demographically, they take resources from the young and transfer that wealth to the old. Another way to say it is that they take resources from the politically weak and transfer those resources to the politically powerful. Yet another way to look at is that resources are taken from the productive (workers, savers), healthier and poorer (as a demographic group) and transfer them to the wealthier, non-productive (consumers – retired people spend rather than save) and health care consumers. A more polarizing way to look at it is that they take money from the 99-percenters and transfer it to the 1-percenters.

    This has the obvious negative effect of increasing income inequality. In addition, it also is punishing to families, which retards their formation and size (size is needed to keep the Ponzi Scheme of entitlements working). I don’t have the solutions (I have ideas) to the problem of entitlements (which are the herd of elephants in the room), but I generally think we will have to transition to means-tested entitlements and to a more thoughtful philosophical approach to government-sponsored programs that would reward virtue, punish vice and ensure that no one starves. Essentially, a system that requires more personal responsibility and accountability for life choices; with a safety net that provides life-sustaining benefits (and not more) in any case.

    Respectfully submitted, Rob.

    • Rob Hamer says:

      Added my blog account that has not been updated in years.

    • Rob, I always enjoy hearing your perspective and welcome your contributions. Medicare as a Ponzi Scheme is something I definitely want to talk about and the political strength of that group is a significant barrier to meaningful reform. I also include liberals who worship entitlements and have a “Don’t touch this” mentality to them. Put those two groups together, and it’s quite a constituency. Part of my reason for starting this blog is to see if I can get those groups to think about things differently. “Hey elderly, do you really like the idea of robbing from your children?” and “Hey liberals, don’t you know that when Medicare takes more and more, that means there is less and less for the other things you care about?”

      P.s. Thanks to you and Di for having so many children to help support this pretty soon to be elderly person’s medical needs! 😉

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