Medicare math 101: The numbers just don't add up

Ask Betty, a senior, how she feels about the prospect of her Medicare benefits being cut and you’re likely to get a response along the lines of, “Hands off my Medicare! Those are my benefits. I’ve paid taxes all my life!”

And that makes sense–except for one detail: Her taxes haven’t paid for those benefits, at least not all of them.

And that’s the reason the current system is unsustainable. Americans are living decades longer in retirement than in previous generations. And the enormous demographical lump of baby boomers means that the number of those Americans will jump sharply and stay high for an entire generation. These two factors will dovetail into a massive entitlement obligation that will crush the federal government, unless something changes.

But back to the taxes our senior paid–don’t they entitle her to that benefit? In an interview with National Public Radio, Eugene Steuerle, a former Treasury Department official and senior fellow at Washington’s Urban Institute, explains the numbers just don’t add up. “An average couple retiring today has paid just a little over $100,000 in Medicare taxes” over the course of their working lives, he explained. And what do they get back in the form of Medicare? After adjusting for inflation, “about $300,000 in benefits,” Steuerle said.