Watch out, seniors!
Here’s a simple proposition: every penny of potential budget savings in the Medicare program should first be reinvested into the Medicare program to help ensure its solvency or secondarily be allocated to debt reduction.
Under no circumstances should Medicare be exploited as a cash cow for other government programs, whether it’s increasing Obamacare grants, funding “climate change” initiatives, to promote taxpayer funding of abortion or any other narrow ideological obsession that captivates “progressives” in Congress at the time.
Now get this. In their frantic attempts to salvage some semblance of the Biden administration’s inflationary domestic agenda, the Senate Democratic leadership is considering a 190-page amendment to impose a complex system of government control over Medicare prescription drug prices.
Importing price controls into the Medicare drug program is a bad idea. This will reduce older people’s access to new and innovative medicines and pass on the higher costs to those not covered by health insurance.
Noting the drug amendment, the Congressional Budget Office estimates that this bill would save the federal government approximately $287 billion over 10 years.
What happens to those savings? One would think that because the Medicare hospital insurance trust fund faces insolvency in just six years, every penny extracted from Medicare would go into this deficit trust fund – or at least offset the federal budget deficits incurred by the hospital. Rapidly Rising Medicare Spending.
But that’s not exactly what Senate Democrats have in mind. In a recent media interviewSenator Joe Manchin, DW.Va. – acknowledging that the proposed price control scheme would save “about $288 billion over ten years” – suggested: “Take $40 billion of that and extend the Affordable Care Act rebates that people were getting so their premiums won’t go up… And also take the remaining $240 billion and put it into debt reduction.
Amid congressional spending sprees and rampant inflation, Manchin at least managed to settle that part of the debt. But, when it comes to Obamacare, he’s got it all wrong. Shoveling Medicare “savings” to cover Obamacare spending holes not only ignores the Medicare budget crisis, but also ignores the failed Obamacare subsidy program that will ultimately cost taxpayers an additional $78 billion.
In fact, not extending Obamacare subsidies for another year would mean real savings for taxpayers and not result in a higher level of uninsurance.
an old story
For so-called progressives, raiding Medicare to pay for their government health care plans is an old, old story.
Flashback to 1993: the Clinton administration wanted to finance its gigantic health security bill (“Hillarycare”) to the tune of $389 billion over the period from 1994 to 2000. The proposed method: tighter caps on Medicare spending through tighter price controls that would give an estimate $124 billion of “savings” over this period. This attempted raid on Medicare was thankfully thwarted by the collapse of the bill.
Looking back to 2010: While promoting Obamacare, his flagship legislative achievement, President Barack Obama declared he would not add a penny to the deficit. The problem: over the period 2015 to 2024, the Congressional Budget Office valued Obamacare spending would reach nearly $2 trillion.
So Obama and his allies in Congress have included a combination of tax increases and spending cuts to pay for Obamacare. Beyond the law’s long list of unpopular tax increases, several of which were later repealed, the CBO reported that the Medicare payment reductions provided by law would amount to $716 billion over the period 2013 to 2022.
Incredibly, Obamacare supporters tried to claim that the statutory Medicare payment reductions would not only pay for the new Obamacare entitlement programs, but also expand the solvency of the Medicare Hospital Insurance Trust Fund. A classic budget gadget.
Echoing a precedent OBC assessment of such an outlandish claim, in 2010, Medicare actuary Richard S. Foster, declared, “In practice, enhanced funding from the Medicare Hospital Insurance Trust Fund (HI) cannot be used simultaneously to fund other federal expenditures (such as coverage extensions) and to expand the trust fund, despite the emergence of this result in the respective accounting policies. ”
In short, you can’t spend the same dollar twice.
Looking back on 2013: Effective in 2013, under ObamacareCongress enacted a special 3.8% “Medicare” payroll tax on the wages of individuals with annual incomes of $200,000 or more and couples with annual incomes of $250,000 or more.
The law also applied another “Medicare surcharge” of 3.8% on investment income, including income from capital gains, dividends, estates and trusts, rents and royalties. The revenue generated by this special “Medicare” tax was not intended to be deposited in Medicare trust funds, but rather a source of revenue for non-Medicare purposes.
Yet another example of the Medicare label being used for other purposes.
Flash-forward to today: As part of recent efforts to salvage what’s left of President Joe Biden’s ‘Build Back Better’ agenda, Senate Democrats were planning extend the 3.8% Medicare surtax on investment income to individuals earning more than $400,000 per year and couples earning more than $500,000 per year and apply it to business income, including small business income.
It is hard to imagine a worse policy than taxing investment and directly undermining business and job growth as the country teeters on the edge of recession. Due to Manchin’s objections, this provision appears to have been deleted from the Senate proposal.
Make no mistake, Medicare needs reform, but a poorly designed government price control program that will block seniors’ access to new and innovative drugs is not the answer. In place, Health insurance reform should focus on exploiting the benefits and savings resulting from increased choice and competition.
The savings generated by Medicare reform should be reinvested in improving the solvency and financial position of the program and in alleviating the rising costs of Medicare for beneficiaries and taxpayers. Savings should not be diverted to other budget gimmicks or cost shifting.
Taxpayers and seniors deserve nothing less. Congress can and must do better.
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