At age 78, Milton Jones feel like he鈥檚 earned his Medicare benefits.
鈥淚 imagine so,鈥 he says. 鈥淚 paid taxes all my life.鈥
Today, Jones is retired. He volunteers and calls bingo once a week at his local community center. But for 30 years, he worked in Pittsburgh鈥檚 steel mills.
鈥淚鈥檇 mostly run a 983-Caterpillar,鈥 he says, 鈥渁nd I鈥檇 clean up the molten slag after the the ladle ran over.鈥
It was hard, hot work. And Jones 鈥 like many seniors his age 鈥 says because he鈥檚 paid in, he鈥檚 earned the benefits Medicare pays out.
In Seattle, 68-year-old retired librarian Diane Rosolowsky qualified for Medicare shortly after a traumatic brain injury. She was grateful for the benefits she received.
Years earlier, when she helped run her husband鈥檚 veterinary clinic, she told employees who scoffed at Medicare tax deductions on their paycheck, 鈥溾楾hat鈥檚 your prepaid medical care for when you are a senior citizen!鈥 鈥
And in Brookline, Mass., 86-year-old Elane Shapiro says she didn鈥檛 have to struggle with medical bills after her husband died and she was diagnosed with cancer.
鈥淚 was taken care of. I鈥檝e always paid my taxes.鈥 she says.
鈥淚 think most people feel the way I do. If anyone talks about changing Medicare, we get very nervous.鈥
In and Out
Some seniors get more than nervous, as U.S. Rep. Paul Ryan learned in a town hall meeting in his home state of Wisconsin this past week.
鈥淗ey, c鈥檓on!鈥 Ryan told an increasingly hostile crowd. 鈥淚f you鈥檙e yelling, I just want to ask you to leave.鈥
Ryan is the Republican point person for budget reform in the House. And Democrats are painting his plan as as an attack on Medicare, even as some Senate Democrats support a bipartisan plan that includes cuts similar to Ryan鈥檚.
There鈥檚 a reason system current system is unsustainable, says Eugene Steuerle, a former Treasury Department official and senior fellow at Washington鈥檚 Urban Institute. He boils it down to two simple numbers.
鈥淎n average couple retiring today has paid just a little over $100,000 in Medicare taxes鈥 over the course of their working lives, Steuerle tells Guy Raz, host of weekends on All Things Considered.
And what do they receive?
鈥淎bout $300,000 in benefits鈥 鈥 even after adjusting for inflation.
No One To Say 鈥楴o鈥
How did the current system become so unbalanced?
It has to do, Steuerle says, with the way Medicare was built to work 鈥 by passing on an individual retiree鈥檚 health care costs to the wide pool of current taxpayers.
鈥淭he incentive for me as a consumer to worry about the cost isn鈥檛 very high,鈥 he says. 鈥淏ut the incentive for providers have this incentive to keep listing as many services as possible. The more services the hospital can list, the more they can collect.鈥
A system like that works all right if health care costs stay low. But over the past few decades, they鈥檝e risen dramatically. There are more and more people entering the Medicare system. Those people live increasingly longer lives. And most importantly, Steuerle says, no one is in charge of saying 鈥渘o鈥 to medical-cost inflation.
The result is a Medicare system that only pays for one third of itself. The shortfall is made up 鈥 in part 鈥 from other sources of revenue.
鈥淚t鈥檚 also borrowing from China and Germany and a lot of other countries,鈥 Steuerle says.
Paying For Your Parents
That average, 66-year-old couple Steuerle talks about didn鈥檛 really pay taxes for their own Medicare benefits, he says; they paid for their parents鈥. That鈥檚 the way the system works: Current taxes pay for the benefits that go to current Medicare recipients.
But say demographics shift, health care costs rise. and fewer children are born to pay into the system. Then, the child-to-parent cost chain breaks down.
鈥淪uppose you have a household with three children,鈥 Steuerle says. Those children pay for their parents鈥 health care. But if those three children only have two children?
鈥淭o what extent does that mean I am entitled 鈥 from my children 鈥 to have all my health costs covered?鈥 he says.
Stephanie Rennane, a research associate and colleague of Steuerle鈥檚, represents the generation struggling with that question. She鈥檚 25.
鈥淚f I talk to my friends, other people who are 25 right now, they say, 鈥楩orget [Medicare]; it鈥檚 not going to be around for us.鈥 鈥
Slowing Growth
And bringing that system into balance, Steuerle says, is going to cost all of us.
鈥淚 don鈥檛 see any way we can exempt any broad portion of the population from tackling our broad budget issues,鈥 he says.
That could mean higher taxes for everyone 鈥 including people currently on Medicare. And possible cuts to the program.
鈥淏ut when we鈥檙e talking about cuts in things like health care and elderly support programs,鈥 Steuerle says, 鈥渨e鈥檙e basically talking about cuts in a rate of growth.鈥
Health care, in other words, is always growing. If it鈥檚 going to grow by $100 billion next year but is trimmed to grow only by $80 billion, that鈥檚 still called 鈥渁 cut.鈥
鈥淪o the language can be very misleading,鈥 Steuerle says. A rate of sustainable growth is the real goal of any sensible Medicare reform proposal, he says.
鈥淭hat doesn鈥檛 mean that your children aren鈥檛 going to get more health care in the future. They are 鈥 partly because we鈥檙e going to invent a lot better things to provide them with,鈥 Steuerle says.
鈥淚t just means the rate of growth that we now promise is totally unsustainable.鈥