August 21, 2014

Why Medicare Is So Popular -- and Needs Reform

Recent calculations by Gene Steuerle and Stephanie Rennane at the Urban Institute underscore Medicare’s financial challenges and the need to curb its growing costs. The new numbers show the relationships between what people of different ages and incomes pay into Medicare and Social Security and what they are scheduled to receive from them.

Current and future retirees who earn average or above-average wages are scheduled to receive slightly less in cash benefits from Social Security than they paid in taxes. But with Medicare, Steuerle and Rennane concluded that “past and current retirees, and most working age adults, will never pay for all of their benefits."

This is because Medicare payroll taxes and premiums cover only 51 to 58 percent of total Medicare expenditures over time. With the oldest baby boomers starting to sign up for Medicare in large numbers, elected officials must focus on reforms that can make this important program sustainable in the decades ahead.