Skip to comments.What you pay for Medicare won't cover your costs
Posted on 12/31/2010 3:19:25 PM PST by Graybeard58
WASHINGTON You paid your Medicare taxes all those years and think you deserve your money's worth: full benefits after you retire.
Nearly three out of five people say in a recent Associated Press-GfK poll that they paid into the system so their benefits shouldn't be cut.
But a newly updated financial analysis shows that what people paid into the system doesn't come close to covering the full value of the medical care they can expect to receive as retirees.
Consider an average-wage, two-earner couple together earning $89,000 a year. Upon retiring in 2011, they would have paid $114,000 in Medicare payroll taxes during their careers.
But they can expect to receive medical services from prescriptions to hospital care worth $355,000, or about three times what they put in.
The estimates by economists Eugene Steuerle and Stephanie Rennane of the Urban Institute think tank illustrate the huge disconnect between widely held perceptions and the numbers behind Medicare's shaky financing. Although Americans are worried about Medicare's long-term solvency, few realize the size of the gap.
"The fact that you put money into the system doesn't mean it's there waiting for you to collect," said Steuerle.
By comparison, Social Security taxes and expected benefits come closer to balancing out.
The same hypothetical couple retiring in 2011 will have paid $614,000 in Social Security taxes, and can expect to collect $555,000 in benefits. They will have paid about 10 percent more into the system than they're likely to get back.
Many workers may believe their Medicare payroll taxes are going for their own insurance after they retiree, but the money is actually used to pay the bills of seniors currently on the program.
That mistaken impression complicates the job for policymakers trying to build political support in coming months for dealing
(Excerpt) Read more at rep-am.com ...
Government forcing the people to take care of their own business is such an expensive cluster f**k!
“The same hypothetical couple retiring in 2011 will have paid $614,000 in Social Security taxes...”
I wanna see the math on that.
If they would have paid that same amount into a private fund ,over the years, they would probably have over a million dollars with which to draw from.
What you individually pay never covers what you receive when you have a major illness in any insurance plan, private or not. Collectively, however, it would - that is, if your insurer invests it and doesn’t throw it away.
Think about it. A national mandatory insurance plan where you pay a certain percentage of your income every year - for benefits that you may or may not receive and which in many cases people with pension programs that provide insurance won’t ever receive or use (since Medicare asks you about your alternate insurance) - why shouldn’t you get more than you paid in if you need it? Because chances are you won’t need it, and that’s what insurance is all about.
A person who pays into any non-goverment program and has a catastrophic medical event (or even an average surgery-required medical incident, such as a mastectomy) is going to receive more than he or she has paid in. But most people will never use it or not need to use it for very much.
That’s the whole principal of the thing. Most people won’t have something catastrophic or chronic, the company invests the money you’re contributing when you’re healthy and is making big bucks (or should be), and the odds are on the side of the company.
This would be the case with Social Security and Medicare, had not our government been stealing the money for decades now.
Such a perfect intro to “Death Panels”...kills two birds with one stone: Old people off Medicare and Social Security at the same time...voila or some such word!
Any analysis over 10 or more years that ignores the time value of money is a joke.
$100 per month for 30 years at 6% = a total payment of $36,000 but has a future value of over $100,000. Comparing anything to that total of $36,000 is meaningless. The value of that payment stream is AT LEAST $100,000.
Or is everyone going to assume that they should get out exactly what they put in without considering that the government made use of the moneies paid to them and a reasonable rate of return should be expected?
And I am going to bring up the number of people who pay into Medicare and never get anything out of it.
Such a perfect intro to Death Panels...kills two birds with one stone: Old people off Medicare and Social Security at the same time...voila or some such word!
They remember that pesky constitution and they despise socialism because they don’t trust overlords...for good reason as we see now that it is time for their generation to collect on their government “benefits” they “invested’ in.
Cutting off this generation from the retirement benefits they and their employers paid in for them will result in a genocide with or without death panels.
"they" should all quit AARP.
This government has taxed the hell out of the working man to the point he’s damn lucky to have any savings at all.Never mind saving for medical care when you retire.
Where the hell do they think we’ll get the money?Governments at all levels confiscate close to 50% of your income and then they complain that your not investing enough to provide for your retirement.
Please dear Lord....
THEY FORGOT TO MENTION THE EMPLOYER MATCH!!!!!!!!!
For every penny deducted from a paycheck, an employer somewhere matches it.
Such a very important concept.
Get the math straight then present the analysis.
That mythical $114,000 contributed to Medicare is REALLY $228,000!!!!!
This really matters, you think?
It burns me up when some lib talking heads start talking about the Tea Party and how we want to cut government but not in our own entitlement programs. That’s right. We feel like we have more to gripe about when our entitlements are cut because At LEAST WE PAID SOMETHING into the system. It isn’t fair to weigh welfare and Medicaid equally with Social Security and Medicare. The first group pays nothing and takes all. At least the last group pays state and federal taxes, property taxes, capital gains taxes, SS and Medicare taxes, ad infinitum. The payments may not cover 100% of expenses, but at least we have diligently paid what we owed.
Accordingly, to properly account for the relative value of the stream of income they may receive in the future as well as the medical care benefit, they should FIRST use present value analysis to bring both amounts into the current period.
That requires imputing interest to the amount loaned the government and then substantially discounting the future value of the benefits.
If the government didn't properly deal with the proceeds of the loans that's not the fault of the lender. If it takes the sale of Western range land and National Parks so be it ~ the loan has to be repaid, with interest.
I know that at 5% per anum, compound interest will double your money in 14 years. And double it again in 28 years. Am I right? So Medicare has actually made off like bandits with a lot more than that bare naked $114,000.
Correct me if I'm wrong.
They’re using a certain number. My daughter and hubby each make that. They’re paying through the nose for someone NOW....their contribution for their future use....simply doesn’t exist FOR THEM.
They remember that pesky constitution and they despise socialism because they dont trust overlords...
If you think the older generations opposed these socialist policies, you're going to have to explain how they elected the New Dealers into office 5 terms in a row.
Well said. Seems a lot of people like to forget that pesky little fact.
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