BETA
This is a BETA experience. You may opt-out by clicking here

More From Forbes

Edit Story

Seniors Are Receiving Far More In Medicare Benefits Than They Pay In Taxes

Following
This article is more than 8 years old.

Republican presidential candidate Jeb Bush tripped the Medicare wire recently in talking about the urgent need for entitlement reform, a key pillar of his plan to get the American economy moving again with 4% growth.

According to a CNN report, he was confronted by a senior citizen at a New Hampshire town hall meeting who said she was very concerned about policies that would change or phase out Medicare.

"My Medicare right now is wonderful and I paid into it for all these years. Why are you always attacking the seniors?" she asked Bush.

“Well, I’m not,” Bush responded, according to Politico.  “Here’s what I said: I said, ‘We’re going to have to reform our entitlement system.’ We have to.”

“It’s not an entitlement,” the woman shot back. “I earned that.”

“It’s an actuarially unsound health care system,” said Bush.

The fact is the woman questioning Bush was wrong in saying she has paid for her Medicare benefits. At best, she will have paid for less than half of the expected cost of her lifetime Medicare expenditures and possibly as little as 8%.  Medicare is not sustainable as it is currently structured, and reform is indeed vital.

In fact, today’s typical Medicare beneficiary will have paid into the system just 13% to 41% of his or her expected Medicare consumption.  The rest is funded by payroll taxes paid by today’s working Americans.

Politifact has taken on this issue in its Truth-O-Meter based upon Urban Institute data, concluding that “today’s beneficiaries have gotten far more back in Medicare spending than they put into the system through their tax payments…

“A two-earner couple, with one high earner and one average earner, who both turned 65 in 2010 would have paid $158,000 in Medicare taxes over their lifetimes, but can be expected to be the recipient of $385,000 in Medicare spending. That’s a ratio of $2.40 in benefits for every dollar paid in taxes -- and that’s the least generous ratio we found.

“The highest such ratio we found was for one-earner couples in which the earner turned 65 in 2000 and was paid the average wage. Such a couple would have paid $39,000 in Medicare taxes but can expect to benefit from $306,000 -- a ratio of $7.80 in Medicare spending for every dollar the couple paid in taxes.”

Also on Forbes:

So Gov. Bush is correct that Medicare is not sustainable under this model, especially with 10,000 Baby Boomers retiring into the program every single day.

And there are huge implications for our economy overall.  Over the next decade, 85% of the projected growth in federal spending will be because of entitlement spending and interest on the national debt. The threat of a debt crisis is very real and would pose lasting damage to the economy absent reform.

Presidential candidates would be irresponsible not to talk about burgeoning entitlement spending and the threat it poses to the nation’s fiscal future.

Gov. Bush did not back down from his initial comment.  When challenged, he said we need to have a “grown-up” conversation about entitlement reform. “We need to protect [Medicare] for people that have it, and we need to make sure that we reform it for people that are expecting it.”

Programs like the Medicare Part D Prescription Drug Program show we can deploy the forces of consumer power and free markets in achieving savings. In 2003, the Congressional Budget Office projected that net federal spending for Part D would be $99 billion by fiscal year 2013; actual spending was $50 billion, or nearly 50% less than anticipated.  Part D can be a model for future Medicare reform, engaging an army of seniors in getting better value for their health care dollars.

Seniors themselves are transforming the larger Medicare program by choosing to participate in private Medicare Advantage plans over the antiquated fee-for-service program.  In 2014, more than 16 million Medicare beneficiaries – one-third of total enrollees – had voluntarily chosen to enroll in Medicare Advantage plans – private plans, such as HMOs or preferred provider organizations. The plans receive funds from the federal government to provide Medicare-covered benefits to enrollees. Medicare Advantage plans are offered as an alternative to the traditional Medicare fee-for-service program.

While the administration touts the Medicare Trustees’ recent declaration that Medicare is solvent until 2030, the program could be in the red as early as 2022 if Medicare prices begin to rise from current historic lows.

Instead of making sensible changes, the Affordable Care Act took a hatchet to Medicare, cutting an estimated $716 billion from the program over 10 years.  According to Medicare actuaries, this would mean that 40% of providers eventually will either go bankrupt or stop seeing Medicare patients altogether.

To make sure that its spending targets are met, Obamacare creates the dreaded Independent Payment Advisory Board to enforce the cuts — and even more if needed. The IPAB puts thumb screws into the strategy because the law makes it nearly impossible for Congress to override the board’s orders and shields the board’s decisions from judicial review — and patient input.

Medicare can be preserved, taxpayers can be protected, and seniors can continue to have access to the treatments and medicines they need, with lower costs driven not by government price controls and micromanagement but by competition, consumer choice, and innovation.

But we need to start now with that “grown up” conversation over entitlement reform. There isn’t a moment to waste in the 2016 presidential campaign.  The time for demagoguery is over.  There is an urgent need for reform.