Medicare: Robin Hood in Reverse

Brian Doherty from the January 1998 issue

Debates over reining in runaway Medicare costs often suggest that anything that would slow Medicare growth would also bash the elderly poor. A recent National Bureau of Economic Research study instead indicates that the wealthiest elderly get the most bang for their Medicare bucks.

The study's authors, Jonathan Skinner and Mark McClellan, divided 1.4 million Medicare beneficiaries into 10 income brackets, and compared Medicare payments since 1966 with recipients' expected lifetime benefits. Everyone tends to get more then he paid in. But the study found that those in the higher income brackets benefit even more than those in the lower. For example, the net lifetime gain for the second-highest income group was found to be $18,900, while for the third-lowest it was only $15,500. Thus, the study concludes, "the Medicare program effectively transfers money from low to high income groups."