Second, we can’t let the oldsters get off scot-free. As my colleague David Leonhardt reported in The Times, two 56-years-olds with average earnings will pay about $140,000 in dedicated Medicare taxes over their lifetimes. They will receive about $430,000 in benefits. This is an immoral imposition on future generations. The Ryan budget wouldn’t touch this generation, but a bipartisan budget deal should ask middle-class and affluent boomers to make a sacrifice for their country. Slow the growth in health care benefits now and dedicate that money to paying down the debt and investing in the young.
Mr. Steuerle — along with his Urban Institute colleague Stephanie Rennane — has done some of the most careful work comparing Medicare taxes and benefits. They added up all the taxes people at different points on the income spectrum would pay over their working lives and then translated these amounts into a single sum, expressed in today’s dollars. Mr. Steuerle and Ms. Rennane likewise added up the value of Medicare benefits (net of premiums) that men and women could expect to receive...Their results show that no cohort of Americans, with the possible exception of the very affluent, pays enough Medicare taxes and premiums to cover their costs. The gap is growing over time, too....Two married 66-year-olds with roughly average earnings over their lives will end up paying about $110,000 in dedicated Medicare taxes through the payroll tax, including the portion their employers pay. They can expect to receive about $340,000 in benefits. Two average-earning 56-year-olds will pay about $140,000 and get back about $430,000 in benefits.
The fact is that if one looks at the Urban Institute Study, and then compare it to our analysis of a couple of years ago, one can note:
1. We look at the distribution of incomes and not at the lowest level. Their study looks at a 65 year old whose salary equals the average of all workers. In reality the average salary may be at the age of 32 not 65 and when the adult reaches 65 the salary has increased often two fold.
2. One must look at Medicare across all salary levels. Not just one low value.
3. The costs stated in the study are wrong by more than a factor of 2! Look at our study then look at the real data. I have no idea where they got their numbers.
4. They also fail to note that Medicare participants pay a substantial amount, namely $1,200 per year and then 20% or more plus drugs if not in Part D.
The study is flawed to the extreme by not dealing with the full distribution of the population. If one looks at our analysis one sees we have taken into account all of the factors. On average the contributors never get back what they put in!
Now why did Leonhardt and Brooks not catch that flaw, well because the answer plays into their theme. It is a shame that writers who opine on things which they do not understand do so with almost total ignorance of the facts. Pity the Press is so poor.
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