Illegal Immigrants Give Billions to Medicare, Social Security With No Hope of Benefit

Published on
January 7, 2013

Sophia, 44, works up to 40 hours per week at a Mexican restaurant in Gurnee, Ill., making $10 an hour.

With every paycheck, she said, $136 goes to payroll taxes, $62 of which goes to Social Security and Medicare; that means that 6.2 percent of her wages go to the Social Security Administration and another 1.45 percent goes to the Medicare’s Hospital Insurance (HI) Trust Fund.

“I’ll never see that money again,” she said in Spanish. Sophia, who declined to give her last name, is an illegal immigrant from Mexico.

Sophia came to the United States legally 13 years ago when she applied and was granted a temporary worker visa. She moved from one low-paying job to another. She was a babysitter, worked at the fast-food restaurant Jimmy Johns, and cleaned houses for Merry Maids. The mother of two moved to her current job just as her permit was set to expire 5 years ago. Today, she works as a kitchen manager, using her now-invalid Social Security number and different name to deter immigration officials.

Retirement is still far off for Sophia, who is relatively healthy. Yet concerns on how she will pay for hospital visits and medications as she gets older are already on her mind.

“Right now, my only option is to work. Even when I’m too old, I need to work,” she said, taking a break from overseeing the kitchen where two other undocumented immigrants from Mexico work. “I know costs for (medicine) are only going to get more expensive.”

Sophia is not alone. As politicians continue to debate proposals to reform Medicare and extend the solvency of the federal health insurance program for Americans ages 65 and older, many of the estimated 10.8 million illegal immigrants in the United States continue to provide the Medicare and Social Security systems with financial support—by the billions of dollars each year.

However, unlike the millions of Americans who retire each year, these same undocumented workers won’t receive benefits from the federal health insurance program or the Social Security Administration (SSA).

Earnings Suspense File

Experts say illegal immigrants make up a majority—possibly up to 75 percent—of SSA’s “earnings suspense file,” which is a record it keeps on W-2s where the names and Social Security numbers don’t match up in their system.

In 2010, the last year for which figures are available, employers reported wages of $70.3 billion from 7.3 million workers whose records were placed in the earnings suspense file, according to data provided by the SSA to The Medicare NewsGroup.

These payroll taxes, however, go straight to their respective trust funds. This amounts to about $2 billion for Medicare and $8.7 billion for Social Security in 2010.

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The Medicare payroll tax finances, in large part, the Medicare’s Hospital Insurance (HI) Trust Fund, which pays for inpatient services for Medicare beneficiaries who have Medicare Hospital Insurance (Part A). The HI Trust Fund collected $215.6 billion in 2010, of which payroll tax revenue made up 84.4 percent of that income.

While Medicare contributions in the earning suspense file amount to just over 1 percent of the total revenue the program received from payroll taxes directed to the Medicare HI Trust Fund, those dollars represent real value in terms of their contribution toward extending the life of the program, says attorney Gregory Schell of the Florida-based Migrant Farmworker Justice Project, a legal advocacy group for farm workers.


From 2001 through 2010, the total Medicare contributions from the suspense file amounted to about $21 billion dollars.

 “It’s almost equivalent to a slush fund,” Schell said. “It’s money that benefits everyone else but never those who paid for those taxes.”

While some records in the earnings suspense file are due to errors in paperwork, most are believed to be from illegal immigrants.

Social Security’s chief actuary Stephen C. Goss told The New York Times in 2005 that they assume about 3 out of 4 “other-than-legal immigrants” pay payroll taxes.

Health Care Costs of Illegal Immigrants

Despite the money illegal immigrants pay into the program, Ira Mehlman, spokesman for the Federation for American Immigration Reform (FAIR), which advocates for stricter enforcement of immigration laws, says the costs of illegal immigrants to local, state and federal governments greatly outweigh their contributions.

“If you look at all the costs associated with illegal immigration, it is logically inconceivable they pay enough taxes (from low-paying jobs) for the services they receive. It defies logic,” he said.

While data are scarce on illegal immigrants’ costs and use of health care services, especially for those who are seniors, “billions of dollars are estimated to be spent each year,” according to the American College of Emergency Physicians. Emergency departments are required by law to provide care to everyone who seeks treatment, including those without health insurance, which is the case for many illegal immigrants.

According to a FAIR cost study on illegal immigration, the federal government is estimated to spend nearly $29 billion per year on educational, welfare, medical and other services for illegal immigrants. The study estimates that $6 billion go toward medical expenses, including $250 million for emergency medical care a year. However, the FAIR study includes the medical costs of an estimated 3.4 million children who are U.S. citizens with illegal immigrants as parents.

It’s unknown how much more it would cost, or save, if illegal immigrants were to utilize Medicare benefits instead of costly emergency room care.

Gaping Loophole

The transition from employers paying illegal immigrants under the table to adding them to payrolls came after President Ronald Reagan signed the Immigration Reform and Control Act in 1986.

Today, about half of illegal immigrants come with valid visas but choose to not follow the terms, said demographer Michael Teitelbaum, former vice chair of the U.S. Commission on International Migration.

The 1986 law required employers to ask for paperwork, such as a Social Security and green cards, from workers seeking jobs.

But there’s a gaping loophole. Schell said the law doesn’t require employers to verify the work authorization of new hires.

Fake Social Security cards are easily attainable, selling for between $100 and $150 in some flea markets, he said.

In some cases, Schell said, employers provide employees with names and numbers of former workers to avoid receiving notices from Social Security regarding discrepancies.

If the SSA notifies employers that a worker’s Social Security number and name don’t match, many employers simply ask the employee to get a new 9-digit number.

Sophia said her employer forwards her the notifications, though those letters from Social Security are simply ignored.

“(Social Security) just tells me that I need to straighten it out so I can claim the benefits,” she said. “Obviously, that’s not an option.”

Even as controversial verification options such as E-Verify, an Internet-based program designed to verify work authorization of new hires, become more available, a majority of states have implemented laws to limit the use of the program.

According to the National Conference of State Legislatures, only Arizona requires the use of E-Verify for all employers, public and private. Some states, such as Alabama and Mississippi, are phasing in the program. Others only “encourage” the use of the program, leaving it up to companies to implement it, while states like California and Illinois have enacted legislation limiting its use.

“As long as (a Social Security card) looks OK,” Schell said. “As long as it doesn’t have Mickey Mouse’s picture on it, (employers) don’t have to look further.”

Limited Options

When she turns 65, Sophia said she expects to still be working. As she continues to get older, Sophia said she knows her health will be a concern. Her health care costs, due to age-associated diseases and the prescription drugs she’ll need, will likely rise.

The elderly represents about 43 percent of those individuals who were in the top 10 percent health care spenders in the United States in 2008 and 2009, according to the Agency for Healthcare Research and Quality. Data on the health care costs of illegal immigrants who are 65 years or older is unavailable.

Since Sophia is unable to claim Medicare benefits, options for paying for health care remains limited.

“Some clinics, some churches and organizations will offer help,” Sophia said.

However, if she develops multiple chronic conditions, such as obesity or heart disease, her bills will likely skyrocket. If she is unable to pay all of her medical bills, most of the burden falls back to the federal and state governments, which are the primary sources of funding for uncompensated care of the uninsured, according to a Kaiser Family Foundation report. Uncompensated care is health care that has not been fully paid for.

Combining federal, state, and local funding streams, $42.9 billion dollars was spent on uncompensated care for the uninsured in 2008. Sixty percent of those government dollars was money flowing through the Medicare and Medicaid programs, according to the report.

“There are family members and friends who will usually help out,” Sophia said of her future medical bills. “There are really no options but to try pay as much of it myself.” (MNG) original articles can be reprinted or republished with credit to The Medicare NewsGroup. To use our content, simply copy and paste text from the MNG website. Use of our content is done in compliance with our Terms and Conditions but does not extend to material from other sources that are subject to their copyright.