MEDICARE FROM THE PERSPECTIVE OF GENERATIONAL ACCOUNTING: Baseline U.S. Generational Accounts 4

Medicare and U.S. Generational Accounts Tables 1 and 2 break down the generational accounts of current generations into their various tax and transfer components. The tax components are labor income taxes, capital income taxes, payroll taxes, and excise taxes. The transfer components are OASDI (Social Security), Medicare, Medicaid, and Welfare. The Welfare category includes all non OASDI, Medicare, and Medicaid transfers.

Tax PaymentsTransfer Receipts
LaborCapital
Age inNet TaxIncomeIncomePayrollExciseOASDIMedicareMedicaidWelfare
1995PaymentTaxesTaxesTaxesTaxes
077.433.59.034.331.57.24.714.94.2
595.741.611.242.836.68.85.716.75.2
10119.552.114.353.942.510.67.219.16.5
15149.165.118.167.848.612.18.821.58.1
20182.279.523.583.653.413.710.923.59.7
25196.286.027.990.653.516.412.722.710.1
30196.886.333.790.252.719.915.021.59.8
35189.082.940.786.051.424.617.820.49.2
40171.276.046.678.650.430.821.619.38.7
45139.265.150.267.447.738.826.118.28.1
5093.750.851.352.943.749.331.616.57.6
5537.534.649.736.338.762.837.414.67.0
60-25.518.646.319.532.980.143.912.66.3
65-77.77.441.27.527.591.853.310.65.7
70-89.23.233.03.322.285.051.69.35.1
75-87.91.622.41.716.971.746.18.54.2
80-77.2.911.21.011.954.837.46.93.1
85-68.3.7.0.78.042.626.86.12.1
90-53.8.5.0.56.333.721.14.71.7
TaxPaymentsTransferReceipts
LaborCapital
Age inNet TaxIncomeIncomePayrollExciseOASDIMedicareMedicaid Welfare
1995PaymentTaxesTaxesTaxesTaxes
051.919.49.520.930.46.85.09.86.8
563.424.111.926.135.28.36.110.88.5
1078.130.215.132.940.510.07.712.310.6
1595.737.719.341.345.611.39.513.913.5
20115.045.724.850.749.812.711.714.916.8
25122.648.130.353.750.415.313.715.215.7
30120.746.236.251.650.118.616.115.613.2
35113.842.842.347.949.823.019.116.110.8
4099.038.246.343.048.628.822.916.78.7
4572.831.647.735.746.236.527.517.57.0
5037.423.646.826.942.346.933.116.55.6
55-5.215.044.817.237.660.639.215.34.8
60-52.07.641.68.732.478.645.414.14.2
65-91.22.735.63.127.189.353.712.83.8
70-101.01.025.31.222.283.451.812.13.4
75-101.0.514.1.616.971.646.711.82.9
80-90.2.35.3.312.457.238.710.12.4
85-73.5.1.0.19.443.528.49.41.9
90-55.8.1.0.17.233.221.57.01.5

Medicare is clearly a very important transfer component. Indeed, for most generations, it represents the second largest transfer component after Social Security benefits. Take 70-year-olds. The present value of the projected Medicare transfer to males in this age group is $51,600. For equally aged females, it’s $51,800. This is about five eighths of the corresponding Social Security transfer. It’s also over four times larger than the corresponding Medicaid transfer. Since the generational accounts of 70-year-old males and females are -$89,200 and -$101,000, respectively, Medicare is responsible for more than half of the remaining lifetime net transfer being made to this cohort. Even though Medicare benefits are only available to disabled workers prior to age 65, the program’s net transfers loom quite large for young and middle-aged workers. Take 45-year-olds. Their protected Medicare transfer exceeds $25,000 in present value. These transfers, in conjunction with the Social Security transfer, exceed the present value of the generation’s projected future payroll taxes; i.e., this generation has a larger stake in maintaining the pay-as-you-go financed Social Security and Medicare programs than it does in eliminating them. More info