Saturday, April 06, 2013
Are Social Security and Medicare really to be called "earned benefits"?
Jackie Calmes has an important story in the New York Times Thursday April 3, p. A3, “Misperceptions of benefits making trimming harder”, link here.
She explains that Medicare payroll taxes fund only Part A (hospitalization, and that Part B coverage (80%) has really been coming from the general treasury.
Social Security, on the other hand, comes much closer to having been intended to fund itself.
But in practice, the government has been paying benefits of the retired from taxes on the working. (We’ve discussed the “trust fund” mechanism, which seems legally binding here before).
She points out a single male who turned 65 in 2010 (I did so in 2005) would probably have paid in $300,000 in Social Security taxes and could expect to collect $277,00 in benefits. With Medicare, he would have paid $61,00 in Medicare taxes but is likely to collect $180,000 in benefits, but some of those benefits might result from unnecessary tests and treatments and health care inefficiency. Women fare better in this analysis because the live longer. Younger workers will fare less well than older people.
She points out that we should use the term “earned benefits” for Social Security and to some extent Medicare, rather than “entitlements”.