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Joe Biden's Wild Idea To Save Medicare: Tax The Rich Instead Of Cutting Benefits
Is he allowed to say that?
President Joe Biden today presented his plan to keep the Medicare progam solvent for at least 25 years, by raising Medicare taxes on those making more than $400,000 annually and by negotiating lower prices for a wider range of prescription drugs. That's a sharp contrast to Republicans, who have been insisting that the best way to save Medicare is to cut its funding and raise the eligibility age, because old people are living it up too much.
Medicare's trust fund is currently on track to start running low in 2028, as more benefits are paid out than revenue comes in. Yes, that's us damn Baby Boomers aging. As the Washington Post (gift link) explains,
Roughly 60 million seniors depend on Medicare for their health insurance. Because the program is spending money at a much faster clip than it brings in funding, it faces automatic federal cuts starting in 2028, raising the nightmare scenario of medical providers refusing care to senior citizens if Congress and the White House don’t address the looming shortfall first.
In the Times , Biden was glad to take credit for one of the "two biggest health reform bills since the creation of Medicare," which were put in place by Barack Obama and by himself: Obama's Affordable Care Act, and Biden's Inflation Reduction Act, which not only capped insulin costs for seniors at $35 a month, but included substantial improvements to Medicare coverage as well.
The Affordable Care Act embraced smart reforms to make our health care system more efficient while improving Medicare coverage for seniors. The Inflation Reduction Act endedthe absurd ban on Medicare negotiating lower drug prices, required drug companies to pay rebates to Medicare if they increase prices faster than inflation and capped seniors’ total prescription drug costs — saving seniors up to thousands of dollars a year. These negotiations, combined with the law’s rebates for excessive price hikes, will reduce the deficit by $159 billion .
We have seen a significant slowdown in the growth of health care spending since the Affordable Care Act was passed. In the decade after the A.C.A., Medicare actually spent about $1 trillion less than the nonpartisan Congressional Budget Office projected before the A.C.A. reforms were in place. In 2009 , before the A.C.A., the Medicare trustees projected that Medicare’s trust fund would be exhausted in 2017; their latest projection is 2028. But we should do better than that and extend Medicare’s solvency beyond 2050.
Democrats probably need to make a lot more noise about how Obamacare actually extended the solvency of the Medicare trust fund by 11 years, don't you think? Hell, I write here about healthcare policy and I didn't know that.
The major parts of Biden's plan to extend the trust fund's solvency well into the middle of this century involve an incremental tax increase on the wealthiest Americans, coupled with giving the government the ability to negotiate more prescription drug prices sooner than the timeline already in the IRA.
On the taxation side, Biden's proposal would increase the existing Medicare tax rate on "earned and unearned" income — i.e., capital gains and investment income – over $400,000 from its current 3.8 percent to 5 percent. As the fact sheet notes, yeah, damn right this is about evening out just a little bit the huge advantages the investor class has legislated for itself since the Reagan years:
Since Medicare was passed, income and wealth inequality in the United States have increased dramatically. By asking those with the highest incomes to contribute modestly more, we can keep the Medicare program strong for decades to come.
Another provision would involve closing loopholes in the Medicaid tax, to make sure very wealthy folks can't avoid it via accounting games:
High-income people are supposed to pay a 3.8 percent Medicare tax on all of their income, but some high-paid professionals and other wealthy business owners have managed to shield some of their income from tax by claiming it is neither earned income nor investment income.
As the Post explains, this would expand the Medicare tax to apply to
more kinds of income from pass-through firms — businesses in which the owners pay taxes on their personal income taxes. Currently, these kinds of business owners do not pay this tax.
Again, that would be for pass-through income over $400,000, not to small businesses like, say, this little mommyblog. Hey, if this passed and you people want to help keep Medicare solvent, we won't mind if you donate a lot more so we're subject to that provision!
The other side of the proposal would simply speed up the schedule under which Medicare would be allowed to negotiate prices on the costliest prescription drugs, by allowing the program to "negotiate prices for more drugs and bringing drugs into negotiation sooner after they launch." Savings from these negotiations would go into the Medicare trust fund.
In addition, the Biden plan would provide additional savings to Medicare beneficiaries. They'd see lower co-pays for the drugs whose prices get negotiated, plus a $2 copay cap for certain generic drugs for chronic conditions, and elimination of cost-sharing for up to three mental or behavioral health visits per year.
The trick, of course, would be getting any of this passed in a Congress where Republicans control the House, or for that matter getting the 60 votes in the Senate needed to get past the filibuster. That makes the proposal more of a marker for the 2024 elections — and a counter to Republican demands to slash Medicare and Social Security in exchange for not crashing the economy over the debt ceiling, that time bomb that's still ticking out there in the inky shadows.
And then there's fixing the funding for Social Security, whose trust fund is in less immediate trouble than Medicare's — it's fully funded through 2033 — but hey, one fight at a time. Expand payroll taxes on high incomes, tax the fuck out of stock buybacks, and maybe tax Elon Musk every time he tweets something stupid.
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