Misunderstanding About Medicare/Social Security

Medicare is, quite possibly, the most confusing “Entitlement” program that the government has.  As I recently told a friend from school days, “Medicare is close enough to what people are use to that people feel comfortable with it, but it is different enough that people can get easily confused.”

I understand and, to a degree, agree with those who say, “Medicare and Social Security are not ‘Entitlements’.  I paid for those.”  However, although I am sympathetic to that argument, personally,  I also understand why both programs are classified as “Entitlement” programs by the government.

In recent years there has been a hypothetical plan proposed in congress.  It would expand the age for qualification for Medicare.  It would create a national health care system by lowering the age for Medicare down to new-born infants.  Although that may make good political sense, the plan would not work without a major overhaul of the way Medicare and Social Security work.

At the same time there has been a hypothetical plan proposed that would raise the qualification age for Medicare from 65 to 67.

Obviously, the federal government cannot do both.

Sadly, I constantly hear, “I paid into Social Security all my life.  Why is it in danger of not being there for me?”   How can you tell an intelligent adult, “Because you don’t understand how the Social Security system works” without sounding “snotty”?

Social Security and Medicare are “Inter-generational Taxes”.  That means that the money we Baby-Boomers paid into the system was used to pay for our parent’s retirements and health care.  The retirement and health-care needs for us Baby-Boomers will be paid by our children through their payroll taxes.  When they reach retirement age, their benefits will be paid for by our grandchildren.  The way the system is constructed, those who are taking advantage of benefits now, are being subsidized by those who are currently in the workforce.

Here is the principle that many people don’t understand.  The second your employer withholds your FICA and Medicare taxes from your pay check. you lose ownership of that money.  Technically speaking, when a politician, Republican or Democrat, says that either Social Security or Medicare is an “Entitlement” they are correct since you lose ownership of your money the instant it is paid to the government through your payroll taxes.

There is no account established for your retirement.  Your money is co-mingled with the money from millions of other Americans in the work-force.  The government uses your money to help your parent’s retirement needs.

Think of it as a money laundering process.  The government takes your money and loads it in with the money it takes from other Americans.  It then takes all of that “dirty” money and gives it to Social Security and Medicare beneficiaries in the form of a “clean” Entitlement.

Your only hope, as far as Social Security and Medicare is concerned, is that those who pay withholding taxes now pay enough to keep the system viable during our retirement.

In case anyone feels this is unfair, and I can understand those who do, remember that there is a safe-guard against those who would abuse the system.  Unless one is determined to be physically/mentally unable to work and pay payroll taxes, they are not entitled to Medicare without paying a large premium each month and they are not entitled to any Social Security Retirement benefits.  In order to qualify for benefits, one must have paid payroll taxes for 10 years or have been married to someone who paid payroll taxes.

Contrary to what some believe, Social Security and Medicare are not “Free”.  During your working years you, and your employers, paid for those benefits with your payroll taxes.  If you do not qualify for Medicare because you did not come to the United States until later in your life and you have not paid sufficient payroll taxes to qualify for Medicare, you can still get it but you will have to pay a premium.

However, the politicians have already increased the age qualification for Social Security Retirement benefits. Medicare will probably be the next program.  There are some that want to increase the age qualification for Medicare to mirror Social Security so that one cannot claim benefits until he/she are 67 .  The current proposal would “Grandfather” those who are current age 55 so that they would have Medicare during their Golden Years but younger folk would have a different system.

You cannot afford to assume that Medicare will be the same in 10 years as it is today.  Heaven only knows what Medicare/Social Security will look like 100 years from now but by then I will be long gone.