How much have Medicare beneficiaries 'paid in' to the system?

http://www.politifact.com/truth-o-meter/statements/2014/sep/09/national-republican-senatorial-committee/how-much-have-medicare-beneficiaries-paid-system/

By Louis Jacobson on Tuesday, September 9th, 2014

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Currently, workers pay a 1.45 percent payroll tax for Medicare, while employers kick in an additional 1.45 percent. Self-employed people pay both parts of the tax. Meanwhile, starting in 2013, households earning $125,000 (or $200,000 or $250,000, depending on the number of people in the household and their tax-filing status) pay an additional 0.9 percent Medicare tax.

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However, it’s not as if those payroll taxes are placed in an account for that beneficiary’s future use alone. Instead, the proceeds of payroll taxes paid by workers of all ages (combined with the proceeds of current beneficiaries’ Medicare premiums) foot the bill for the Medicare costs of today’s beneficiaries.

And the way the math has worked out over the years, today’s beneficiaries have gotten far more back in Medicare spending than they put into the system through their tax payments. We discussed this topic in 2013, using statistics from the Urban Institute, a nonpartisan research institute in Washington. We’ll recap their findings here, updated with the most recent data.

Institute researchers figured out what people turning 65 in various years have already "paid in" to the system and what they can expect to "take out" after they reach age 65. Because marital status and family income can significantly affect both the amount paid in and the amount paid out, the institute offers calculations for various types of family units.

To make the final amounts comparable to what might have been done with the tax money had it been invested privately, the institute adjusted all dollar figures at 2 percentage points above the rate of inflation.

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We looked at the statistics for three "cohorts" of seniors -- those who turned 65 in 2000, 2005 and 2010. That means they’re 79, 74 and 69 years old today.

We found that, for Medicare recipients, the "worst" deal for any of these demographic groups is still quite generous. A two-earner couple, with one high earner and one average earner, who both turned 65 in 2010 would have paid $158,000 in Medicare taxes over their lifetimes, but can be expected to be the recipient of $385,000 in Medicare spending. That’s a ratio of $2.40 in benefits for every dollar paid in taxes -- and that’s the least generous ratio we found.
The highest such ratio we found was for one-earner couples in which the earner turned 65 in 2000 and was paid the average wage. Such a couple would have paid $39,000 in Medicare taxes but can expect to benefit from $306,000 -- a ratio of $7.80 in Medicare spending for every dollar the couple paid in taxes.

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We paid for our parents’ Medicare. There’s very little money sitting in the trust funds.

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While Americans have indeed "paid in" to Medicare, the amount that today’s beneficiaries have paid in only covers a fraction of their expected costs. The taxes paid by today’s typical beneficiaries will cover just 13 percent to 41 percent of what those beneficiaries can expect to get from Medicare during their lifetime. The rest of what has been "paid in" for their care has come from younger Americans.

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tags: medicare funding,