Most Medicare recipients receive far more in benefits than they “pre-pay” through payroll taxes. Far too few Americans understand this simple truth, with the result that too many Americans think politicians have no business cutting “my Medicare.” Even though much vitriol of late has been directed at Social Security, Medicare is arguably far more of a Ponzi scheme than Social Security ever was.
The payroll taxes used to finance Part A Medicare benefits (hospital, nursing home, home health, and hospice care) don’t finance the rest of Medicare (physician and other outpatient services, pharmaceuticals, durable medical equipment, and preventive services). So over a lifetime, Medicare beneficiaries typically receive two to six dollars in benefits for every dollar they paid in Medicare payroll taxes (figure 5.6a).
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