Medicare misperception causes it to be even harder to chop
WASHINGTON President Barack Obama had Senate Republicans nodding in agreement throughout a recent icebreaking dinner because he described a fundamental problem for that nation’s fiscal future: For every dollar in taxes that Americans purchase Medicare, they ultimately draw about $3 in benefits solstice canada goose . In addition, he added, many people don’t realize that solstice canada goose .
The president was talking about the widespread and incorrect view, especially among older Americans, that Medicare recipients get only what they have taken care of through taxes, premiums and medical copayments . Since misperception is which makes it all of the tougher for politicians to think about trimming those benefits or raising outofpocket expenses because they seek to restrain Medicare spending that’s rising unsustainably while seniors age and medical prices increase .
Late this year, for the sixth straight year, Medicare’s trustees issued a warning that is required legally whenever a lot more than 45 percent of the health program’s costs must be included in general revenues from all taxpayers .
Up to now, Obama has mostly proposed Medicare cuts not to benefits but to Medicare payments for medical service providers, such as hospitals . He has supported reducing benefits or raising costs for higherincome beneficiaries but makes any broader benefit changes determined by Republicans’ agreeing to additional tax revenues from wealthy individuals and corporations .
Nevertheless, Republican senators said these were heartened by Obama’s dinner comments around the growing imbalance between Medicare’s benefits and taxes . If they could not yet agree to solutions, agreeing around the problem would be a start, said Sen . Ron Johnson, a firstterm conservative from Wisconsin who was among the diners .
“I suggested it might be immensely useful to reaching methods to these complaints if he’d utilize that bully pulpit and begin conveying towards the American public the full extent, the entire depth, of our problems,” Johnson said .
He added, “I’ll know President Obama is serious about working with us after i start hearing him tell the American people what he told us in private . ”
Administration officials asserted Obama, in talking about a 3to1 ratio of Medicare advantages to taxes, was referring just to Medicare’s Medicare part b coverage for doctor and outpatient services .
Older Americans pay about A quarter of Medicare part b costs through premiums, deductibles and coinsurance (highincome beneficiaries pay 35 % to 80 percent) . The remainder originates from general revenues income taxes along with other levies . The ratio is comparable for Medicare’s prescription medication benefit: While beneficiaries’ premiums cover in regards to a quarter of costs, the rest originates from general revenues and borrowed money .
“They are heavily subsidized by the federal government, and the trend is getting worse,” said Robert Reischauer, a former director from the Congressional Budget Office and today 1 of 2 public trustees for Medicare and Social Security .
Medicare payroll taxes finance only the program’s Medicare part a coverage for hospital costs .
While Obama apparently was speaking only about Medicare part b, analysts say that it is roughly true for all of Medicare that beneficiaries on average pay about $1 for each $3 in benefits .
Analysts frequently cite Gene Steuerle, an economist in the Urban Institute, an insurance policy research organization, who calculates average payroll taxes and benefits for Medicare as well as Social Security within the lifetimes of numerous kinds of individuals . Those figures vary by income, health, longevity, marital status, children along with other factors .
For instance, Steuerle’s October update showed that a single male who earned the typical wage ($44,600 in 2012 dollars) and turned 65 this year had paid about $61,000 in Medicare taxes and may expect $180,000 in benefits .
Social Security is a different story these days . That very same single male, Steuerle calculated, paid about $300,000 in payroll taxes and could expect $277,000 in retirement benefits . (Many analysts note, however, that Americans also get survivor and disability insurance for their Social Security taxes, should they become disabled or die prematurely . )
Social Security and Medicare benefits are greater on average for women simply because they generally live longer than men .
The idea among Americans they get back what they paid for, with some rate of return, dates to President Franklin D . Roosevelt’s legislative marketing of Social Security nearly 80 years ago . When Medicare was made in 1965, new payroll taxes were assessed to cover only Medicare part a hospital insurance .
“That was sort of a basis argument that FDR popularized once the Social Security Act was passed that this was a fiscally responsible program because people would pay in and, as a result of their payments, be entitled to benefits,” said Reischauer, the general public trustee .
Yet Social Security happens to be a payasyougo system, with workers’ payroll taxes going not to some actual trust fund for them but directly toward benefits for presentday retirees . So while the program’s initial beneficiaries had paid little or nothing in to the system, “all of the first generations got windfalls,” Steuerle said .
For many years until the 1980s, workers paid a Social Security tax rate much lower compared to current 12 . 4 percent (split between employers and employees) as well as on less of their wages, even while Congress expanded benefits . But now are new Social Security claimants roughly breaking even and certain to get back about what they paid in . But young workers today can expect fewer benefits for his or her taxes .
“The final point here is the older you’re, the more likely that your Social Security benefits exceeded your contributions,” said Charles Blahous, another public trustee along with a former adviser to President George W . Bush . “The younger you are, the greater certain it’s that your tax burden will exceed that which you ever get out . ” . solstice canada goose .