April 15, 2024

Economix: Estimating Medicare Taxes Versus Benefits

My column this week describes some work by Stephanie Rennane and Eugene Steuerle examining the total amount of money people pay in Medicare taxes over the course of their lives, as well as the total benefits they receive. For every cohort of workers, going back to the founding of Medicare in the 1960s, the benefits exceed taxes.

If you are interested in more details, you can read this article by Mr. Steuerle. This chart has more estimates than we were able to print in the paper. This Q. and A. discusses their methodology.

To do the calculations, Ms. Rennane and Mr. Steuerle, who both work at the Urban Institute, assumed that money saved by the government would earn a 2 percent annual return, after inflation. They talk more about this in the Q. and A.

But even if they had assumed a higher rate of return — say, 3 percent — the basic finding would not change. Americans receive more in Medicare benefits than they pay into Medicare, even after including the share of the tax paid by employers and even after including Medicare premiums.

Article source: http://feeds.nytimes.com/click.phdo?i=60c3102bdffdd0721660ffd624f2e149

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