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.
and what about the automatic deductions from monthly social security for medicare ptB ?
My mom died at 60, my dad at 52.
Always paid, never used a bit of it.
Perhaps the Progressives should introduce legislation making it mandatory that parents and grandparents be insured by their children and grandchildren after age sixty-five. Cut out the middleman. After all, the seniors are more vulnerable than twenty-something “kids” at their age.
Talk about “death panels!”
Means testing social security served only to siphon social security off for earmarks, waste, graft, corruption, etc.
Don’t retire, just die. That’s the message of the article.
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.
When these so-called journalists write this clap-trap they ought to have a smidgeon of financial training.
I am assuming the $114,000 paid in is correct. If those contributions had been invested at a modest rate of interest over 30 years or more, the $114,000 would be worth something like $500,000 or more today.,
Wonder how the early (pre 62 years old) death of those who have contributed to both SSAN and Medicare for years is figured? Many people spend most of their lives contributing and never collect. I never see this fact factored in any projected figures. It seems the assumption is everyone will live to collect. Then there are some who collect for only one or two years and then (conveniently for the Gov.) drop dead.
That is what they want everyone to believe. Until people DEMAND that all SS Taxes be placed in an untouchable (by POLs) fund the siphoning of the money will continue.
Cut unnecessary Depts and get rid of the PE Unions. Then you might see the ship right itself.
Getting people to accept the housecleaning is the problem at hand.
After reading the comments I would add that the authors of this analysis are writing to those Americans who believe they are getting money from Uncle Sam when they get a refund check from the IRS.
Our biggest problem is the increasing number of Americans who are brain dead.
I’ll explain the mostly dead new dealer generation if you will explain all the gray haired tea party protesters of the boomer generation. Don’t mix apples and oranges.
Yes, I think if we advertized ARRP’s stand on medicare cuts to pay for the socialization of health care, they would abandon the communist organization. If we are silent, they will be ignorant.
The problem is that with an aging population, almost everyone winds up in the "sickest of the sick" category over time. We will eventually wind up with millions of people who are 93 years old, suffering from several degenerative diseases, and sure candidates for that six-week, multimillion dollar stay in the ICU before they die (because denying one minute off that stay would be running a "death panel", natch).
Under the current Medicare model, those nonagerians have long since burned through what they and their employers put into the program. They are staying alive on the dollars paid in by younger workers, and that's the part which unfortunately can't be replicated on a voucher system.
My prediction of Medicare in say 2035 or so is that there will be walk in clinics for diseases that can be treated with drugs or minor procedures, and hospice care for the dying, with nothing much in between. Major hospital procedures will be for those who can afford to write a check.
And by the way, this is why "preventative care" is a disastrous idea for a country in which everyone eventually is covered by Medicare. The 63 year old taxpayer who suddenly drops dead of an unexpected heart attack or stroke is a huge financial plus to the system. Cure that disease at 62 and he'll be riding in the wagon pulled by his kids and grandkids and great grandkids for another thirty years.....
Oh, so you're contending that this statement applies to the Baby Boomer generation, who were the children of the "Greatest Generation"?: They remember that pesky constitution and they despise socialism because they dont trust overlords...
The Boomers, who radically altered this country in almost unfathomable ways to the left? Ok.
You got some pluses and minuses going here in your comment.
First, the minus. I’m not sure that so-called “preventative” medicine helps or prevents much of anything. It sounds good on paper but I’m thinking it’s probably mostly just away for the medicos to get more revenue.
I have no statistics but I’d sure bet they’re don’t prevent much more diseases with these preventative measures that’s it’s worth all the millions poured into this program. But hey, if YOU’RE the one that has a colon polyp discovered before it turns cancerous, you’re a happy guy. Never mind that billions were wasted looking for young polyps to find some in maybe a fraction of a percent of those tested.
That being said, I’m not sure that any talking point espousing eliminating preventative care that the 63 year old might die younger than the 90 he’ll live to with this preventative care is such a good talking point. But again, I’ll allow it’s a good point when coupled with the reality that preventative care costs waaaaaaaay more to justify the few it really saves. Add to it that the few saved only end up costing the system way more money in the long run, that not-so-nice talking point of yours, and you’re probably right.
I also agree with your point that the longer people live the more likely they are to spend a long million dollar stay in an ICU before they die. That’s a sad fact and a real problem, I know this.
The BIGGER problem, with all your unpleasant truths, THE LAST PEOPLE ON THE PLANET WE WANT MAKING THESE DECISIONS IS A GUBMINT BUREAUCRAT!!!
This is why the concept of “Death Panels” is so awful.
Despite the gubmint’s intention to intrude, people do die every day out here in la-la land and I’m thinking all of yon readers on this thread probably have had to deal with life or death of a loved one at some point in our lives.
More often than we give ourselves credit for, I’m thinking death comes by arranging a comfortable place to stay as it nears, free from pain, WITHOUT absurd measures to try and keep the inevitable end at bay. Again, I don’t have the statistics but we do have this thing called common sense that the elite do not have.
A scenario where you get a 93 year old in a 6 week ICU is kind of rare, I suspect. But it happens and yeah, the longer people’s life spans the more likely this is to happen.
Hey, it’s not like us boobs are not as smart as all the gubmint and mighty Obama don’t understand this stuff. We sure do. But we don’t want the gubmint deciding, even if by damning rules and regulations, and given the chance, I daresay we’ll make the right choice.
That’s my story and I’m sticking to it.
The boomers - are not all one thing. The boomers are a minority of communists (the ones in the white house and that took over our institutions) and also they are the ones who beat back liberals for the last thrity years. They are the ones who kept Christianity and families alive abet under constant attack by boomer leftists.
It is a huge generation and not all one thing. The loud mouths - the neo-Marxists who came of age in the 60’s - are not THE generation. THE generation showed up at the tea parties and they were fighting against the one’s in the White Hut and the “intellectuals” he brought with him. They fought in the Viet Nam war and ride their motorcycles today as vets in support of the troops ...while the left boomers whine and hate.
Once they get on Medicare they are still paying around $100 or so a mnth. They forgot to add that Orc.
Should have been....of course.
Right! I pay $115 a month.
Pretty big diff. in their math here. And as someone else pointed out, they forgot that little matter of the compound interest. I’ll go one further and add that probably, at the younger age of the deductions AND the employer match, the money likely would have been invested in the stock market.
So take $114,000 deducted from my paycheck, ADD the employer match made on MY behalf as doggone employers don’t just throw this money in there for no reason.
Had this money been invested in the stock market like husband’s 401(K)...and NOT touched as the gubmint makes private businesses do while THEY plundered these paycheck deducts and employer matches....well husband’s 401K brought in a return of over a 100% of original investment over the years.
So whoever wrote this lie of an article error number one, asserts that the $114,000 deducted from a paycheck was the ONLY money put in the future Medicare bucket on the employee’s behalf. We must double that for the lying scumbucket forgot this so we’re up to $228,000 from that original lie of $114,000 for the employer match.
Add an almost 100% return had the money been invested in the stock market over the years like a 401K often is....and this is really rough calculation but check it out. $1,000 invested in the stock market 30 years ago would probably easily be $2,000 now. NOW we’re up to almost half a million bucks on that $114,000 deducted from the employee’s paycheck, matched by his or her employer, properly invested and left untouched!
Waaaaaay over the estimated $365,000 originally stipulated in this article that would be spent on a Medicare recipient from eligibility until death.
Add in the monthly deduct from SS for Medicare, which rises every year I might add, and the folks who die before collecting one dime and their money properly invested would be quite high and what have we here?
HAD MEDICARE BEEN INVESTED IN THE SAME MANNER THE GUBMINT MAKES PRIVATE BUSINESS RUN THERI AFFAIRS AND MEDICARE SHOULD BE A REAL PROFIT MAKER!!!!
Instead they raided the Medicare coffers and now blame the folks like myself who paid in many years, MATCHED BY OUR EMPLOYERS, for wanting all these “entitlements” and now here’s the question of the day...
WHY DO THEY CALL IT UNEMPLOYMENT “BENEFITS” when the employee pays not one dime into it, but it’s ENTITLEMENTS that we’ve paid into all our lives as well as an equal match by our employers?
In the manner of politicians, they will stoke the flames and have us fighting amongst ourselves, instead of class warfare, let’s lie all to hell about a mythical $114,000 out of a paycheck to equal a subsequent $365,000 out and folks LET’S KILL GRANDMA!!!
SHE’S THE PROBLEM!!! THAT’S THE TICKET!!
Thus, we must have death panels.
Yes, this is less then many pay for their insurance - but factor in that these people paid in advance for 50 years before they could use it.
Then factor that not EVERYONE is going to be using those figures for medical treatment...tho’ everyone paid and pays in...and many died before reaching retirement or soon after - and they pre-paid 50 yrs.
It isn't retirees that are breaking the system. It's the embezzled funds - stolen and given to the druggie, alcoholics and ‘bi-polars and other young, perfectly healthy leaches who get a monthly check with NO deduction for medical on medicaid - and their coverage is FULL. No deductible, no co-pay, office visits and counseling totally covered. The vast majority of these mooches are perfectly able to work.
they choose not too - and no one is doing anything to weed out the able bodied slackers.
How about doing some cutting in these ranks before you come after those that worked and paid for 50 years ahead and now still paying a share?
Except for people who became eligible in 2010. The lowest is now $110 and it scales upward according to your income
I became eligible in June 2010. The deductable is higher for us 2010ers too and the co pay is 20% not $20.00.
In addition, unlike most insurance plans, office visits aren't covered.
When your deductible is met, office visits are covered, just the same as everything else - subject to the 20% co pay.
I've had two office visits since becoming eligible in June 2010, not enough to cover my deductible. Normal office visit at my doc is $75 but they are only allowed to charge what Medicare would normally pay, which my doctors office told me that was $63.99 and that's what I paid for each visit, but I got a statement from Medicare telling me that I was credited towards my co pay $55 for each visit, which means somebody in that office committed a crime by charging me an excess of $8.99 per visit.
I will take that up with the financial division of my doctor's office at the first chance I get.
The laws changed for 2010 and some doctors aren't even aware of it yet.
The first time I showed my card to the receptionist, she said I wasn't eligible for part "B" because there was no "B" after my S.S. number, only an "A". I had to show her right on the card where it says I'm eligible for parts "A" and "B". Actually it says "entitled" to both parts but I don't like to print that word around here.
OOPS - I meant - co=pay 20%
With the 50 yrs of PRE-PAYING and then the monthly deductible from social security checks, office visits and 20% copay - with the monthly deductible jumping up each year - We've paid what any one is paying on their plans.
And let's not forget, that all those years we - and the match from our employers - were pre-paying, we were also paying on a private plan for current insurance.
We really need to to write our reps - many of whom don't understand this - and are leading the charge with the pubic against our ‘free ride’ - and explain this all. We have not had/are not getting a ‘free ride.’
If we had been allowed to put that pre-pay into a system like Texas people can choose to -like Bush proposed, we'd be fine...because our money would not have been embezzled...and the compound interest would have been added, not stolen...AND any that we didn't use, we could leave to our kids.
No one has ever siad 'free ride' to MY face more than once.
>> Any analysis over 10 or more years that ignores the time value of money is a joke.
The tax is not set aside in investment funds, so there’s no growth.
Who is the buyer? China? No thanks. U.S. territory needs to remain in the hands of U.S. citizens. Perhaps an in-kind payment of acreage to U.S. citizens whose money has been stolen by the government. A few acres in Idaho would suit me fine.
Depends on the acreage, but of course “in kind sales” are certainly acceptable. It’s long overdue to protect our Western lands with private ownership and care.
Whether there is growth or not, there should be. (And isn't the "surplus" invested in a "lockbox" full of T-bonds?)
And another thing...it's the opportunity cost that counts, not what the gov't is doing with the money. If you fail to pay your taxes, the gov't will charge you penalties and INTEREST. You can't say that you don't want to pay the interest because you did not invest the money (and thus have growth) while you kept "their" money.
>> it’s the opportunity cost that counts
I understand that, but we’re talking about the real value of the “set aside”. Actually, the “set aside” is never set aside, but spent - so, there’s no real value to speak of.