If You Get Medicare, You Didn't Pay For That

Moneybox
A blog about business and economics.
Oct. 15 2012 4:37 PM

Old People Didn't Pay For Medicare

It's not literally 100 percent true that the Social Security benefits elderly Americans receive were paid for by their payroll taxes, but that works as a rough-and-ready description of how the social insurance program functions. But as this attack ad reminds us, many people are under the impression that Medicare works the same way, which it doesn't:

The basic issue here is that, famously, the cost of medical care relative to other goods has steadily risen over time. Social Security is money-in, money-out. Medicare is money-in, health care out. But if you paid Medicare taxes in the 80s and 90s to cover the then-elderly's hospital bills, what you're getting today is coverage of the much more expensive hospital bills of the 21st century. What's more, the scope of benefits has also expanded over time. Today's retirees get prescription drug coverage, for example, but that didn't exist when they were paying Medicare taxes.

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Now in some metaphysical sense you nonetheless "earned" guaranteed Medicare coverage as part of the implicit social contract and that's fine. But the perception among elderly people that the value of the Medicare benefits they receive is proportional to the Medicare taxes they paid is simply mistaken.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.

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