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Study: Immigrants put billions more into Medicare than they use

When politicians talk about immigration and health care, they usually voice worries about immigrants as a drain on federal health care programs.

The idea has repeatedly surfaced in the congressional debate over immigration: What would it mean to extend legal status, and the benefits that come along with it, to millions of unauthorized workers?

New research suggests that, for the Medicare program, it would actually prove a boon: Immigrants regularly contribute billions more to the Medicare program than they draw out.

The study, published Wednesday in the journal Health Affairs, showed a surplus for immigrants' contributions to Medicare every year between 2002 and 2009. It finds that immigrants have, over that time period, contributed $115 billion more to the Medicare program than they drew out.

A team of Harvard University researchers looked at immigrants' contributions to Medicare's Hospital Insurance Trust Fund, which (as the name might make obvious) covers seniors hospital visits. The trust fund is largely financed by payroll taxes, meaning that current workers tend to pay into the program.

Immigrant workers generated a $13.8 billion surplus in 2009. US-born workers, meanwhile, created a deficit of $30.9 billion, spending more in the Medicare program than the revenue brought in.

Can immigration reform, then, solve Medicare's financial woes? Probably not: Much of this imbalance has to do with demographics. The immigrant population is generally younger than those born in the United States. That means there are more working-age people paying the taxes that support Medicare for each senior using the program.

For each U.S. born Medicare beneficiary, for example, there are 4.7 working-age people paying into the program. Among immigrants, there's a significantly higher ratio of 6.5 to 1.

"Immigrants generate a surplus for Medicare primarily because so many of them are working age adults and the group has a high labor-force participation rate—a combination that generates large payroll tax payments," the team of researchers, lead by Leah Zallman, writes.

This paper does not explore what happens as demographic trends shift, as immigrant workers get older—and many would age onto the Medicare program.

Zallman contends in her paper that other factors would likely lead to lower Medicare costs for immigrants, regardless of demographic changes.  Some elderly immigrants may not become eligible for Medicare because they have not met a five-year legal residency requirement. Others may retire outside the country, meaning they would never draw from the Medicare program anyway.

"Providing a path to citizenship for currently undocumented immigrants would affect Medicare's finances in multiple ways," she concludes. While it would increase payroll tax incomes, "in the long term, it would probably increase the number of immigrants eligible for Medicare and hence expenditures on their behalf."