The problem

by on September 12, 2013 at 1:14 pm in Economics, Education, Medicine, Political Science, Religion | Permalink

One reason that many Americans believe Medicare does not contribute to the deficit is that the majority thinks Medicare recipients pay or have prepaid the cost of their health care. Medicare beneficiaries on average pay about $1 for every $3 in benefits they receive…However, about two-thirds of the public believe that most Medicare recipients get benefits worth about the same (27%) or less (41%) than what they have paid in payroll taxes during their working lives and in premiums for their current coverage.

Here is more, via Amitabh Chandra.

foosion September 12, 2013 at 2:05 pm

I’d be cautious about taking survey responses too literally.

Respondents are probably saying the Medicare is a good thing, without regard to the deficit.

As an analogy, consider the recent survey showing a large number of Republicans blaming Obama for the Katrina response. Either they are stupid with no memory or they view the survey as a proxy for saying: Obama is bad.

Tim September 12, 2013 at 2:10 pm

Considering most Tea Partier’s still think Reagan’s OK, but see Obama as a socialist (even though Obama is far to the right of Reagan), I think the former is more likely.

Could you imagine anyone rationally thinking that blaming Obama for Katrina would be more likely to be seen as a proxy for their feelings on Obama than painting themselves as idiots?

Andrew' September 12, 2013 at 3:01 pm

So, both “liberal” and neocon equal statist. That’s what I’ve been sayingOr, explain how Obama is actually to the right of Reagan?

Andrew' September 12, 2013 at 3:03 pm

You can’t, to me, for example, say that the left no longer understands their traditional position on banks and then call that “right wing.”

mike September 12, 2013 at 3:26 pm

“even though Obama is far to the right of Reagan”

Someone with a mind this deranged, commenting on others’ partisan rationality? I want to send this comment back in time to when our forefathers were debating universal suffrage, but they wouldn’t understand it in context.

Tim September 12, 2013 at 4:25 pm

Well he was pro-LBGT rights in 1980! Something Obama wasn’t 100% on board with until his second term. He signed the bill making abortion legal in California. He was pro-gun control. He was anti-torture signing the UN Convention Against Torture. He was not only pro-union, but was a lifelong member of one. He passed not just immigration reform, but signed amnesty for illegal immigrants. And his views on balancing the budget were very much the same sort of moderate views as Obama (combination of tax cuts and hikes), but in effect he raised taxes almost every year he was in office. The number of government employees grew under Reagan, and he’s largely viewed as the President most responsible for our current deficit spending.

Careless September 12, 2013 at 4:59 pm

Ronald Reagan was pro-gay marriage in 1980? [citation needed]

mike September 12, 2013 at 5:18 pm

It’s impressive how fast the partisan hamster wheel can spin when one is so desperate to reach an absurd conclusion.

Andrew' September 12, 2013 at 5:27 pm

I’d say none of those really put Reagan to the left of Obama. Just one: what you call amnesty probably wasn’t. Not to mention it was also the law, possibly not Reagan’s idea, that reiterated the illegality of illegals while allowing about 3 million to become legal. That is not the same as saying Reagan would do it again today 20 million illegal immigrants later.

Tim September 12, 2013 at 6:07 pm

Careless – Didn’t say gay marriage. LBGT rights – see the Briggs Initiative. It in many ways echos issues like repealing “Don’t Ask Don’t Tell”, and it was obviously a much less popular position at the time.

Bernard Guerrero September 12, 2013 at 6:19 pm

Err, pro-union? PATCO mean anything to you?

JWatts September 13, 2013 at 10:21 am

even though Obama is far to the right of Reagan

Sorry, this is an insipid Leftie meme that has no substantial basis in fact. I hate to break it to you, but just because someone said it on the internet, that doesn’t make it true.

http://www.youtube.com/watch?v=bufTna0WArc

Hazel Meade September 13, 2013 at 1:09 pm

Social vs. economic issues.

Can we please stop conflating the two?
Reagan was a relative liberal on social issues and a relative conservative on economics.

We’re talking about Medicare here and it’s effect on the budget, so I should think we’re talking about economics. Thus, claiming Obama is some sort of right-winger is retarded.

OH LOOK, Reagan was pro-LGBT, that must mean Obama’s not a socialist!

Careless September 14, 2013 at 8:44 pm

So Reagan was to the left of Obama on gay stuff because Reagan was against making it illegal for the state to employ homosexuals, while Obama was not only against that, but for civil unions, etc? You must know you’re being ridiculous.

Careless September 14, 2013 at 8:45 pm

Social vs. economic issues.

Can we please stop conflating the two? Reagan was a relative liberal on social issues and a relative conservative on economics.

Yet still to the right of Obama on social issues

ThomasH September 12, 2013 at 5:31 pm

I think the “to the right of Reagan” refers to the Federal spending and employment and the speed of deficit reduction, even in the face of a weak recovery from recession.

ChacoKevy September 12, 2013 at 6:08 pm

Foosion is hardly the first person to suggest Obama’s conservatism:
http://www.thefiscaltimes.com/Columns/2011/07/22/Barack-Obama-The-Democrats-Richard-Nixon

The money quote is in the last line.

Careless September 14, 2013 at 8:47 pm

The first thing that I notice on that page is a real howler
He caved to conservative demands that the Bush tax cuts be extended without getting any quid pro quo whatsoever;

Nothing at all, except for his major campaign promise to extend them

And it looks like the rest of it is similarly horrid quality.

mulp September 12, 2013 at 11:51 pm

Well, either that, or Reagan was acting for most of his presidency and reading lots of liberal speeches his leftist speech writers had written to make him more acceptable to the public.

For example his prepared statement before signing the tax and spend bill that more than doubled the gas tax.
http://www.reagan.utexas.edu/archives/speeches/1983/10683a.htm

To quote an bit: “The money for today’s improvements will come from increasing the gas tax, or the highway user fee, by the equivalent of a nickel a gallon — about $30 a year for most motorists.

The repairs and construction are expected to stimulate about 170,000 jobs, with an additional 150,000 jobs created in related industries. Another provision in this bill adds up to 6 weeks of unemployment benefits for people who have used up all their unemployment insurance. Such badly needed assistance will put more than half a billion dollars into the pockets of family budgets of our long-term unemployed.”

Sound familiar to what Obama keeps saying??

Note the unemployment was at 10.8% at the time Reagan signed this tax and spend stimulus bill.

Three months later he signed the hike to FICA taxes:
http://www.reagan.utexas.edu/archives/speeches/1983/42083a.htm

“This bill demonstrates for all time our nation’s ironclad commitment to social security. It assures the elderly that America will always keep the promises made in troubled times a half a century ago. It assures those who are still working that they, too, have a pact with the future. From this day forward, they have one pledge that they will get their fair share of benefits when they retire.”

“It was nearly 50 years ago when, under the leadership of Franklin Delano Roosevelt, the American people reached a great turning point, setting up the social security system. F. D. R. spoke then of an era of startling industrial changes that tended more and more to make life insecure. It was his belief that the system can furnish only a base upon which each one of our citizens may build his individual security through his own individual efforts. Today we reaffirm Franklin Roosevelt’s commitment that social security must always provide a secure and stable base so that older Americans may live in dignity.”

And from the end of WWII until Reagan, the Federal debt burden had been only been going down, and since Reagan the debt burden has only gone up as borrow and spend has become the Republican fiscal policy.

GW Bush was more Reagan than Reagan when it came to the deficit – starting with balanced budgets and the prospect of there never being another debt limit battle, Bush enshrined constant debt limit crisis into Congress whenever the Republicans lost the White House.

Democrats were more correctly spend and tax. Republicans were the grinches because they were tax and spend, putting all the focus on the sacrifice. But Reagan institutionalized borrow and spend because that is a free lunch. What angers Tea Party Republicans most about Obamacare is its tax and spend – taxes come first and then the spending – very pre-Reagan Republican.

JWatts September 13, 2013 at 10:22 am

Three months later he signed the hike to FICA taxes:

So our you saying the Left is in favor of raising FICA taxes?

John Thacker September 12, 2013 at 3:46 pm

The ways that Obama is most notably “far to the right of Reagan” are all things where Woodrow Wilson was “far to the right of Reagan.”

Z September 12, 2013 at 3:53 pm

I’m going to assume this is a gag post and Tim is not posting from an asylum. Well done.

Tim September 12, 2013 at 5:00 pm

Thanks! I enjoy your comedic blog as well!

Hazel Meade September 13, 2013 at 1:14 pm

Awesome, can we start telling progressives that Reagan was a socialist because he supported LGBT rights in 1980?

Also Obama’s clearly a capitalist stooge because he wants to bomb Syria.

It’s so fun when we can just pretend social and economic issues are inseparable. Like there’s some sort of direct link between LGBT rights and single-payer healthcare. Or between the UN convention on torture and peace activism.

Dan in Philly September 12, 2013 at 2:15 pm

So what you’re saying is…. popular opinion is wrong?

Z September 12, 2013 at 2:17 pm

I’m always skeptical about these things. Every few years someone does a poll on something nuts like the existence of big foot or space aliens and comes back with w result that indicates mass stupidity. That said, if you randomly tested people under the age of 50 on the basics of Medicare, Medicaid and Social Security, they would fail and fail badly. Do the same exam on things like payroll taxes and employer provided health insurance and the results would be similar.

These programs are complex and obscure by design. Go back and read Progressive pundits from the early 20th and you will find many arguments in favor of obscurity in order to make them more palatable. We have close to a century of deliberate, systematic dissemination of false and misleading information from our rulers. No one should be surprised to find out it has worked.

ThomasH September 12, 2013 at 5:34 pm

It’s just the Republican base trying not to recognize they are on welfare.

kpres September 13, 2013 at 7:17 pm

Not quite. According to this 63% of welfare recipients are Democrats vs. only 22% for Republicans…..http://super-economy.blogspot.com/2012/02/do-welfare-recipients-mostly-vote.html

Finch September 12, 2013 at 2:21 pm

You know what the problem is? The frickin MR comment lag is the problem.

It’s bad enough that you make a comment and it takes forever to get posted, but all the comments from everyone seem to post in laggy batches. This would be fine if I came here to read the OP, but the most interesting thing about MR is the comment thread that follows each wacky vaguely-economics-related OP. If commenting doesn’t work right, it significantly reduces the value of the site.

I can’t believe you’d blow up MR in response to spammers, so I imagine the problem is difficult to run down, like some sort of caching issue outside your immediate control. Can you at least post to acknowledge you’re working on it so we can have some confidence this will eventually end?

Paul September 12, 2013 at 3:31 pm

I thought it was just me. Whew. Now I know what the problem is.

Z September 12, 2013 at 3:55 pm

I think all comments are moderated manually and Tyler checks in a few times a day to do it. That would be my guess.

lxm September 12, 2013 at 4:19 pm

I always assumed it was an unpaid intern or minimally paid graduate student who had that duty. They really should consider working for Walmart.

When I ran websites, I got some of my best comments from trolls from Russia and Indonesia and other places that I didn’t even know where they were. So you do have to be careful. You just don’t want to eliminate all trolls.

Just joking. It’s a PIA to moderate a site like this.

Finch September 12, 2013 at 5:46 pm

I’ve seen differences in the update level of the site when I look on my computer and on my smartphone. For example, right now updating on my PC shows 20 comments and updating on my smartphone shows 27.

So it’s not comment moderation.

AndrewL September 12, 2013 at 7:54 pm

It Wordpress. It is aggressively caching the comments, perhaps too aggressively. Try to reload the page in Internet explorer or another browser. then you will see the new comments, but dosn’t work all the time.

When this blog is under heavy load, i think it caches more aggressively.

prior_approval September 13, 2013 at 6:22 am

‘It is aggressively caching the comments’

Possibly – but my money is on the new style of spam that appeared several week ago.

Dan Weber September 16, 2013 at 9:42 am

Go to the url and add “?dklfj3″ after “.html” and you will get a fresh page. Change those letters each time to get the latest.

This is definitely a hack. Who wants a greasemonkey script for it?

Finch September 16, 2013 at 5:23 pm

Thank you Dan Weber.

prior_approval September 13, 2013 at 6:21 am

I assume it is a new variety of not exactly sophiscated, but very effective, spam – something I noted when it first appeared a few weeks ago, and essentially impossible to filter automatically. And since this site used to use automatic filters to handle the unavoidable flood of comment span (actually, it occurred at a very poor time – during both the traditional GMU summer break and while Prof. Cowen was travelling – a fact that has become a real problem), this is, hopefully, just a work around.

Though in an age of algorithm driven advantage taking, this problem may not be possible to resolve without exploiting human labor, and it attendant disadvantages.

Hazel Meade September 13, 2013 at 1:17 pm

Just switch to disqus like everyone else. Or make people register their account.

Finch September 12, 2013 at 2:22 pm

You know what the problem is? The frickin MR comment lag is the problem.

It’s bad enough that you make a comment and it takes forever to get posted, but all the comments from everyone seem to post in laggy batches. This would be fine if I came here to read the OP, but the most interesting thing about MR is the comment thread that follows each wacky vaguely-economics-related OP. If commenting doesn’t work right, it significantly reduces the value of the site.

I can’t believe you’d blow up MR in response to spammers, so I imagine the problem is difficult to run down, like some sort of caching issue outside your immediate control. Can you at least post to acknowledge you’re working on it so we can have some confidence this will eventually end?

This would be funny if it wasn’t so sad: I’ve tried posting this and gotten the “duplicate comment detected” error message for the first thing I’ve posted all day… This may appear twice.

n September 12, 2013 at 2:33 pm

Could the problem be that the costs in the past were more representative of the true cost of healthcare while the current costs are out of control due to middlemen and churn and compliance? So maybe they did fairly prepay but they didn’t pay for the spike in churn and middlemen.

http://content.time.com/time/magazine/article/0,9171,2136864,00.html

Additionally, today’s costs may be higher because we can treat more conditions. Physical therapy for toddlers, speech pathology, gender reassignment, impotence, etc.

John Thacker September 12, 2013 at 3:47 pm

Additionally, today’s costs may be higher because we can treat more conditions.

Certainly seems plausible, but do note that means that they didn’t exactly “fairly prepay.” Unless you’re planning to restrict them to the healthcare available at the time that they prepaid. (Which also, I suppose, would include semiprivate rooms instead of private.)

JWatts September 13, 2013 at 10:28 am

Which also, I suppose, would include semiprivate rooms instead of private.

Or even Wards? Something you don’t see except in old TV shows at this point.

Greg September 12, 2013 at 5:37 pm

Wait, wait, wait. You do understand the post is about Medicare, right? And that the Time article, and all that stuff about billed charges and middlemen does not apply to Medicare? That Medicare does not pay billed charges? That one clear benefit of Medicare – whatever its other faults – is low administrative overhead (i.e., no middlemen)?

As for the “more conditions” that are now treated (physical therapy for toddlers, gender reassignment), again you understand we are talking about Medicare, right? Do you understand who is covered by Medicare? You know, old people (who, are not in general, considered to be toddlers, and who I would think are not high demanders of gender reassignment). Yes, Medicare also covers people of any age with ESRD, but there are not a lot of toddlers in that group either.

JWatts September 13, 2013 at 10:32 am

That Medicare does not pay billed charges?

Medicare pays a standard rate per procedure, I’m not sure why you would not consider that a “billed charge”. The hospital or doctor performs a procedure and submits it to Medicare for reimbursement. Ergo, they submitted a bill.

Ilya September 12, 2013 at 2:59 pm

* on average pay about $1 for every $3
* most Medicare recipients get benefits worth about the same

Both of these statements can be true at the same time if the distribution of benefits is highly uneven.

John Thacker September 12, 2013 at 3:56 pm

Well, it depends on whether you mean “get benefits” in the sense of “get insurance that is worth a certain actuarial value” or “get payouts from their company.”

Note that with most insurance you want most people to “get payouts” that are much lower than their premiums (otherwise it’s not insurance, merely pre-paying a third party), so actuaries would argue that it’s a weird way to look at it– but it may be the way that most people are responding. (I suppose that they’d also say that “most homeowners “get benefits” worth a lot less than they pay for their homeowners’ insurance, flood insurance, etc.)

At the population level these things converge, naturally.

Dangerman September 12, 2013 at 6:20 pm

Which it is.

“the costliest 5 percent account for 38 percent [of Medicare spending.”

http://www.hhnmag.com/hhnmag/jsp/articledisplay.jsp?dcrpath=HHNMAG/Article/data/11NOV2012/1112HHN_Coverstory&domain=HHNMAG

Which would entirely explain the alleged “disparity” from the article, making the point about reform moot.

The way to reform Medicare isn’t to cut the median benefits, it’s to fire up the death panels for the most expensive ~5%.

John Thacker September 12, 2013 at 10:37 pm

That would be reducing the median benefits. The value of *insurance* isn’t that it pays for routine cheap costs, it’s that it protects you against low probability expensive events. Reducing the benefits for people who have the most expensive catastrophic bad luck would reduce the median benefits, because that’s what the ordinary person should care about.

That “costliest 5 percent” is not, according to that article, the same people every year. People move into and out of the costliest 5 percent, although granted some people have chronic but not terminal conditions.

mulp September 13, 2013 at 12:20 am

Property insurers mandate you spend on prevention or they won’t insure you. Most of the insurer mandated spending they hide in government dictates. For example, insurers mandate you spend money on electrical wiring and devices that meet their approval, and this is enforced by government in the building codes and product safety laws.

Insurers could mandate you see a doctor periodically at your expense and follow his instructions at your expense, or else they will hike your premiums by some amount that in some cases will be more than the mandated costs and in other cases less than the mandate.

For example, if you won’t see a doctor for $200 a year, then the insurer will assume you have high blood pressure and diabetes that you are not treating and will then increase your premium $1000 a year in expectation you will have a stroke or heart attack or coma at a cost of $50,000 with 2% probability. Seeing the doctor and taking the drugs might cost you $500 or maybe $1500, but the probability of the big bill falls significantly.

But insurers would want to prevent fraud where you have an incentive to lie to the insurer that you have done the required preventative, so like property insurance, they would make government mandate the prevention, like with building codes.

John Thacker September 13, 2013 at 8:55 am

There’s already some movement in that area with private insurance, though usually it’s phrased as a “discount” or reward for doing those things, rather than as a penalty, for psychological reasons. However, Medicare isn’t doing anything like that.

However, the problem is that compliance is much, much harder than it seems, especially for the common disease of diabetes that you mention. The personal health costs are already very high to people if they don’t comply with their treatment regimen, yet people still do a very bad job since compliance is difficult. I’m not sure that financial penalties would raise compliance all that much, nor would a mandate cause people to take and check their insulin regularly if they’re not doing it. It’s an every day thing.

JWatts September 13, 2013 at 10:37 am

The way to reform Medicare isn’t to cut the median benefits, it’s to fire up the death panels for the most expensive ~5%.

Reducing the benefits for people who have the most expensive catastrophic bad luck would reduce the median benefits.

That would be reducing the mean benefits. Sharply reducing benefits to the most expensive 5% wouldn’t have any affect on the median beneficiary. (other than making sure there is enough money to pay their bill, of course)

John Thacker September 13, 2013 at 12:59 pm

That would be reducing the mean benefits.

Nope, it would be reducing the median benefits, from the perspective of someone currently healthy. If I am just turning 65 and have median health, then the most important part of my benefits is the protection against catastrophic events. In my way of thinking, if you reduce the level of the catastrophic events, you’re reducing the protection of everybody from the point of view of the present uncertainty, even if only a few people will need that protection retrospectively.

The whole point of insurance is that you don’t know a priori who will suffer bad events. Reducing the payout in the case of catastrophe reduces your benefits from the viewpoint of the uncertain here and now, which is IMHO the correct way to look at it.

JWatts September 13, 2013 at 2:40 pm

Nope, it would be reducing the median benefits, from the perspective of someone currently healthy.

I don’t follow you. From your point of view, can you give me an example of reducing the mean benefits of Medicare?

Jimbino September 12, 2013 at 9:39 pm

Medicare qualifiers who retire overseas get NOTHING back for all the Medicare FICA taxes they’ve paid for 45 years. Obamacare will be even worse: Amerikans traveling overseas will be liable for income taxes on even foreign earnings, will be liable to enroll in Obamacare or pay a tax penalty, but will NOT get any Obamacare while backpacking, climbing Everest or sailing around the world.

JPF311 September 12, 2013 at 11:55 pm

Depending on the plan and on laws in various foreign countries American health insurance (AKA “Obamacare”) may or may not be valid when one is traveling out of the country. In most of North America it generally is.
Please do not spread disinformation to the contrary. Anyone planning a foreign trip should check with their insurer and perhaps with a foreign consulate of a country they plan to visit to learn the exact details.

mulp September 12, 2013 at 11:57 pm

Actually, it depends on the policy you buy it you buy a policy in the US. One of the Medicare supplemental policies covers overseas medical expenses.

And I’m sure that if you live in Europe or Asia where you are mandated to buy health insurance, that will meet the requirement for being covered under Obamacare – those policies are more comprehensive and mandatory than Obamacare is.

Jimbino September 13, 2013 at 11:23 am

If you are an Ameikan resident overseas, you are free of Obamacare obligations. Insurance is not mandatory in Germany; I was “freiwillig (un)versichert” when I lived and worked there. An independent contractor is also free to go “bare.”

As far as Medicare availability in in North America (http://tripinsurancestore.com/medicare-does-not-cover-you-outside-the-usa/) :

“In rare cases, Medicare can pay for inpatient hospital services that you get in Canada or Mexico. Medicare can pay only if:

You are in the United States when a medical emergency occurs and the Canadian or Mexican hospital is closer than the nearest U.S. hospital that can treat the emergency.

You are traveling through Canada without unreasonable delay by the most direct route between Alaska and another state when a medical emergency occurs and the Canadian hospital is closer than the nearest U.S. hospital that can treat the emergency.

You live in the United States and the Canadian or Mexican hospital is closer to your home than the nearest U.S. hospital that can treat your medical condition, regardless of whether an emergency exists.”

As far as I know, the only plan to make Medicare available overseas through special arrangement with retirees living in Lake Chapala, Guadalajara is on hold.

comment lag fan September 12, 2013 at 10:30 pm

I like the comment lag,
It reminds people that the comments section of even this very interesting blog is like the box seats at a baseball game with a 2 hour rain delay after the middle of the fifth, home team leading.
Trivializing accusations are kept more singular.
Also no blog nowhere anytime should be in real time when said blog is focused on a real world which also unfolds in real time.
My substance comment on this post is this – if sprezzatura, the idea of
doing things for the merit and the worthiness of the thing, rather than for the recorded benefits, were a bigger concept in economics, the fact that a majority of every group in the United States would fail a test on medicare reality – with the exception of the particular groups of academic or government or lobbyist specialists – would be inconsequential. I for one do not care at all if the losers in life with respect to the biological lottery of pain and sickness get more access than we (first person plural pronoun inserted here, because I am definitely in the bottom half of that assortment, probably in the bottom third) paid for to a random assortment of good and indifferent medical experts and their licensed products. And if my kid grew up to be a Medicare scammer my first, second and third emotions would be closer to intense pity than fault-finding.

Claude Emer September 12, 2013 at 10:56 pm

How do you feel about the losers in life with respect to the education, wealth, race lotteries?

Therapsid September 13, 2013 at 12:52 am

Claude – he pretty much made his feeling on that clear. There’s no reason it would be any different than his feeling on the fate of the biological lottery losers of pain and sickness.

comment lag fan September 13, 2013 at 1:08 am

Good question, and if my previous comment in any way appeared to condone cheating, it was to that extent badly expressed. My perspective is that, assuming a certain level of quality of life (which in several dozen countries, fortunately none of them mine, is generally not available to losers in the lotteries mentioned by you and me) you have to assume that you can build a decent life even if you are going to be, as is statistically likely, to the left of the bell curve in several important “advantage markets-lotteries”, and even if you wind up to the right in every one of them your wife may still leave you because you are boring (which happened to my second favorite president and to several actors who look like uberfortunate versions of me) or you may fall in love in turn with a fetching loser in each of the lotteries mentioned and be rejected each time (or, like Solomon in his later years, not be rejected where you would be better off without the romantic victory).

Ray September 14, 2013 at 4:31 am

Small (extreme, and highly unrealistic) exercise:

1. 100 people are asked in the survey.
2. Each person paid $50.00 in premiums, risk-free & inflation adjusted.
3. 25 people have claimed. This implies a hit ratio of 25%, which is high for international private health insurance, where I work; I expect it’s too low for Medicare.
4. 22 of the 25 claimants have $40.00 in claims. The remaining claimants are near end of life, and each has claimed 50x his or her premiums with a 25% case discount negotiated, for a total rate of $2,000.00.

Total claims = $2,000 * 3 + 22 * 40.00 = $6,880
Total premiums = $5,000

Altogether the portfolio is in catastrophic shape, but *individually*, a person would be right to say he or she has paid less than he or she receives in “benefits”. Recasting the situation, a newspaper-person could write the following about this block:

When asked, 97% of people claim to have paid more in salary contributions than received in benefits, even though, on average, Medicare beneficiaries receive $1.38 in benefits for every $1.00 in contributions.

This is just to show that, numerically, unless you think people should be thinking in terms of conditional expected values, which is a bit strong, people don’t have to be stupid to respond as such. Insurance is bizarre, and it has a lot of asymmetries which make crucial, when doing averages or other summary statistics, the distinction between portfolio & customer.

Rick Caird September 14, 2013 at 6:45 pm

I wonder if these calculations are inflation adjusted or nominal. I also wonder what would happen if the contributions were adjusted for some reasonable investment growth amount. While I realize Medicare, like Social Security, is pay as you go, to those of us who have been taxed since 1968, it is prepaid health insurance and funded over 40 years. Couple that with the monthly premium and the 20% copays and I would not be surprised if it turned out to be a loser to those of us who have paid into the fund for 40 years.

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