Social Security & Medicare Are Going Broke
When it comes to Medicare, physicians get no respect. When it comes to paying into the Medicare program, self-employed doctors pay both ends of the Medicare tax, as employer and employee. The same goes for the Social Security tax.
“If the people knew how hard I had to work to gain my mastery, it wouldn't seem wonderful at all.”
—Michelangelo
When it comes to Medicare, physicians get no respect. When it comes to paying into the Medicare program, self-employed doctors pay both ends of the Medicare tax, as employer and employee. The same goes for the Social Security tax. And when it comes to getting paid by Medicare, doctors get shrinking reimbursements and are threatened with 10% across-the-board fee cuts after July 1 (and perhaps 15% next year).
Now, it seems, both Medicare and Social Security are in dire straits. The latest report from the Social Security and Medicare Trustees forecasts that the Social Security trust fund will run out of cash by 2041 and the Medicare fund will be depleted by 2019. To balance the books, the Medicare tax, currently at 2.9% of all wages, would have to rise to 6.44%. To get Social Security back to financial health would require an increase in that tax from 12.4% to 14.1% (or a 12% cut in benefits). If the tax increases become reality, self-employed doctors would be facing a 20.5% combined Social Security and Medicare tax, in addition to any income taxes they are responsible for.
You won’t hear many real world solutions about all this on the 2008 presidential campaign trail, perhaps because no candidate wants to be the first to point out how huge the problem is; let alone correct it. According to the latest Financial Report from the US Government Accountability Office, if Medicare were subject to the same rules as company pension plans, it would be underfunded by $34 trillion.
Bottom line for doctors: With the Social Security system in deep fiscal trouble and the political will to reform it scarce, you must depend on your own private investing and saving in the coming decades to fund your retirement.
$4.7 trillion—Total amount of benefits paid out since Social Security began in 1937.(US General Accounting Office)
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