According to a new study and commentary, the reformed Medicare program under Obama’s Patient Protection and Affordable Care Act amounts to little more than a grand Ponzi scheme to benefit seniors, costing young Americans – who voted overwhelmingly for Obama in 2008 – more than $100,000 apiece over and above benefits received in their lifetimes.
John Goodman, president and founder of the National Center for Policy Analysis, breaks down the numbers in a blog post summarizing a study on the effects of the recently passed reform act, often called “Obamacare.”
Goodman explains that even if Medicare avoids the bankruptcy many pundits are predicting, a typical 25-year-old will pay in premiums, payroll taxes and income taxes supporting Medicare an extra $111,000 over and above the cost of benefits he or she would receive from the program. Typical 85-year-olds, however, can expect to receive $55,000 in insurance benefits over and above what they pay into the system.
Why the discrepancy?
“Because like Social Security, Medicare finances work like a chain letter,” Goodman states. “Although workers have been repeatedly told that their payroll taxes are being securely held in trust funds, they are actually being spent – the very minute, the very hour, the very day they arrive in the Treasury’s bank account.
“No money has been saved. No investments have been made. No cash has been stashed away in bank vaults. Today’s payroll tax payments are being spent to pay medical bills for today’s retirees,” he continues. “Just as Bernie Madoff was able to offer early investors above-market returns, early retirees got a bonanza from Social Security and Medicare. That’s the way chain-letter finance works.”
The study, authored by Dr. Courtney A. Collins, assistant professor of economics at the Stetson School of Business at Mercer University, and Dr. Andrew J. Rettenmaier, executive associate Private Enterprise Research Center at Texas A&M University, was published by the NCPA.
A chart summarizing the findings demonstrates that the Medicare system turns out to be a net loss not just for 25-year-olds, but for any typical American under the age of 50:
“In terms of dollars in and dollars out,” Goodman explains, “Medicare breaks down this way”:
- “A typical 85-year-old is going to get back $2.69 in benefits for every dollar paid into the system in the form of premiums and taxes – a good deal by any measure.
- People turning 65 today don’t do nearly as well – they get back $1.25 for every dollar they pay in.
- The average worker under age 50 loses under the system – with a 45-year-old getting back only 95 cents on the dollar.
- That’s better than the deal 25-year-olds get, however; they can expect to get back 75 cents for every dollar they contribute.
The NCPA is a is a nonprofit, nonpartisan public policy research organization located in Dallas, Texas, with the stated goal: “To develop and promote private, free-market alternatives to government regulation and control, solving problems by relying on the strength of the competitive, entrepreneurial private sector.”
Dr. Goodman received his Ph.D. in economics from Columbia University and has taught and done research at Columbia, Stanford University, Dartmouth University, Southern Methodist University and the University of Dallas. He has appeared on several television news networks, testified before Congress on health-care reform and is the author of nine books.