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Why US should not pay Warren Buffett's Social Security and Medicare

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As with the proposal Congressman Paul Ryan (D) of Wisconsin has made to reform Medicare, these phase-out provisions in general would only apply to people who are presently younger than 55. Also, the thresholds for the phase-outs would be annually adjusted for inflation and would reflect at the time the provisions become law the inflated value of $75,000 and $175,000 in 2011 dollars.

The Social Security phase-out proposal is similar to the phase-out for such payments under Canadian law. The Canadian phase-out (what Canadians call a claw-back), which was enacted many years ago, is not considered controversial and is generally accepted as fair.

Medicare premium payment requirement protects rich, too

And the Medicare proposal is structured so that even a high-income person who elected to self-insure would not see all of his or her assets completely depleted as a result of the cost of health care. This point can be illustrated as follows. Once a retired person’s investable assets (including assets held in a pension plan, but not a principal residence) produced less than $175,000 in retirement income, the person would be entitled to some support from Medicare, and if such person’s investable assets failed to produce $75,000 in retirement income, the person would be entitled to full Medicare benefits.

With a 5 percent annual return of earnings and capital gains, the $175,000 threshold would translate into approximately $3.5 million in investable assets, and the $75,000 threshold would translate into approximately $1.5 million in investable assets. So, as a practical matter, a retired person with less than approximately $1.5 million in investable assets would likely be entitled to full Medicare benefits. Consequently, someone who self-insured would not see his or her investable assets reduced below approximately $1.5 million as a result of medical bills.

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