Joss Delage

Average Medicare cost vs. contribution per recipient?

12 posts in this topic

All,

I am looking for solid numbers on how much Medicare recipients get out of the system vs. how much they contributed. I have heard that the average couple contributed $149,000 over their life and receive $350,000 during their retirement. I would like to confirm that and get some solid sources.

I would appreciate if anyone could give me some info on that or point me somewhere where I can find it.

Thanks,

Joss

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I'm looking for medicare numbers, not medicaid. Medicaid is meant as welfare so the ratio money in / money out on a per vintage basis is meaningless. Plus it's a comparatively small number. Medicare is the far greater injustice where the transfer is from one generation to the previous, without even the excuse of a welfare goal. I heard those numbers from some podcast where they had a token conservative. I don't know anything how they were calculated.

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Whatever the numbers are you have to take into account what time period they cover, because the amounts change over time, and how much was lost in investment opportunity, such as ordinary bank interest or more, from the loss to medicare taxes.

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I agree but at this point I'd be glad to find absolute dollars (not including time value of money). I know those numbers exist, I just can't find them.

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Got it. The numbers are $116,000 and $357,000 for 2011 retirees. In 2030, it will be $175,000 and $527,000. Those numbers include a 2% real interest rate, which is a bit conservative IMHO.

http://www.economist.com/blogs/freeexchange/2012/10/health-care

http://www.urban.org/publications/412281.html

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I agree but at this point I'd be glad to find absolute dollars (not including time value of money). I know those numbers exist, I just can't find them.

what is an "absolute dollar"?

ruveyn

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It means not including the time value of money, inflation, etc. So $100 now plus $100 paid 20 years ago adds up to $200 absolute dollars but more in terms of real dollars.

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Joss, I'm an actuary. Computations using discounting are very familiar to me. Which doesn't mean I don't make mistakes. Check my work if you use it.

I wrote a quick function to look into your problem. Here are the things I assumed:

The couple's 2012 annual income is $50,000. They worked 45 years, from 1967 through 2011. The rise in the CPI during that time was 588%. This averages out at about 4% per year. The Medicare contribution each year was 0.029% of earnings.

First I computed the annual salary for each year based on inflation. In 1967 they earned $8,902, in 1968 $9,258 and so on. The Medicare contribution in 1967

was $258.17, in 1968 $268.49 and so on.

As a check on my function, I accumulated the contributions at the inflation rate. This should be the same as 45*0.029*50000 = $65,250. My function does indeed yield this result.

Next I ran the function assuming a 2% real yield. I.e., the couple get a 6% return on their investments. In this case the accumulated value of the contributions is $102,279.

Finally, I used an accumulation rate that is nearer to the average that the stock market yields, 8%. In this case the accumulated value is $168,320.

If you would like me to run the function with other inputs let me know.

Here is the function:

NB. Compute Medicare contributions

NB. x is i,a or i,a,n where i is inflation rate, a is accumulation rate,

NB. and n is duration (default 45)

NB. y is the current income, e.g., $50,000

NB. E.g., 0.04 0.06 45 vM 50000

vM=: 4 : 0

'i a n'=:3{.x,45 NB. sets duration to 45 if elided

v=:1,*/\(n-1)#%1+i NB. inflation factors

s=:|.y*v NB. income earned. From earliest year to the present

c=:0.029*s NB. Medicare contribution in each year

af=:|.1,*/\(n-1)#1+a NB. accumulation factors

7":pvc=:+/c*af NB. accumulated value of Medicare contributions

)

If you're ambitious, and you would like to run the function yourself, go to www.jsoftware.com and download version 6 of the language. It's free. The language is J, the successor to APL.

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Oh, Brian I'm sorry I was not clear. I don't need that. I'm *very* familiar with DCF calcs - I was a finance professional for quite a while... I was just looking for actual numbers. Thank you for your work, I'm so sorry what I wrote didn't make that clear.

(This being said, I am learning programming but I have 0 experience with functional languages. I need to do that. I probably will learn Scheme rather than J though, as there's so much documentation support for it.)

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Oh, Brian I'm sorry I was not clear. I don't need that. I'm *very* familiar with DCF calcs - I was a finance professional for quite a while... I was just looking for actual numbers. Thank you for your work, I'm so sorry what I wrote didn't make that clear.

Joss, no problem. I'll seize any excuse to program in J. :D

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