House Speaker Paul Ryan (R-WI) promises that 2018 will be the year Congress attempts to reduce spending on big federal programs like Medicare. As that debate unfolds, keep this in mind: A 65-year old woman will need to have put aside $95,000 to have a just a 50/50 chance of paying her Medicare premiums and prescription drug costs over her remaining lifetime. If she wants to 90 percent chance of paying her Medicare bills, she’d need $147,000. The estimates are from the Employee Benefit Research Institute.
These estimates are for Medicare costs only. They do not include health care not covered by the program, such as dental and vision care. And they do not include the costs of long-term care. My Urban Institute colleague Melissa Favreault estimates that an average senior would have to save an additional $69,000 at age 65 to pay for high levels of long-term supports and services for the rest of her life (equal to about $138,000 in lifetime costs). That’s combined total savings for Medicare and long-term care–which Medicare does not pay for– of more than $200,000.
For context, in 2011 the median net worth of a household aged 65-69 was $194,000, according to the US Census Bureau. That number is certainly higher now, thanks to a booming stock market and rising home values. But keep in mind that only one-quarter of those 65-69 owned stocks or mutual funds in taxable accounts in 2011 and only about one-third had retirement accounts. Thus, many seniors have not benefited at all from the long, post-recession bull market.
And, of course, people need their retirement savings for more than medical and long-term care. They’ll draw down savings to help pay for food, transportation, utilities, taxes, and the like.
At the same time, conservatives are right that Medicare is a big, costly federal program. In fiscal 2017, the federal government spent $590 billion on Medicare, about 15 percent of the entire federal budget. And as the Baby Boomers age and incur even higher medical costs as they approach their 80s, those costs will increase significantly.
And another of my Urban Institute colleagues, Gene Steuerle, estimates that the lifetime value of Medicare benefits for a woman who turned 65 in 2015 was about $220,000, net of the premiums she paid over her working life.
So when you hear Paul Ryan talk about how Medicare is breaking the back of the federal government, or when you hear progressives say the program is untouchable, try to keep two ideas in mind: First, Medicare is a costly federal program that provides big subsidies to seniors and, second, that even with those subsidies, most older adults cannot afford to pay for their medical and long-term care needs.
Both are true. And any debate over Medicare must acknowledge that reality.
You really do not seem to understand Medicare as it exists today, its history, or Medicare reform issues. You appear to be some academic type who either does not even have to retire or with some private retirement benefits that leave you with no special dependence on public Medicare. You really should stop writing these columns about Medicare that mislead people and stick to some subject you have researched.
Whatever, specific to this column:
– You have a version of this in Forbes that includes an additional paragraph. That extra paragraph nonsensically says Ryan once made a Medicare reform proposal that would have an actuarial value of only 30%. What are you possibly even thinking of? Since it is not here, have you retracted that claim. Why have you not changed the claim on Forbes?
— Why would this 65-year-old lady have to put anything “aside” to pay Part B premiums and related OOP costs. They are taken out of her SS. Even if she had put money “aside,” the Part B premium has to come out of SS if — as with almost everyone — she takes SS and wants Part B. So she could not literally use the money put “aside” to pay them even if she had put it aside
— I guess you are you coming up with some estimate of Part B, Part D, B/D-related OOP and/or public Part C or private Medigap premiums and their related OOPs. If so, at about $5000 a year for all of that on average, are you saying on average a 65 year old lady is going to live to age 94? (I don’t know; just asking; maybe it is the worst/best case and not an average?)
— that little adjective in the phrase “taxable accounts” kind of makes your whole analysis a bit misleading, no?
— Steurle’s model is completely flawed because it puts in no implicit value of the the share of income taxes paid over a lifetime into the Part B trust fund (I know the system does not work that way but you need to factor an implicit value in if you want to do what Steurle did with intellectual honesty. And he also does not count the value of all the money put in by people who do not live to get any benefits back. Steurle’s model is just terrible deceit.)
Apparently all these odd remarks are based on some probably accurate economic theory but please join we real senior citizens here in the real world