Newspaper article St Louis Post-Dispatch (MO)

Workers Heavily Subsidize Retirees' Medicare

Newspaper article St Louis Post-Dispatch (MO)

Workers Heavily Subsidize Retirees' Medicare

Article excerpt

Health insurance is expensive. Ask any employer how much he pays for his employees. Likely it will range from $3,000 to $5,000 a year. On TV recently, a manufacturer said he needed more employees. But he also said it was cheaper for him to pay overtime than to hire new employees, who immediately would cost him $3,000-$5,000 for health insurance!

Still, Medicare is a bargain - a real bargain. Retirees in 1995, enrolled in Parts A and B, paid $46.10 a month or a total of $553.20 a year. A bargain? You bet!

But some quirk in the law (or incompetence in Washington) allowed that premium to be reduced in 1996 to $43.20 a month or $518.40 annually. Strange? You bet! That reduction in the premium, in itself, created a shortfall in revenues to the Medicare program of almost $1.3 billion annually.n If you extrapolate that to the seven-year deficit period being debated, the total exceeds $9 billion. The shortfall in Medicare is made up through payroll taxes on "working America" of 2.9 percent per employee on salary paid. On a somewhat modest salary of $20,000, the employer pays 1.45 percent and the employee pays a similar amount - each paying $290 a year for a total of $580. That figure is more than the retired Medicare recipient pays - $518.40 - after the premium reduction. The American worker may not even have medical insurance of his own through the company that employs him. But both the company and the employee pay for Medicare. That's the law! A cap was placed on this Medicare tax. It was limited to salaries up to $135,000. But during the first year of the Clinton administration this cap was eliminated. Now, the tax bite can be applied to any salary, no matter how big. On a salary of $1 million both employer and employee pay 1.45 percent - $14,500 each - or $29,000 a year. Thus, the Medicare recipient is subsidized and will continue to be subsidized by working America. The Medicare recipient was never meant to pay the full cost of insurance. It was not possible, especially for those retirees with little or no income other than their Social Security benefit, which is often quite small. But the subsidy on Part B, for example, originally intended to be 50 percent of the total cost, has now risen to a subsidy of almost 75 percent - and on the backs of working America. I do not believe that it was intended that today's workers should heavily subsidize those retirees who have other income, especifically those with incomes of $75,000 or $100,000 or more. Peter G. Peterson, secretary of commerce under President Richard Nixon, has written a book, "Facing Up," in which he outlines many ways we can rescue our economy and balance our budget deficits by the year 2000. The tough choices he advocates involve both Social Security and Medicare. He believes both should be "means tested. …

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