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What's the 75th percentile of income for the age 65+ population? The current higher Medicare premiums (starting at incomes of $85,000/yr.) only affect the Top 5% of retirees (95th percentile).

http://www.washingtonpost.com/politics/health_care/over-time...

More importantly, due to the creeping effects of inflation, 20 million Medicare beneficiaries would end up paying higher “income related” premiums for their outpatient and prescription coverage over time.

Administration officials say Obama’s proposal will help improve the financial stability of Medicare by reducing taxpayer subsidies for retirees who can afford to pay a bigger share of costs. Congressional Republicans agree with the president on this one, making it highly likely the idea will become law if there’s a budget deal this year.

</snip>


intercst
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Yep! I paid in way more than the average worker during my working career, and the exact year I reached 65 and qualified for Medicare, the higher rates for those with higher AGI's went into effect.

I now pay roughly triple the normal Medicare rates, due to the installment sale proceeds from the sale of a business I sacrificed and lived small for many years to build and make successful.

Play by the rules, work hard,....and your reward is subsidizing others to deliver promises the politicians of both parties made to buy votes ( knowing the promises could not possibly be kept without changing the rules...but that they would have cashed out and be gone by the time the bills came due ).

Cheers!
Murph
Home Fool
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I now pay roughly triple the normal Medicare rates, due to the installment sale proceeds from the sale of a business

So will you be paying the higher premium only for a limited time until the payments are done?

I've been on partial food stamps (when I had an infant and toddler and my ex lost his job and didn't find another for several months). I would rather not qualify for food stamps. Or low Medicare premiums, come to that. However, not being in the top 5%, we will qualify for 95%ile Medicare premiums when we turn 65 next year. Wanna trade?

As Mama used to say, don't complain about a lot of taxes, it means you made a lot of money. Of course, that was before anyone heard of Mitt Romney =8~0

promises the politicians of both parties made to buy votes

It isn't possible that some politicians care to prevent the elder poverty and lack of medical care that were common before Social Security and Medicare?
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Well, where to start....

First, of all, I don't respond to strawman arguments ( "wanna trade").

Second of all, if my paying 3 times the normal cost of Medicare is a "tax", why isn't it called that?

Third, I deliberately planned to take Social Security at age 70 when the installment payments stop, so that and other interest/dividends will make me only pay two times normal.

Fourth, as to politicians, if they REALLY cared about the elderly poor, etc., they wouldn't write checks with their mouths that they KNOW can't be cashed....even if "the rich" are taxed at 100%.

Fact: I and my employers paid in over $65,000 to Medicare since 1966. If one calculates the time value of that money until today, I could have purchased private insurance superior to Medicare at age 65...and still had plenty to give to numerous charities.

I'm done on this.

Cheers!
Murph
Home Fool
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Sincerely, I didn't mean to drive you off, Murph :-( I'm happy to have a new voice here. "Wanna trade" was supposed to be funny, not a strawman argument (but I've been known to get humor wrong before-).

I could have purchased private insurance superior to Medicare at age 65

I was only 16 when Medicare was started in 1965, so I looked up health insurance for over 65s before then. Hard info to find, but here's something from the history section of the wikipedia article on Medicare:

"Before Medicare's creation, only half of older adults had health insurance, with coverage often unavailable or unaffordable to the other half, because older adults had half as much income as younger people and paid nearly three times as much for health insurance. Medicare also spurred the racial integration of thousands of waiting rooms, hospital floors, and physician practices by making payments to health care providers conditional on desegregation"

I should think premiums would be phenomenally expensive for seniors today, what with our very expensive treatments for cancer, transplants and heart surgery, etc. developed since 1965. Out of reach for way more than half of seniors I should think.
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if my paying 3 times the normal cost of Medicare is a "tax", why isn't it called that?

Because if it were called a 'tax' instead of 'means-testing', then all of those politicians who proclaim they are against tax increases could not have voted for it.

AJ
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Well, like they say, alstoemeria, the vast majority of communication is tone of voice/body language, etc...not the content....so, no harm, no foul. ;-)

As to this thought:

I should think premiums would be phenomenally expensive for seniors today, what with our very expensive treatments for cancer, transplants and heart surgery, etc. developed since 1965. Out of reach for way more than half of seniors I should think.

No doubt about it, but in my particular case, the premiums could be paid with money left over. Never doubt what Einstein said( or at least some attribute to him) about the awesome power of money compounding over time ( the $65 K spaced over 40+ years and easily returning an average of 7% annual compounded ).

There is no doubt that some people need help. There is no doubt that some people receiving help don't deserve it. The devil is in the details....details which the politicians talk about briefly ( especially when trying to justify the cost of some new program by "cutting waste and fraud" ), and then promptly do next to nothing about.

If I felt my direct tax dollars and my stealth tax dollars ( extra Medicare premiums, losses of deductions due to AGI, AMT, etc ) were being spent relatively wisely, I would be much more tolerant of the games politicians play; but in my lifetime ( and IMHO), the waste has only gotten worse, the sense of "entitlement" greater and the willingness to sacrifice in the short-term for a better long-term life has greatly diminished.

Sounding just like my Dad ( rest his soul ); must mean I've finally graduated to curmudgeon. ;-)

Cheers!
Murph
Home Fool
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in my particular case, the premiums could be paid with money left over.

In our particular case, assuming say $4,000 per senior per month, then nyet ;-) (er, this use of Russian is supposed to be funny as I expect I come across as some sort of communist to you///and that was supposed to be funny, too...oh, I give up!)

Why $4k? My healthy SIL was paying $2000/month for an individual policy when she was 64, my not so healthy brother cannot even get a policy when he offered $6k/month...eh, maybe $4k is too low?!

There is no doubt that some people receiving help don't deserve it

I can only guess what you mean, but since I love guessing games, I'll try...smokers? the obese? people who don't exercise? people who didn't "tithe" into retirement accounts starting with their first job? people who invested poorly (hello-)?

If I felt my direct tax dollars and my stealth tax dollars...were being spent relatively wisely, I would be much more tolerant of the games politicians play; but in my lifetime ( and IMHO), the waste has only gotten worse, the sense of "entitlement" greater and the willingness to sacrifice in the short-term for a better long-term life has greatly diminished.

I feel the same way about Pentagon spending. (And I kinda feel that way whenever I drive past the extensive projects in Spanish Harlem-)

Sounding just like my Dad ( rest his soul ); must mean I've finally graduated to curmudgeon. ;-)

I achieved my license to commit eccentricity on my 50th birthday.
.......

Oh, back to health insurance at age 65+ covering half of seniors before the establishment of Medicare. Lemme guess that most of the insured half had retiree health insurance as former executives or as workers at rust belt corporations and the government.

PS--Don't be a stranger around here!
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I should think premiums would be phenomenally expensive for seniors today, what with our very expensive treatments for cancer, transplants and heart surgery, etc. developed since 1965. Out of reach for way more than half of seniors I should think

more like most of us couldn't get insured at all


then
four choices:
ER and hope for the best
just die & get out of the way
bankrupt children
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I can only guess what you mean, but since I love guessing games, I'll try...smokers? the obese? people who don't exercise? people who didn't "tithe" into retirement accounts starting with their first job? people who invested poorly (hello-)?


all of the above? ie, Not me.
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In regards to the medicare premiums; I would like to point out seniors are getting a very good deal as they are paying only 25 to 35% of the cost of the program. The balance is subsidized by the taxpayer.

From the article. As a rule, taxpayers pay for 75 percent of Medicare’s outpatient and prescription benefits.
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No. of Recommendations: 33
TMFMurph writes,

I now pay roughly triple the normal Medicare rates, due to the installment sale proceeds from the sale of a business I sacrificed and lived small for many years to build and make successful.

</snip>


You do realize that even three times the "normal" Medicare premium of $99.90/month (about $3600/year) is only one-third of the $11,000 per beneficiary the Gov't spends on Medicare.

You're still getting a tremendous bargain.

intercst
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Hi intercst!

You are forgetting the extra premiums for Part D on top of the Part A "mean-testing" premiums.

In 2012, I paid almost $8000 for Medicare-related premiums....and let's NOT forget that I paid in a whole lot more than many for more than 40 years for the "same" insurance benefits at age 65+.

Put the two together and the "tremendous bargain" begins to disappear. ;-)

Your mileage may vary.

Cheers!
Murph
Home Fool
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TMFMurph writes,

You are forgetting the extra premiums for Part D on top of the Part A "mean-testing" premiums.

In 2012, I paid almost $8000 for Medicare-related premiums....and let's NOT forget that I paid in a whole lot more than many for more than 40 years for the "same" insurance benefits at age 65+.

Put the two together and the "tremendous bargain" begins to disappear. ;-)

</snip>


You're paying $3,600 for the Part B and $4,400 for Part D ???

The average Part D premium is only about $50/month. The most expensive plan available nationwide is $165/month -- about $2,000/yr. How did you end up paying double that?

http://www.q1medicare.com/PartD-MedicarePartDPlanStatisticsS...

intercst
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The average Part D premium is only about $50/month. The most expensive plan available nationwide is $165/month -- about $2,000/yr. How did you end up paying double that?

He works twice as hard as liberals.
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BenHurJudah analyzes,

<<The average Part D premium is only about $50/month. The most expensive plan available nationwide is $165/month -- about $2,000/yr. How did you end up paying double that?>>>

He works twice as hard as liberals.

</snip>


Must be twice as hard, and half as smart.

I've long maintained that many T-baggers are bad at math, but what right-wing email could you have acted on that left you paying more than double the maximum Part D premium in the nation?

intercst
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I now pay roughly triple the normal Medicare rates, due to the installment sale proceeds from the sale of a business I sacrificed and lived small for many years to build and make successful.

</snip>

You do realize that even three times the "normal" Medicare premium of $99.90/month (about $3600/year) is only one-third of the $11,000 per beneficiary the Gov't spends on Medicare.





2013 numbers are $104.5
about triple that ,$335.70 for income over $214K *

then. at that income an *extra* $66.6 for part-D

http://www.medicare.gov/Pubs/pdf/11579.pdf


* put another way: with an income of 25k (about average SS income ,iirc), you pay about 5% of that to Medicare;
at 220K, 1.8%
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You're paying $3,600 for the Part B and $4,400 for Part D ???

The average Part D premium is only about $50/month. The most expensive plan available nationwide is $165/month -- about $2,000/yr. How did you end up paying double that?


I'm guessing again here--a wife, who I'm also guessing earned little compared with him over the years so he pays for both of them? Or maybe some sort of gold-plated plan is available if you know where to look? He's also counting Part F (is that W's drug plan?)? Or copays???
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I paid in a whole lot more than many for more than 40 years for the "same" insurance benefits at age 65+

As a relatively wealthy retiree (top 5%--or better), you'll statistically live longer than most who made less than you did, so you might easily get more benefit from Medicare than others.

There are also more expenses for health care than insurance premiums. Those in worse health have more copays, deductibles, and other expenses (not to mention uncovered expenses like hearing aids and nursing home care). Not to mention those who cannot afford a Medicare supplemental policy.

Few Americans can afford to delay collecting SS until age 70, as you plan to. If you live beyond your break-even age, you'll receive many thousands more in SS benefits than average. (Wasn't it Monty Python who said "Always look on the bright side of life"?!)
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Hi intercst,

You are misundertanding what I said: " In 2012, I paid almost $8000 for Medicare-related premiums..."

Specifically:

              Monthly                   Annual

Part A Free 0
Part B $335.70 $4028.40
Part D-MC 66.60 799.20
Part D-Plan 76.30 915.60
M.Supplement 163.60 1963.20

TOTAL $642.20 $7706.40


The last time I looked, 7.7 rounds up to 8, so "almost $8000" seems accurate to me. ;-)

Cheers!
Murph
Home Fool
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...I've long maintained that many T-baggers are bad at math, but what right-wing email could you have acted on that left you paying more than double the maximum Part D premium in the nation?

Hi again, intercst.

I wish I had read this post before I posted my specific Medicare costs for 2012 in response to what I thought was an honest question. Now I see that the agenda here is to politicize things and call names...without the benefit of waiting for an answer/looking at facts.

If that's the way you want to roll here, fine by me....but, IMHO, life is too short to play those games.

Have a nice life.

Cheers!
Murph
Home Fool
( who notes that he blamed politicians of both parties in previous posts for the mess that Medicare is/will become )
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You do realize that even three times the "normal" Medicare premium of $99.90/month (about $3600/year) is only one-third of the $11,000 per beneficiary the Gov't spends on Medicare.

You're still getting a tremendous bargain.


Oh, before I leave...speaking of "bad math", this sentence totally ignores the $65,000 in Medicare payments made during my working career ( and all the money those contributions could have made during the last 40 years ) ;-)

Cheers!
Murph
Home Fool
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I went on Medicare the past December. I was surprised at all the rules and things that made figuring it out unnecessarily complex. I didn't even realize that Medicare Part B was means tested until I learned that I would have to pay a higher Part B premium and drug plan premium. My upward adjustment only moves me up one tier right now, so it's not too bad. Compared to what I had paid for my BCBS individual policy, it was a huge overall reduction. I was paying about $10K in annual premiums just for me, plus a $2.5K deductible, plus a $2K co-insurance, plus all the co-pays. A few years ago, I developed a serious heart issue, so I can count of paying the full deductible and co-insurance each year. So, for my last year before Medicare, I paid about $18K in total out of pocket medical costs for insurance and all the add-ons. Heck, my drug co-pays for the year were $150 per month, and all my drugs are generics. Anyway, getting on Medicare, even with the added premium for being in a higher income bracket, cost me about $12K less than I was paying for BCBS. My wife pays the same thing I did for BCBS, only she doesn't have any real health issues, so she just pays the BCBS base premium (this year about $11K), plus a little of her deductibe). When she goes on Medicare, we'll save another at least $5K per year. Bottom line: Medicare is a great deal. I don't mind paying a higher premium since we have a nice income in retirement, but I do mind paying the extra money when nobody in DC, either Dems or Repubs, know how to be financially responsible in way, shape, or form. I also don't like the fact that the government gives me no choice but to be in Medicare, when the entire plan right now is to reduce the availablility of quality health care to retirees and just about everyone else as their idea of how to keep cost down. Well, that's my two cents on this subject.
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let's NOT forget that I paid in a whole lot more than many for more than 40 years for the "same" insurance benefits at age 65+.

I don't know where to find it, but I would find it hard to believe that those who earn more, and thus pay more in Medicare Premiums during their earning years are much more likely to live old enough to take advantage of Medicare.

I could be wrong, but is it not true that those who earn less die earlier?

Thanks,
Mark
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I don't know where to find it, but I would find it hard to believe that those who earn more, and thus pay more in Medicare Premiums during their earning years are much more likely to live old enough to take advantage of Medicare.

I could be wrong, but is it not true that those who earn less die earlier?


Here's a working paper from the Social Security Administration that shows that for males born in 2 cohorts (1912 and 1941), the life expectancies for those in the top half of earners are, indeed, longer, with the 1941 difference being more prounounced. http://www.ssa.gov/policy/docs/workingpapers/wp108.html (See Chart 1)

The paper is actually focused on 'mortality improvement' and determined that higher earners have had a faster rate of 'mortality improvement' than lower earners.

AJ
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TMFMurph: "I and my employers paid in over $65,000 to Medicare since 1966. If one calculates the time value of that money until today, I could have purchased private insurance superior to Medicare at age 65...and still had plenty to give to numerous charities."

Several things.

Why do you assume that your employer would have paid the Medicare tax amount to you?

I have never located a separate statement of the Medicare tax rate before 1991, when the cap in earnings taxed for Medicate was raised above the earnings amount taxes for FICA. From 1966 through 1990, there was one combined tax rate and a single earned income cap. For 1991 through 1993, there was a separate earned income cap. Commencing with 1994 the earned income cap for Medicare has been unlimited.

In addiiton, I do not think that it is reasonable to project the 1.45% Medicare tax rate back to 1966 given that overal combined FICA and Medicare Rate was 4.2% in 1966 (on the first $6,600 of earned income) and did not reach the current 7.65% until 1990.

I am curious has to how you calculated "your" total payments to Medicare.

1.45%/7.65% is 19.95%; call it 20% to make the math easy for me.

Maximum combined FICA AND MEDICARE tax for 1966 was 277.20.

20% of that amount is $55.44

$55.44 compounded at 7% for 40 years is $830.18, which I doubt (WAG) would have paid one month of the FMV price of a policy to insure you at age 65.

Maximum amount of FICA AND MEDICARE tax for 1990 was $3,924.45

20% of that amount is $784.90.

$784.90 compounded at 7% for for 16 years is $2,317.15, which is probably not more than two months of the FMV price (WAG) of a policy to insure you at age 65.

SWAG, the Medicare payments for 25 years from 1966 through 1990 would perhaps purchase maybe 40 months of FMV insurance. Call it 48 months, or 2 year of insurance for you and your spouse.

Now perhaps once the Medicare income limit was raised, or the cap eliminated entirely, you had a big earned income and paid huge amounts of taxes, but compounding since 1991 (higher cap) or since 1994 (uncapped) is a considerably shorter compounding period then since 1966.

And I wonder how much the FMV cost of a policy would be increased for a 65 year olf as they age each year?

I am not nearly as sanguine that you could have purchased a policy superior to Medicare for the balance of your life (and yoru spouse's life) and still had plenty to give to numerous charities.

I also note that any giving to charity prior to your death would be decreasing the amount available to compound to support the policy costs.

Regards, JAFO
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Hi JAFO,

Why do you assume that your employer would have paid the Medicare tax amount to you?
It doesn't matter whether they would or would not have, they had no opportunity to make that decision. If the funds were tehre (not only for the specified employer, but every other potential employer,) then our Fool could have competitively pressed for compensation to meet his value, and if the specified employer would have refused to compete with the overage, others would have had the opportunity to do so.

As it is, our Fool and his employer (and all other employers desiring his quality of service) were denied their freedom to negotiate a fair employment agreement including the selection of preferred medical insurance coverage. they were all forced to pay for inferior mandatory coverage.

Dave
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Hi JAFO!

Why do you assume that your employer would have paid the Medicare tax amount to you?

Because, in the end, every employer looks at the total cost of an employee...and to get good help, pays what the market demands. My assumption is that my employer would have paid me a slightly higher salary if the employer side of the Medicare tax did not exist. Your ( assumption) mileage may vary.


I am curious has to how you calculated "your" total payments to Medicare.

I got them off my annual Social Security statement.


As to your detailed calculation, well, the problem with averages and generalities is that they do not exist. In my specific case, my income over 40 years was quite "lumpy"....especially after 1990....and yes, I did have some large income after that date. More than that level of detail, I don't feel inclined to disclose on a public forum.

Cheers!
Murph
Home Fool
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TMFMurph writes,

You do realize that even three times the "normal" Medicare premium of $99.90/month (about $3600/year) is only one-third of the $11,000 per beneficiary the Gov't spends on Medicare.

You're still getting a tremendous bargain.

Oh, before I leave...speaking of "bad math", this sentence totally ignores the $65,000 in Medicare payments made during my working career ( and all the money those contributions could have made during the last 40 years ) ;-)

</snip>


Assuming you retired in 2012, paid maximum FICA in each of the preceding 35 years, and got a 10% return on your annual Medicare FICA contributions, your $65,000 would have grown to $173,000. Of course, while a savvy investor might have realized a 10% return, the average person only got 2.1% annualized over the past 20 years according to DALBAR. At that rate, $65,000 only grows to $87,000.

http://www.thestreet.com/story/11621555/1/average-investor-2...

A lump sum of $173,000 will only buy a 65-year-old an inflation-adjusted annuity of about $600/month ($7,200/year) I wasn't able to find a policy on ehealthinsurance.com with Medicare's $100 annual deductible. The best I could do was $1200/month ($14,400/year) for a $1,000 deductible plan for a 64-year old. And of course, your for-profit private insurer will want to increase that with age. What would they charge for a 75-year-old, an 85-year-old? Double? Triple?

Hard to see how you could do better on your own.

intercst
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Because, in the end, every employer looks at the total cost of an employee...and to get good help, pays what the market demands. My assumption is that my employer would have paid me a slightly higher salary if the employer side of the Medicare tax did not exist. Your ( assumption) mileage may vary.

I hear that argument from time to time and it makes very little sense to me. I agree that compensation is mostly set by supply and demand. I've never heard of wages being set by the employer's available cash. Bonuses sometimes, but not wages. Wal-Mart is one of the most profitable companies in the world, and four of the ten richest people in America are named Walton. Yet most people at Wal-Mart make minimum wage. Wal-Mart is also the largest private employer in the county. IIRC, McDonald's is number two private employer, and same thing there.

See also:

http://tcf.org/blog/detail/graph-corporate-profits-rise-to-n...

and

http://econographics.wordpress.com/2013/03/05/corporate-prof...

I've simply never heard of employers overpaying employees if the company has extra money. There might be isolated incidents where it has happened, but it is certainly not standard practice.
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Of course, while a savvy investor might have realized a 10% return, the average person only got 2.1% annualized over the past 20 years according to DALBAR. At that rate, $65,000 only grows to $87,000.


but we're talking TMF/Fool, so 'average' is irrelevant... have to go at least with 'savvy', probably 'very savvy'

and at 10%, that 65k grows to 440K ... might be enough to pay for-profit insurer ... if you don't have any serious health issues
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I've simply never heard of employers overpaying employees if the company has extra money. There might be isolated incidents where it has happened, but it is certainly not standard practice.



but you're also talking about 'average' -- not relevant here.

employees with unique, special skills and experience can negotiate for higher pay

think CEOs, TomCruise, NFL quarterbacks ....



[not something i could ever do.
my whole working life: choices were
This HERE job, or
unemployed for god knows how long
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Oh, before I leave...speaking of "bad math", this sentence totally ignores the $65,000 in Medicare payments made during my working career ( and all the money those contributions could have made during the last 40 years

Let's address that one. It's coming from a highly distorted view of Medicare (and Social Security).

All that money you paid in over the years did not go into some kind of an account for your retirement benefit. It was not set aside for your future medical expenses.

It was - and remains - a tax. Nothing more, nothing less. The government has used its taxing authority to levy this tax on wages and other earned income.

The government then used this stream of tax money to pay a kind of welfare benefit to those that qualify. Currently, in the case of medicare, those that qualify are simply 65 years of age or older, or disabled.

So your tax money for the last 40+ years was spent on medical care of the elderly and disabled during those years.

Having now reached the age of 65 yourself, you meet the eligibility requirements and qualify for this welfare benefit.

So congratulations. After years of working hard and paying taxes, you're now on welfare. :-)

--Peter
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but you're also talking about 'average' -- not relevant here.

employees with unique, special skills and experience can negotiate for higher pay

think CEOs, TomCruise, NFL quarterbacks ...


Remember, I said that wages are mostly set by supply and demand. Not many guys can play quarterback in the NFL, so those wages are bid up.

The original claim was that if an employer's expenses were lower (for example, no FICA) then the employer would share at least some of those savings with the employee. If you look at the graphs I posted, corporate profits have been climbing steadily, but wages are stagnant. In other words, each worker is producing more money for corporations.

Reducing an expense is fundamentally the same as making more money, right? Yet, the case of making more money corporations as a whole aren't motivated to share those extra dollars with their employees. So why are corporations willing to share with their employee if expenses go down, but not in the case when profits go up? Makes no sense.

I realize there are some exceptions and marginal cases etc., but overall that's the way the world works.
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I hear that argument from time to time and it makes very little sense to me.

It makes sense to at least some people. From today’s New York Times:

Although the tax is technically split between employers and employees, economists agree that workers suffer the whole cost of the tax. Without it, workers could expect to have higher wages, not just lower taxes.

http://www.nytimes.com/2013/04/14/opinion/sunday/payroll-tax...
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It makes sense to at least some people. From today’s New York Times:

Although the tax is technically split between employers and employees, economists agree that workers suffer the whole cost of the tax. Without it, workers could expect to have higher wages, not just lower taxes.

http://www.nytimes.com/2013/04/14/opinion/sunday/payroll-tax...


Given that this column is from the Opinion section of the NY Times, that the writer is a law professor, not an economist, and that the writer provides no data to support their statement, I would say that that statement is just as valid as any opinion you can find here on TMF.

Cites of some studies where economists actually provide data supporting the statement would have made the statement more believable.

AJ
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It makes sense to at least some people. From today’s New York Times:

There are certainly lots of people who think that way. Again, I hear people say it all the time. The thinking is that the employer reduces wages by approximately the amount of his share of the tax. But if that's true, it also assumes that the employer is the only one who controls the price of wages. Yet the reason why your employer pays you more than minimum wage is supply and demand. If he wants your services, he's got to pay and you don't care what his expenses are. Therefore the employee must also has some control over wages.
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The original claim was that if an employer's expenses were lower (for example, no FICA) then the employer would share at least some of those savings with the employee.



the original claim was for that specific Employee... charts and averages just don't apply.

no way we can say he isn't as specially, specifically skilled as an NFL QB



I realize there are some exceptions and marginal cases etc., but overall that's the way the world works.


for most of us. not for everyone
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Given that this column is from the Opinion section of the NY Times, that the writer is a law professor, not an economist, and that the writer provides no data to support their statement, I would say that that statement is just as valid as any opinion you can find here on TMF.



given that it's NYT (vs WSJ) and Law Prof (vs Bank Teller),
i'd give it a BIT more validity than a random opinion around here
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the original claim was for that specific Employee... charts and averages just don't apply.

no way we can say he isn't as specially, specifically skilled as an NFL QB


Actually the original claim was "every employer." But just for the sake of argument, let's say that he really is that skilled. Tom Brady makes $11,400,000 million per year. FICA taxes are 6.2% up to $113,700 or $7050 in his case.

Is the argument really that absent FICA his contract would have been $11,407,050 because management would not be able to afford that extra little bit?
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the original claim was for that specific Employee... charts and averages just don't apply.

•••

Actually the original claim was "every employer."

OK...... i just read it differently .....



Number: 71983 of 72029

•••
Fact: <I and my employers paid in over $65,000 to Medicare since 1966. If one calculates the time value of that money until today, I could have purchased private insurance superior to Medicare at age 65...and still had plenty to give to numerous charities.



But just for the sake of argument, let's say that he really is that skilled. Tom Brady makes $11,400,000 million per year. FICA taxes are 6.2% up to $113,700 or $7050 in his case.

Is the argument really that absent FICA his contract would have been $11,407,050 because management would not be able to afford that extra little bit?


that's how i read the argument......
or maybe that ,absent FICA, he could have easily got $7050 more if he asked.

perhaps silly re a TomBrady.
but not so silly for someone making $214,000 with several employers interested
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Yet the reason why your employer pays you more than minimum wage is supply and demand. If he wants your services, he's got to pay and you don't care what his expenses are.

So you think the government could required employers to pay 100% of FICA taxes without any effect on wages?

What about income taxes?
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Dwdonhoff: "Hi JAFO,"

Howdy, welcome back, and I assumed you were too busy with either catch-up or the spreadsheet you intend to construct.

<<<Why do you assume that your employer would have paid the Medicare tax amount to you?>>>

"It doesn't matter whether they would or would not have, they had no opportunity to make that decision. If the funds were tehre (not only for the specified employer, but every other potential employer,) then our Fool could have competitively pressed for compensation to meet his value, and if the specified employer would have refused to compete with the overage, others would have had the opportunity to do so."

It matters if OP plans to assume that he would have received it, and invested it for a 7% annual return. While the OP "could have competitively pressed for compensation to meet his value", there is no reason to assume the employer would have agreed.

"As it is, our Fool and his employer (and all other employers desiring his quality of service) were denied their freedom to negotiate a fair employment agreement including the selection of preferred medical insurance coverage. they were all forced to pay for inferior mandatory coverage."

"Inferior" is assuming facts not in evidence, and opinion. I will agree that OP and his employer were forced to pay for mandatory coverage.

Regards, JAFO
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TMFMurph:

<<<I am curious has to how you calculated "your" total payments to Medicare.>>>

"I got them off my annual Social Security statement."

It has been awhile since I looked at mine, so I did nto recall that Medicare was separately spefified.

"In my specific case, my income over 40 years was quite "lumpy"....especially after 1990....and yes, I did have some large income after that date. More than that level of detail, I don't feel inclined to disclose on a public forum."

I have no problem with not wanting to disclose financial details in a public forum. I do assume, however, that the large income you reerence was "earned income" subject to FICA and Medicare tax and not dividends, interest or other unearned income not subject to FICA and Medicare tax.

As I understand it, you were the owner of the business and had some control over how to structure the funds you received, some of your current income is coming from the sale of the business, which I suspect is capital gains and not subject to 1.45% Medicare tax on earned income, though it may count as income for purposes of calculating the annual costs you pay for Medicare.

Regards, JAFO
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alchook:

<<<I hear that argument from time to time and it makes very little sense to me.>>>

"It makes sense to at least some people. From today’s New York Times:

Although the tax is technically split between employers and employees, economists agree that workers suffer the whole cost of the tax. Without it, workers could expect to have higher wages, not just lower taxes.

http://www.nytimes.com/2013/04/14/opinion/sunday/payroll-tax......
"


First, the author, Linda Sugin, never agreed that it would be a 100% gain.

Second, Linda Sugin, according to the byline is a law professor. I have no idea whether she has abny background in economics.

Third, who cany sayw ith absolutely certainity that the employer-side tax savings would not be invested into the business, used to pay dividends to the investors of the business or bonues to management, as opposed to wages to employees?

Regards, JAFO
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Third, who cany sayw ith absolutely certainity that the employer-side tax savings would not be invested into the business, used to pay dividends to the investors of the business or bonues to management, as opposed to wages to employees?

So if the government changed the law so the employer, rather than the employee, was responsible for all payroll and income taxes, do you think this would have any effect on wages?
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sykesix writes,

Actually the original claim was "every employer." But just for the sake of argument, let's say that he really is that skilled. Tom Brady makes $11,400,000 million per year. FICA taxes are 6.2% up to $113,700 or $7050 in his case.

Is the argument really that absent FICA his contract would have been $11,407,050 because management would not be able to afford that extra little bit?

</snip>


There's no wage limit on the 1.45% (2.90% if you include employer's share) Medicare FICA. So the employer's share on a $11.4 million salary is $165,300.

intercst
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alchook:

<<<Third, who can say with absolutely certainity that the employer-side tax savings would not be invested into the business, used to pay dividends to the investors of the business or bonues to management, as opposed to wages to employees?>>>

"So if the government changed the law so the employer, rather than the employee, was responsible for all payroll and income taxes, do you think this would have any effect on wages?"

First, given that people often have income unrelated to their employment, the question is only theoretical.

Second, in response to your question, No, but that neither what I said nor the statement I challenged.

The OP claimed that 100% of the employer paid taxes would have been received by him.

"Fact: I and my employers paid in over $65,000 to Medicare since 1966. If one calculates the time value of that money until today, I could have purchased private insurance superior to Medicare at age 65...and still had plenty to give to numerous charities."

"That money" refers to the $65,000 paid by the OP and his employers.

Are you claiming that OP (and in parallel, every other employee) every dollar in Medicare taxes by by an employer would 100% absolutely under all circumstances be paid to OP (and in parallel, every other employee).

If yes, can you provide some proof?

If not, why are you yanking my chain?

Regards, JAFO
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If not, why are you yanking my chain?

Regards, JAFO


Look, if take offense when I respond to a reply you made to my post there’s an easy solution, right?
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Hi JAFO,

I do assume, however, that the large income you reerence was "earned income" subject to FICA and Medicare tax and not dividends, interest or other unearned income not subject to FICA and Medicare tax.

Yes, it was earned income and subject to FICA/Medicare.

As I understand it, you were the owner of the business and had some control over how to structure the funds you received, some of your current income is coming from the sale of the business, which I suspect is capital gains and not subject to 1.45% Medicare tax on earned income, though it may count as income for purposes of calculating the annual costs you pay for Medicare.

The funds I am receiving from the sale of the business are mostly capital gains. Please note that I sold the business in 2004, and that the majority of my Medicare taxes come from my years in the "corporate wars". Yes, the funds I receive do count for purposes of calculating the "means-testing" for annual Medicare premiums.

Cheers!
Murph
Home Fool
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I asked a couple of small business owners I know if they no longer had to contribute to SS and Medicare for employees, would they give that amount to their employees as compensation. They both thought for a few moments and then said No--although one did look a bit sheepish about it.
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I asked a couple of small business owners I know if they no longer had to contribute to SS and Medicare for employees, would they give that amount to their employees as compensation. They both thought for a few moments and then said No--although one did look a bit sheepish about it.

My feelings on this is that over time, the employment market would determine whether they would pass the amount on to employees. If bigger players pass it on then they would have to up pay to compete for talent. I do agree with your findings that many would not initially pass it on, especially if it occurred during a time of high unemployment.
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I'm not at all surprised small employers wouldn't pass savings through to employees. I know many employers who are very generous to their employees. But I also know many who still have the first nickel they ever made and wouldn't give it to their own mother, let alone their employees. And if they could get away with it they wouldn't pay anything near the minimum wage either. Sometimes I think they have no appreciation for the role their employees play in their business success.
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I asked a couple of small business owners I know if they no longer had to contribute to SS and Medicare for employees, would they give that amount to their employees as compensation. They both thought for a few moments and then said No--although one did look a bit sheepish about it.

Could you elaborate a bit?

Under your hypothetical situation the government will be out roughly $500B in revenue every year. Where was that money going to come from?

If the government simply decided to collect the same amount of money in payroll taxes, but did so by doubling the employee’s contributions, would your small business owners simply expect their employees to take the full hit themselves?
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