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