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What You Pay for Medicare Won't Cover Your Costs
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 retire, 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 with deficits that could drag the economy back down.
Health care costs are a major and unpredictable part of the government's budget problems, and Medicare is in the middle. Recent debt reduction proposals have called for big changes to Medicare, making the belt-tightening in President Barack Obama's health care law seem modest. Some plans call for phasing out the program, replacing it with a fixed payment to help future retirees buy a private plan of their choice.
Peel back the layers, and there are several reasons why Medicare benefits and taxes are so out of line. First, the rapid rise in health care costs.
A single woman who retired in 1980, after earning average wages throughout her career, could expect to receive medical care worth about $74,800 over the rest of her lifetime. A comparable woman retiring in 2010 can expect services worth $181,000. Those numbers are in 2010 dollars, adjusted for inflation so they can be compared directly.
Another reason is that payroll taxes cover most, but not all, of Medicare's costs. They are earmarked for the giant trust fund that pays for inpatient care.
Outpatient doctor visits and prescription drugs are paid for with a mix of premiums from collected from beneficiaries and money from the government's general fund. Seniors pay only one-fourth of the costs of those benefits through their premiums.
The system has worked for 45 years, with occasional fine tuning. But the retirement of the baby boomers, the first of whom become eligible for Medicare in 2011, threatens to push it over the edge.
Medicare covers 46 millions seniors and disabled people now. When the last of the boomers reaches age 65 in about 20 years, Medicare will be covering more than 80 million people. At the same time, the ratio of workers paying taxes to support the program will have plunged from 3.5 for each person receiving benefits currently, to 2.3.
"With Medicare, we are all still making out like bandits, shoving all those costs to future generations," said Steuerle. "At another level, we know that this system is totally unsustainable."
© 2010 The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. 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 retire, 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 with deficits that could drag the economy back down.
Health care costs are a major and unpredictable part of the government's budget problems, and Medicare is in the middle. Recent debt reduction proposals have called for big changes to Medicare, making the belt-tightening in President Barack Obama's health care law seem modest. Some plans call for phasing out the program, replacing it with a fixed payment to help future retirees buy a private plan of their choice.
Peel back the layers, and there are several reasons why Medicare benefits and taxes are so out of line. First, the rapid rise in health care costs.
A single woman who retired in 1980, after earning average wages throughout her career, could expect to receive medical care worth about $74,800 over the rest of her lifetime. A comparable woman retiring in 2010 can expect services worth $181,000. Those numbers are in 2010 dollars, adjusted for inflation so they can be compared directly.
Another reason is that payroll taxes cover most, but not all, of Medicare's costs. They are earmarked for the giant trust fund that pays for inpatient care.
Outpatient doctor visits and prescription drugs are paid for with a mix of premiums from collected from beneficiaries and money from the government's general fund. Seniors pay only one-fourth of the costs of those benefits through their premiums.
The system has worked for 45 years, with occasional fine tuning. But the retirement of the baby boomers, the first of whom become eligible for Medicare in 2011, threatens to push it over the edge.
Medicare covers 46 millions seniors and disabled people now. When the last of the boomers reaches age 65 in about 20 years, Medicare will be covering more than 80 million people. At the same time, the ratio of workers paying taxes to support the program will have plunged from 3.5 for each person receiving benefits currently, to 2.3.
"With Medicare, we are all still making out like bandits, shoving all those costs to future generations," said Steuerle. "At another level, we know that this system is totally unsustainable."
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Wage and price controls on the health care industry.
Take your pick, or die sooner rather than later.
In THIS world, if not government to protect us from the ravages of human greed, theft, and conniving, praytheetell, who?
Now they want to punish us for thier ineptness. You will have to give up your own elaborate health care and retirement benefits before you mess with ours!!!
Of course there is a different cost of entry...just as there is a different cost of entry to the fry cook at McDonalds than there is to a top flight chef at a five star restaurant.
And again, in comparing any industry with another, there will be obvious differences (duh!!). They are different industries.
Thus, you might compare repair of a clogged artery to repair of a clogged fuel line in my truck. I have many options when repairing that. Of course, the better the mechanic, the better the outcome of my truck!
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There you go saying one thing and then right after that you prove you don't have a clue.
Again, a mechanical problem with your car is nowhere close to a mechanical problem with your body. You have many alternatives to getting your car fixed without have much impact on your life: buying a new car, bumming a ride, sharing a car, public transportation, etc. Not only are mechanics competing against other mechanics, but they are competing against all the replacements as well.
The same cannot be said about fixing your heart. There are a few options that can help. And all of the docs that can provide the service know you will pay whatever it takes to get your health back.
All of your comparisons to healthcare industry are laughable, at best.
Again, I dont disagree with much that you stated here. But this is because the system is set up this way. There is NO competition. None.
Healthcare isnt a loaf of bread. Healthcare, in your analogy, is like eating. There are many products and services out there in eating. Yes, eating is very important for us. It is NEEDED to survive. Eating is NOT a right!
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So is there a different cost of entry (I'm guess you don't know this term either) between say a doctor's office or hospital and a resturant.
How about the technical skill needed? Any differences between the two services?
Not only that, people can provide for their on food and be very successful at it. The same cannot be said about healthcare.
And then there is the range of replacement products. If you are hungry there are countless options that will provide the same solution. Again, the same cannot be said about healthcare. If you have a clogged artry, your options are pretty limted to get it fixed. If you have cancer, there are limited options.
Not all products and services work the same in the free market. And, yes you claim you understand this, but your comments comparing the healthcare industry to the food industry prove that you don't.
And again, in comparing any industry with another, there will be obvious differences (duh!!). They are different industries.
Thus, you might compare repair of a clogged artery to repair of a clogged fuel line in my truck. I have many options when repairing that. Of course, the better the mechanic, the better the outcome of my truck!
You see, I operate from a basic premise that syas that your body is your body. What you use your body to make (a good or provide a service) belongs to you. It is the fruit of YOUR labor.
I have NO RIGHT to come along and demand that you take a part of your labor and use it to provide it to someone else who did nothing to earn your labor. That in a very real sense, is a form of slavery.
I am responsible for feeding my family. But I am neither a farmer nor a butcher. I pay folks to do that for me. And folks pay me to do stuff for them. That is the way this works.
Where it breaks down is when we believe that we have a right to someone else's labor to provide for us, without paying them back. That is wrong...it is ABSOLUTELY immoral.
Sorry Guns, I havent ignored anything. But you do lie about what I have said!
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Really. Each time we have talked about the Lousiana Purchase you just chalk it up to something you think cannot be reversed. Am I wrong or are you now taking up the fight to correct all the unconsitutional acts of the federal government????? Of course not. Why? Because you are thankful the federal government did that unconstitutional act, like the other 300+ million americans.
Let me refresh your memory...
There are things the government has done that cannot be reversed. Slavery existed in this country a lot longer under the American flag than it ever did under the Stars and Bars. We cannot go back and undo slavery for all of those people. It happened, and they are dead now.
The U.S. forcing the southern states to stay in the Union was unConstitutional. They had no power under the Constitution to do such a thing. Even the Founders stated several times that there was always a possibility that states could leave. If they couldnt, the states would not have gotten into the Union in the first place.
Look at Social Security today. It is illegal!! But, I dont call for its immeidate abolition. Why? Because it is impractical. The horse is out of the barn so to speak.
Instead, I have called for its slow disuse until the day comes when no one is on it. And then, get rid of it forever, as it is illegal and immoral. And really doesnt help what it is supposed to help!
Again, I cant change what the government did to the indians either. But what I can do is make sure our government never does it again. Never tries to take over someone else's land and keep it for our own. That should NEVER happen again.
Again, as I have stated countless times, we are where we are. We must get out of where we are headed. The right direction is the Constitution. And liberty. Thus, we move forward.
That is what I have said. Maybe you will get it now.
I do know. And dont disagree with most of your ascertain. But this is because of government, because of the lack of a free market. You see, we really cannot shop around for insurance. We really cannot shop around much for healthcare....because our insurance tells us who we can see.
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You say you get it, yet you never incorporate the concept in your comments. You keep thinking healthcare is the same as a loaf of bread or something. How silly.
And insurance is not the issue. They charge you what the healthcare industry charges them. there isn't much profit in that industry. There are so many health insurance providers, any given one lacks the power to negotiate any real price reductions with the healthcare industry. Yet you claim weakening their already too-weak negotiating power by having more insurance companies will help. Again, either you are ignorant or you intentionally ignore gaps in your ideas.
And if your insurance is like most others, you have hundreds of doctors to choose from. I challenge you to call any number of them. I have. You will find that they all charge about the same. The same is true with the hospitals. That's assuming you are even willing to TRUST someone else with something so valuable as your health?another factor to the inelastic demand you like to ignore.
The mor tar man admits there is a cage but calls it freedom.
Healthcare isnt a loaf of bread. Healthcare, in your analogy, is like eating. There are many products and services out there in eating. Yes, eating is very important for us. It is NEEDED to survive. Eating is NOT a right!
Thus, our food industry, from making food, to providing it to us in grocery stores, restaurants, etc is done throug the free market.
There are places I cannot afford to eat at on a regular basis. There are people that can afford to eat at those places, and eat high priced foods.
Healthcare is no different.
No. I dont want my state involved in healthcare. If I dont want Washington involved, I also dont want Richmond involved.
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You can have your wish if there are any states that don't want to be involved with health care at all. My guess is you will have a hard time finding a provider willing to work for this utopia of yours. Buying health care systems across national lines just might be the ticket!
You see, the Constitution isnt a document of "thall shalt nots."
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Your words mor tar man. I guess you forgot about things like the Louisiana purchase and the Purchase of Alaska. The federal government paid for and owns the states. Like I said, you are way out of your league.
Mort just ignores the unconstitutional acts by the federal government that he likes.
Again, sorry that you are unlearned on the subject.
Healthcare is not a right. You get what you pay for.
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Again, Mort it is because the demand is inelastic. Do you even know what "the demand is inelastic" even means? I'm guess no, since you blindly blame the government for the high costs. So hold off on your "unlearned" comments since you continuously get wrong basic economic principles that are the basis of the ideas you try to push.
People will pay whatever the vendor is charging because most people put a high value on their health. And the vendor has no incentive to lower their prices because they know most people place such a unmovable high value on their health and if a given customer isn't willing to pay the price THEY set, they know they have an endless line of replacement customers.
But, if our healthcare dollars were under our control, and not under the government's or insurance's...then we would be free to make choices on what we are willing to spend, how much money we have versus the quality we want. We get to make choices.
And in those choices, if a company, or a doctor or insurance, whatever is charging too much, and a different doctor is charging less for the same service...then of course, the money will flow to the guy charging less.
We have NO market forces like that in healthcare now. It is a monopoly, sponsored and protected by the government.