Register letter regarding Medicare taxes paid in is wrong.

The letter to the editor in the Des Moines Register from John Hyde on 8/31/2011 (Medicare problem is mismanagement) contained a math error. If a person earned $45,000 every year beginning 1969 through 2011 and paid the maximum Medicare tax, including the employer match, and compounded it annually, using the 10-year treasury interest rate each year, assuming each annual amount was paid in at the beginning of the year, the ending compounded total would be $128,124 – still far below the average lifetime benefit payout of $188,000 . Note: Before 1988 the Maximum taxable wages subject to Medicare was less than $45,000, and before 1986, the tax rates were also lower.

Medicare is not sustainable in its current form. Currently, Medicare is a Ponzi scheme. The early beneficiaries’ benefits are paid for using the taxes collected from future beneficiaries. Soon, there will not be enough money to pay the full benefits that are promised today. If a private business did this, the people responsible would go to jail.

We need to continue to raise the retirement age for Social Security and Medicare, and require Medicare beneficiaries to pay some significant amount out of their own pocket each time they incur a cost. That way, individuals would decide whether or not the cost of any given product or service is worth the benefits. It would also encourage people to be aware of costs and to try to reduce costs. Today, there really is no financial incentive for beneficiaries to reduce costs.

Here is the link to the original letter in the Register:

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