The truth about who really pays for Medicare

“Your poorly written editorial is just another WaPo attempt to STEAL seniors’ EARNED benefits.”

So read the subject line of one reader’s response to my last column, about how entitlements and other safety-net spending on the middle class are crowding out spending on the poor. The e-mail went on to say: “sorry, spoiled millennial [expletive], but seniors have worked and PAID FOR their SS and Medicare.”

I don’t dispute the middle epithet: I am indeed a millennial. And since we millennials like to disrespect our elders, I feel compelled to explain why her claims about entitlement spending — while very common, judging from other messages in my inbox — are entirely wrong.

Yes, seniors paid into Social Security and Medicare during the years they worked, if they worked. But they generally receive much more out of the entitlement system than they paid into it.

Check out the calculations put together by the nonpartisan Urban Institute. Every year, the organization’s researchers estimate the Medicare and Social Security benefits that different types of Americans receive over the course of their lifetimes vs. what these Americans had paid in Medicare and Social Security taxes. Payments into the system include both the workers’ and employers’ portions of these taxes. The model also takes into account the ways workers could have invested all this money, had the government not stripped it away.

The cost-benefit calculation for any individual senior will depend on such details as life expectancy, marriage, work history, etc. The generation a person belongs to affects the calculations, too: People who had the foresight to be born in 1920 got a much sweeter deal than those of us imprudently birthed in the 1980s.

But let’s consider the average worker who turned 65 in 2010. Generally speaking, the people in this cohort will, more or less, break even on Social Security, according to Eugene Steuerle, an Urban Institute fellow who co-authors the annual report. (Earlier generations made out like bandits; for example, members of an average one-earner couple who turned 65 in 1990 receive twice as much in Social Security benefits as they paid in taxes.)

Medicare, on the other hand, is pretty much a steal no matter when you turned 65.

For Americans who turned 65 in 2010, Medicare benefits will typically amount to two to six times what beneficiaries had paid into the system, depending on their marital and work histories. For example, an average-wage, two-income couple who turned 65 in 2010 paid today’s equivalent of $123,000 into the Medicare system during their working years. They will receive about $385,000 in Medicare benefits over their decades of dotage, even after subtracting out the cost of premiums. For a similar couple that retired 20 years earlier, the comparable numbers were $43,000 paid in vs. $227,000 received. A decent return, no?

It boils down to this: Despite all the “we already paid for it” rhetoric popular among seniors, seniors did not pre-pay for their entitlements. If anything, they paid for their parents’ entitlements, which were more modest than the benefits today’s retirees receive.

So who’s making up the difference between what seniors paid yesterday and what they receive today? “Spoiled millennial [expletives]” like me, as well as Gen-Xers and both groups’ children. And absent a major influx of working-age immigrants, the burden per worker stands to grow enormously in the coming years. That’s because the bloated baby-boomer cohort is aging into retirement, Americans are living longer and health-care costs per person are rising.

Now, the fact that seniors didn’t pay in full for their entitlements doesn’t necessarily mean anyone should take those entitlements away. There are lots of social safety-net programs that are, by design, subsidized by the entire U.S. tax base, not just by direct beneficiaries. That’s the whole point of transfer programs. I am glad that my taxes pay for food stamps, disability insurance, low-income housing and Head Start — and I will count myself lucky if I’m never on the receiving end of that safety-net spending.

But as a society, we must decide exactly how much we’re willing to subsidize the growing ranks of the elderly. Republicans argue that we should control entitlement spending because (I’m paraphrasing here) deficits are evil. They should be joined by Democrats, but for a different reason: Money for other worthy, traditionally liberal causes — education, infrastructure, children, the deeply poor — is being gobbled up by increasingly expensive and unfunded promises to the old.