RSS
Actually, immigrants are keeping Medicare afloat
A new study blows a hole in the conventional wisdom that immigrants are sapping the nation's welfare programs
Jim DeMint, call your office: A new report suggests immigrants are subsidizing Medicare.
Jim DeMint, call your office: A new report suggests immigrants are subsidizing Medicare. Getty Images/Alex Wong
A

s Washington grapples with a sweeping bill that would overhaul the nation's immigration system, a new report shows that immigrants have contributed billions of dollars more to Medicare than they've received from the program, thus helping it to remain solvent.

According to the study, published Wednesday in the journal Health Affairs, immigrants in recent years contributed roughly $14 billion more per year to Medicare than they received from the program. As a result, foreign-born U.S. residents produced a $115 billion surplus from 2002-2009, while the rest of the population created a $28 billion deficit over that same period.

In other words, the aging U.S. population was sucking money from Medicare faster than it could replenish those funds, and immigrants helped cover the shortfall.

The logic behind the findings is straightforward: Immigrants tend to be younger, working-age adults who don't yet qualify for Medicare. Medicare recipients must be 65 years old and up, or meet certain disability requirements.

According to the study, about 80 percent of foreign-born residents were of working age (18-64 years old) in 2009. For American-born residents, that figure was just shy of 60 percent.

The researchers argued that their findings make a strong economic case for a more inclusive immigration policy.

"Policies that reduce immigration would almost certainly weaken Medicare’s financial health, while an increasing flow of immigrants might bolster its sustainability," they concluded.

That finding directly contradicts the notion that immigrants are a drain on public welfare programs. Critics of a bipartisan immigration bill making its way through the Senate have argued that it will dangerously bloat such programs and cost taxpayers trillions of dollars. A recent study by the Heritage Foundation, led by former Sen. Jim DeMint (R-S.C.), offered the most extreme take, claiming the bill would cost the U.S. $6.3 trillion over the next half-century.

The Heritage study was widely criticized — even by conservatives — for failing to consider the economic boost an influx of new workers would bring to the nation.

However, the cost of the Senate immigration bill remains a significant concern among members of Congress. And immigration-reform skeptics were hardly moved by the new report.

"It's a yawner of a study," Robert Rector, a Heritage Foundation researcher who worked on that group's report, told the New York Times. "Young people don't get Medicare. We don’t need several Ph.D.s to tell us that."

While it may be obvious that young people don't get Medicare, the report's authors maintain that was not their focus. Rather, they emphasized how "a steady flow of young immigrants would help offset the aging of the US population and the health care financing challenge that it presents."

To reach their conclusions, researchers used Census data to determine how much immigrants — including undocumented immigrants — paid in payroll taxes. They then used Medicare data from the Department of Health and Human Services to estimate how much money that same group received in payments.

Here's how they explained the difference:

Immigrants pay into the HI Trust Fund [which funds Medicare] in several ways. Those with legal status contribute through payroll taxes under valid Social Security numbers. Undocumented immigrants often pay payroll taxes under Social Security numbers tied to invented names or belonging to someone else, because to comply with federal law employers must obtain a Social Security number from every employee. Less frequently, undocumented immigrants pay self-employment taxes (in lieu of payroll taxes) under individual tax identification numbers, which allows them to claim credit for their contributions should they eventually obtain legal status. [Health Affairs]

The researchers said that a similar phenomenon is likely affecting Social Security as well, with the younger immigrant population paying into the program but not tapping its benefits. By the government's own accounting, that seems to be true. Last month, that agency reported that undocumented immigrants contributed an estimated $12 billion to the program in 2010 alone.

Jon Terbush is a staff writer for TheWeek.com covering politics, sports, and other things he finds interesting. He has previously written for Talking Points Memo, Raw Story, and Business Insider.

EDITORS' PICKS

THE WEEK'S AUDIOPHILE PODCASTS: LISTEN SMARTER

Subscribe to the Week