Immigrants and Medicare

Many immigrants in the United States are working-age taxpayers; few are elderly beneficiaries of Medicare. This demographic profile suggests that immigrants may be disproportionately subsidizing the Medicare Trust Fund, which supports payments to hospitals and institutions under Medicare Part A. For immigrants and others, researchers tabulated Trust Fund contributions and withdrawals (that is, Trust Fund expenditures on their behalf) using multiple years of data from the Current Population Survey and the Medical Expenditure Panel Survey. In 2009 immigrants made 14.7 percent of Trust Fund contributions but accounted for only 7.9 percent of its expenditures—a net surplus of $13.8 billion. In contrast, US-born people generated a $30.9 billion deficit. Immigrants generated surpluses of $11.1–$17.2 billion per year between 2002 and 2009, resulting in a cumulative surplus of $115.2 billion. Most of the surplus from immigrants was contributed by noncitizens and was a result of the high proportion of working-age taxpayers in this group. Policies that restrict immigration may deplete Medicare’s financial resources.

Politicians and others are concerned that Medicare might not be sustainable, given current projections of health care spending growth, the surge in enrollment driven by the aging baby-boom generation, and the diminished size of the working-age population paying into the program through payroll taxes. The role that immigrants play in funding Medicare and their use of the program is not well understood. Because Medicare accounts for 21 percent of all annual US health care expenditures, knowing more precisely how immigrants factor into Medicare revenues and expenditures is important to ongoing policy discussions.

Medicare is financed through general revenues, payroll taxes, beneficiary premiums, and other sources, including taxes on Social Security benefits and payments from states. Medicare has two trust funds, the Hospital Insurance Trust Fund and the Supplementary Medical Insurance Trust Fund. The Hospital Insurance (HI) Trust Fund primarily finances inpatient care through Medicare Part A; it receives most of its income from payroll taxes and interest on past surpluses generated from those taxes. The Supplementary Medical Insurance (SMI) Trust Fund primarily pays for Medicare Part B, which covers physician services (both inpatient and outpatient) and outpatient care. Despite its name, the SMI Trust Fund is not a trust fund in the usual sense of the term; it is fully funded annually by enrollee premiums and yearly congressional appropriations from general revenues.

The most recent annual report from the Medicare Board of Trustees projected that the HI Trust Fund will be exhausted in 2024. At that point, revenues and assets will not be sufficient to cover the full costs of the Medicare program.

Studies have found that immigrants use less health care than US-born individuals, even in some public programs. However, because previous studies have not tabulated immigrants’ contributions to health care funding, concerns remain that immigrants may be a financial drain on the health care system.

The Harvard researchers used nationally representative data on Medicare spending, income, and taxation to determine HI Trust Fund contributions and expenditures attributable to the US-born, immigrants, and noncitizen immigrants. Researchers then calculated the net trust fund surpluses or deficits attributable to each group.

 See the entire study here.