Biden ignores warnings from Medicare administrators and the law |
For three consecutive years (2018-2020), Medicare administrators have officially warned that the program has become overly dependent on general revenue transfers from the Treasury rather than its dedicated revenue sources, such as payroll taxes and bonuses.
When this happens in just two consecutive years, the President and Congress are required – by law – to act. Concretely, the president must present, within 15 days of the submission of his annual budget, a legislative proposal to put the taxation of Medicare in order. And Congress must then review the legislation on an expedited basis.
Yet despite repeated warnings and their statutory obligations, neither the White House nor Congress has moved to slow rising costs and reduce Medicare’s growing reliance on general revenue funding. Continued inaction jeopardizes the stability of the program, accelerating program spending, pushing up premiums for Medicare beneficiaries, while imposing increasingly heavy burdens on taxpayers.
It is important to remember that Medicare was created as a traditional social insurance program and not as a social assistance program. The original arrangement was that beneficiaries would fund the Part A program out of payroll taxes and pay premiums to cover half of the costs of the Part B program. In 1970, when the program had only been in existence for four years. years, general revenues only accounted for 25% of total Medicare income; the rest was financed by social charges (62%) and beneficiaries’ premiums (14%).
This balanced mixture no longer exists. General revenues have assumed the largest share of Medicare funding since 2009. In 2016, general revenues exceeded 45% – the level deemed sufficiently “excessive” to warrant Medicare administrators issuing a “funding warning. “official. Obviously, what was originally conceived as a “social insurance” program is turning into another federal income transfer program.
Its costs are growing faster than national health spending, private insurance and the national economy. With general revenues, taxpayers now provide about three in four premium dollars for Part B (medical services) and Part D (prescription drugs) benefits.
In raw numbers, the transfer from general taxpayers to Medicare will almost double over the next decade, from $ 356.2 billion to $ 705.3 billion. Over the next 20 years, Medicare would consume about 26% of all federal tax revenue, dramatically reducing the resources available for other federal programs – from defense and transportation to education and wellness.
Medicare, along with other benefit expenses, is a major driver of federal deficits and debt. The latter now exceeds 28 trillion dollars, an alarming figure which itself deserves a formal warning.
But that conventional debt figure is eclipsed by unfunded Medicare obligations, the dollar value of the benefits Medicare has promised to provide that are not paid for with dedicated income. Total unfunded Medicare obligations now stand at $ 45.7 trillion, or roughly $ 140,000 for every man, woman and child in the United States
Because this debt accumulates over a long period (75 years), some try to dismiss it as having no urgent relevance. But for current and future taxpayers, this growing debt is real, relevant and unavoidable. Funding, say administrators, “… will require general fund transfers of this amount, and these transfers represent a formal budgetary requirement.”
The rising costs of Medicare is not just a tax issue. They are also tough on Medicare beneficiaries. In 2020 alone, Part B and D premiums and cost sharing reached around 24% of the “average” social security benefit. As administrators have noted, the rapidly growing costs of the program “place increasing demands on beneficiaries and taxpayers.”
Despite these growing fiscal challenges, President Biden ignored warnings from Medicare administrators and did not submit a legislative proposal to strengthen the program. Instead, he proposed to expand Medicare by lowering the eligibility age from 65 to 60. It would only put a strain on the program. According to a reliable estimate, it could cost between 40 and 100 billion dollars per year.
The financing offered by Biden? General recipes.
Soon, Medicare administrators will again be releasing a new report on the financial status of the Medicare program. They may reissue a Medicare funding warning.
For Washington’s political class, this will be another test. Most will fail. If they do not respect the law they promulgated, they should at least repeal it. It would be better than ignoring it and making a mockery of the rule of law.
There is of course another option. Some brave souls on Capitol Hill can take the law and its intent seriously, assess what is right for future taxpayers and beneficiaries, and behave like statesmen.
Senior Fellow in Home Policy Studies at the Heritage Foundation, Robert E. Moffit, Ph.D., specializes in analyzes of health care programs and eligibility.
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