Medicare and Pundits

The NY Times opinion writer Brooks again repeats a distortion regarding Medicare. In my paper of 2 plus years ago on Medicare Myths I demolished this myth, as reported subsequently in the Washington Post.

Now Brooks states:

According to the Urban Institute, the average couple in 2010 had paid $109,000 in Medicare taxes during their working years but would be able to receive about $343,000 in benefits. A chunk of that $234,000 gap will be paid for by their grandkids. That should weigh on the conscience of every American over 55. You’re supposed to help your grandkids, not take from them. 

Let us not go through the details let us just do a simple reality check. Let us do the following:

1. Medicare collects 3% of our total compensation each year.

2. Assume that the Government never invests this, in reality it just spends it, so no interest.

3. Let us assume that at 65 the worker has worked 45 years. Not a bad assumption.

4. Let us assume that they were paid the same every year, so their total salary was 45 X. They contributed 3% of 45 X. Brooks quotes that as $109,000.

5. Now solve for X.

X=$109,000/(45*0.03)=$80,074 per year.

Thus anyone making less than this has paid in less and similarly any one more than this pays more.

Now for benefit:

1. At 65 your life expectancy is 16 years.

2. Your averegae Medicare take is $11,000 per year.

3. Your total take is $176,000.

4. You over benefitted by $67,000.

But the Urban Instituted inflated the payout but did not do so with the pay in! Rather unfair I believe. Also the problem is that poorer people are more unhealthy, obesity etc. The poorer get more and pay less. Can we correct that, perhaps.

But the assumptions and facts in the above are almost totally wrong, so let that be, after all it is just the Times and furthermore it is just some opinion writer as well, we could expect no more. In reality the analysis is a bit more complicated, as is most of reality and yes, many people get a deal, and well Mr. Brooks many people get to pay for the others. And for those of us fortunate to be health and to still work past 65 we collect zero and pay 3% till the day we die.

Is the system fair? I do not know but at least we should all deal with the facts. Brooks seems to continuously ignore them. The Urban Institute has an agenda as does Brookings. Why follow that agenda.