Medicare Taxes and Benefits Just Don’t Add Up

A January 3, 2011 Washington Post article, Analysis Illustrates Big Gap Between Medicare Taxes and Benefits, describes an Associated Press poll that found that most people believe they deserve all of their Medicare benefits with no cuts, no increased costs, and no additional Medicare taxes, even though most have paid in far less taxes over their work lives than they receive in benefits during their senior years.

AP reporter Ricardo Alonso-Zaldivar points out that an average couple paying Medicare taxes during their work lives and earning between them $89,000 annually, will pay around $114,000 in taxes over the years but receive about $355,000 in total health services. The article has quite a few other financial comparisons, many of them from economic analyses conducted by the Urban Institute. (The tables at the Urban Institute link show Medicare taxes and benefits over a lifetime, as well as Social Security, by marital status, retirement year, and annual earnings.)

Beginning this year, according to AARP, “approximately 7,000 Baby Boomers will turn 65 each day, and they intend to stay active into traditional retirement years in the workplace and beyond.”  Therefore every day Medicare will gain some 7,000 potential new beneficiaries, a record number.

But the impact on the program won’t be immediate. John Rother, AARP’s executive vice president for policy, told reporter Karin Zeitvogelt of the Agence France-Presse (AFP) that people who turn 65 and first sign up for Medicare “statistically do not use much in the way of health services. It’s only when the get into their mid-70s and 80s that they’re likely to need intensive and expensive health care.”

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