Most Get More from Social Security and Medicare Than They Pay In
Most Americans receive more in Social Security and Medicare benefits over their lifetime than they pay in taxes to fund the programs, according to recent estimates from the Urban Institute. As both critical programs face financing shortfalls in the near future, understanding the relationship between lifetime contributions (taxes) and benefits can provide valuable insight into how Social Security and Medicare impact American society and the economy as well as guidance for potential reforms.
Social Security and Medicare Benefits Exceed Taxes in Most Cases
The Urban Institute analysis shows that lifetime Social Security benefits exceed lifetime taxes for most Americans, but the opposite is true for individuals with wage income above the taxable maximum ($184,500 in 2026). For most Americans, the gap between lifetime benefits and taxes is projected to increase over the coming decades, assuming benefits are paid as scheduled after the trust funds reach depletion. The benefits of current beneficiaries for both Social Security and Medicare are financed by taxes on the wages of current workers.
For example, a married couple with average lifetime earnings turning age 65 in 2025 will receive $874,000 in lifetime benefits while only paying $824,000 in lifetime taxes (adjusted for inflation to 2025 dollars), a difference of $50,000. For a similar couple turning 65 in 2055, that difference will reach $200,000.
The gap between lifetime benefits and taxes is much larger for Medicare than Social Security. Lifetime Medicare benefits exceed taxes for all income levels, including those earning the taxable maximum and above. Two married taxable maximum earners turning age 65 in 2025 are projected to pay $551,000 in taxes but receive $722,000 in lifetime benefits. For a similar couple in 2055, that figure is projected to grow to $914,000 in taxes and $1.2 million in benefits. The gap between lifetime taxes and benefits is even larger for lower earners.
Lifetime Medicare Benefits Have Grown Faster than Social Security
According to the study from the Urban Institute, lifetime Medicare benefits have grown faster than lifetime Social Security benefits, and that trend is projected to continue through at least 2065. From 1995 to 2025, lifetime Social Security benefits have grown 31 percent, while lifetime Medicare benefits have grown more than three times faster: 105 percent. Over the next 30 years, growth in Social Security benefits is projected to increase 53 percent, and Medicare benefits will still grow more quickly, growing 70 percent.
Growth in Medicare benefits is due to several factors, including recent expansions of Medicare coverage (like the creation of Medicare Part D) and the fast-growing cost of medical care in the United States. Over the past 50 years, Medicare spending on prescription drugs has increased the most of any category of payments. Since the introduction of prescription drug benefits in 2006, Medicare prescription drug expenditures increased from $39 billion to $163 billion in 2024, a 322 percent increase, according to the Centers for Medicare and Medicaid Services. Further, the cost of medical care has grown faster than the cost of goods for wage earners, or CPI-W — the price indexed use by the Social Security Administration to determine cost-of-living adjustments for benefits. Since 1960, the price index for medical care has grown 2.6 times more than CPI-W. As taxes are based on wages and benefits are determined by the cost of care, the gap between taxes and benefits will continue to grow.
Conclusion
Lifetime benefits for Social Security and Medicare are projected to grow considerably in the next few decades. As the trust funds for the programs approach depletion in the near term and the fiscal situation worsens, policymakers have many options available to close the programs’ structural deficits to avoid automatic cuts. Understanding lifetime tax and benefit payments, and how those lifetime balances vary, can help policymakers better target reforms to ensure the programs can be sustainable for decades to come.
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Further Reading
9 Facts About Social Security and the Need to Strengthen It
Social Security is an essential program for millions of Americans, but it’s at risk if lawmakers fail to take action to reform the program.
What Is SNAP? An Overview of the Largest Federal Anti-Hunger Program
SNAP has a positive effect on poverty and food insecurity, with a relatively small effect on the federal budget.
What Is Supplemental Security Income?
SSI faces ongoing challenges including an aging population, evolving disability eligibility, and fiscal pressures on the federal budget.