The distribution of lifetime Medicare benefits, taxes and premiums: Evidence from individual level data

The absence of individual level data linking earnings histories to the receipt of Medicare benefits has hampered the study of the program's distributional properties. Data developed by the Social Security Administration for an early cohort of Medicare beneficiaries includes both earnings records and Medicare payment records and thus overcomes this limitation. For this early cohort, lifetime benefits and taxes are found to rise with lifetime earnings, but taxes rise more rapidly resulting in redistribution from higher to lower earning beneficiaries. Lifetime benefits in the top decile of the earnings distribution are 19% higher than in the bottom decile, but taxes and premiums are four times higher in the top than in the bottom decile. Once taxes and premiums are subtracted, net benefits in the top decile are 79% of net benefits in the bottom decile

► Lifetime Medicare benefits, taxes and premiums are estimated using individual level data for an early cohort of Medicare beneficiaries.
► Lifetime benefits, taxes and premiums are all found to rise with lifetime earnings.
► Taxes and premiums rise more rapidly than do benefits resulting in redistribution from high to low earners within this cohort.
► However, because this is an early cohort of beneficiaries most of the redistribution in the program is from transfers to these beneficiaries from younger generations.