The reality of Social Security and Medicare- My real life experience.

When I read Social Security is a scam or that Congress stole the funds, or “I paid for my own benefits,” I find it very upsetting.

When someone says they paid Medicare taxes while working so why should they pay premiums in retirement and also demand to know what happened to the money, such ignorance is disturbing-mainly because there is no effort to learn the facts.

During my working life I paid $132,817 in Social Security taxes. That was between 1959 to 2010. My employers paid a similar amount. 

Since my wife and I began collecting Social Security benefits – on my earnings record- in 2008 we have received about  $798,750 in combined benefits. That is 213 months of benefits including COLAs. 

Based on my average monthly benefit alone, during the first six years I received in benefits more than I paid in taxes. After eighteen years of benefits we have collected way more than I and my employers combined paid in taxes. 

As far as Medicare goes, sad to say, the return has been even greater. Frankly I wish it had been zero. My total Medicare taxes were $98,080 including a lump sum check of $16,000 I had to pay at retirement because part of my pension is considered by the IRS as deferred compensation. 

The initial emergency treatment for Connie’s eye injury a few years ago resulted in Medicare claims over twice the taxes paid and there has been much more over the years since, plus unrelated care. Since last October her weekly treatments have been about $13,000 each. 

Part A is funded mostly from the payroll tax, but also from a portion of income taxes paid on Social Security benefits. 

Higher income earners pay an extra 0.09% payroll surtax on pay generally above $200,000. 

Part B is mostly funded from general government revenue plus beneficiary premiums which equal 25% of the Part B costs. IRMAA premiums are higher than the 25% equivalent. 

NOTE: income taxes paid on SS benefits go into the Social Security (up to 50% level) and Medicare Part A  trust funds (between 50% and 80% level).  

I will leave it to the spreadsheet gurus to apply present value, ROI, break even and such to these numbers. I see these programs as a good deal, probably too good. They definitely relieve financial stress for retirees. 

And let’s not forget it is all insurance, there will always be some financial winners and some losers, but all seniors have protection. 

For most retirees the ongoing cost for Medicare plus a Medigap policy protecting from out of pocket costs is under $500 a month including Part D. Part D varies greatly though based on plan choice and is also subject to IRMAA. 

Not inexpensive, but when you consider the higher cost risk for the over 65 group, not a bad deal either. Most working Americans pay more that 25% of the cost for their health insurance plus high out of pocket costs. 

Medicare premiums increase because the use and cost of health care services increase each year. Nobody is being unfair to seniors as some people claim. Interestingly, the fees Medicare allows barely and in some cases don’t cover the actual cost of services. This drives cost higher for other payers.

The fact we have four major types of payers-Medicaid, Medicare, commercial insurance and self-pay – each at different levels – is one of the major flaws in our system. 

Please don’t comment that instead of paying taxes for SS, a person could invest the money and come out better. That’s a theory fraught with variables and assumptions that would never be realized for 99% of Americans- IMHO.🤑