Medicare – A Good Investment For Seniors

 

There is much about Medicare that deserves criticism. It doesn’t pay doctors enough and therefore it’s getting harder for seniors to find doctors who will accept them. This situation will only get worse in the future as ObamaCare steals funding from Medicare providers.

I could go on with other faults of Medicare but one thing good about Medicare is that most taxpayers get more in medical benefits than they pay in taxes. Former Governor Mike Huckabee, who is a presidential candidate, has distorted this issue with campaign rhetoric designed to upset seniors. In an editorial he wrote last August he expressed moral outrage saying, “Republicans have the nerve to grow government off the backs of seniors, and in the same breath force seniors to surrender the Social Security and Medicare benefits they have earned.” He claims to be “shocked by politicians who refuse to acknowledge the obvious: a promise is a promise. It’s your money!”

Chris Conover, writing in Forbes, points out two flaws with Huckabee’s argument. First, virtually all proposals for entitlement reform – Republican or otherwise – “grandfather” today’s senior citizens. No one is proposing to take away either Social Security or Medicare from seniors who already have reached the age of 65. The boldest plan offered thus far by Governor Chris Christie calls for the following:

  • Raise the Medicare retirement age by one month a year meaning it would reach 67 by the year 2040 and age 69 by the year 2064.
  • Expand the existing sliding scale for Medicare premiums for higher-income seniors. Seniors with a $85,000 income will pay 40% of premium costs, increasing it to 90% above $196,000 a year.

 

Second is the false claim that “it’s your money.” The truth is the vast majority of seniors do not pay for their own Medicare benefits. Now before you reject this bold statement, pay attention to the results of a study released by Eugene Steuerle of The Urban Institute in September, 2015. His figures offer a powerful rebuttal to the claim “it’s your money” when it comes to Medicare.

Lifetime Medicare Benefits Greatly Exceed Lifetime Medicare Taxes for Most Beneficiaries

For a male who just became eligible for Medicare this year and who had lifetime earnings equivalent to the average for all Social Security recipients, each dollar of Medicare taxes paid during that individual’s working years will result in lifetime Medicare benefits during retirement equal to $2.79. For women with the same lifetime earnings, their benefits equal $3.24 per dollar of Medicare taxes paid. That’s because women live longer than men on average.

These figures vary only slightly according to lifetime earnings as the table below illustrates. Even the highest earners get more in benefits than they pay in taxes.

Medicare Benefits by Income

This benefit has declined somewhat since 1994 because Medicare taxes now are applied to all earnings. Therefore there are certainly some seniors whose Medicare tax payments exceeded the benefits received; but such seniors are indeed rare.

How about Medicare benefits for married couples?

According to government statistics, 45% of women and 72% of men age 65 or older are married. Unlike income taxes, which penalize married couples, Medicare taxes actually benefit those who are married.

A married couple with a single average-wage earner ends up with $6.03 in lifetime benefits per dollar of taxes paid. That is, their situation is identical to that of the average-wage worker except that both spouses enjoy a lifetime of Medicare benefits – effectively doubling the ratio of benefits to taxes. See the table below:

Medicare Benefits for Married

These figures clearly indicate that Medicare has been a good investment for seniors. Nearly every senior receives more in Medicare benefits that they paid in lifetime taxes, and married couples do even better than singles.

To be sure, Medicare is facing insolvency if changes are not made in the near future. But no one currently receiving Medicare benefits should worry that the government is going to take away those benefits. The changes needed will only affect those younger Americans who want Medicare to be available in the future when they become seniors.

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