WASHINGTON —
With Congress debating plans to greatly expand Medicare by adding a prescription
drug benefit, The Concord Coalition said today that trade-offs should be made to
help rein in the program’s already unsustainable long-term cost. In that regard,
The Concord Coalition praised Senators Dianne Feinstein (D-CA), Don Nickles
(R-OK), Lincoln Chafee (R-RI) and Lindsey Graham (R-SC) for proposing an
amendment to the Senate’s prescription drug bill that would increase the
WASHINGTON —
With Congress debating plans to greatly expand Medicare by adding a prescription
drug benefit, The Concord Coalition said today that trade-offs should be made to
help rein in the program’s already unsustainable long-term cost. In that regard,
The Concord Coalition praised Senators Dianne Feinstein (D-CA), Don Nickles
(R-OK), Lincoln Chafee (R-RI) and Lindsey Graham (R-SC) for proposing an
amendment to the Senate’s prescription drug bill that would increase the
Supplemental Medical Insurance (SMI) premium for upper income beneficiaries.
“This reform would generate only a tiny fraction of the savings needed to pay
for the addition of a prescription drug benefit, to say nothing of closing
Medicare’s existing funding gap – a staggering $13 trillion over the next 75
years. It would, however, establish a critical principle: “modernizing” Medicare
for the 21st Century means more than adding politically attractive benefits. It
also means making politically hard choices to ensure Medicare’s fiscal viability
for future generations. Raising the SMI premium, which is nothing more than a
reduction in the government subsidy for upper income beneficiaries, is among the
easiest of the ‘hard’ choices,” said Concord Coalition Executive Director Robert
Bixby.
Currently all beneficiaries pay only 25 percent of Part B program costs; the
remainder comes from general revenues. The basic issue is one of fairness. It
makes no sense for a working couple with two children, and a $50,000 income
(about the national median for family households) – trying to buy a home, trying
to find affordable health insurance, trying to save for their kids’ education,
and trying to put aside something for retirement – to have to pay 75 percent of
the Medicare premium for a retired couple whose income exceeds $150,000 a year
(far above the national median.)
Federal subsidies should not be going to the well-off, particularly when
Medicare is facing strong fiscal challenges and other programs in the budget are
being forced to fight for every last dime. The concept of phasing out federal
subsidies for upper income individuals is well established. Indeed, the tax bill
recently passed by Congress phases out eligibility for child tax credits as
families’ incomes rise. If means-testing is acceptable for working families, it
should be acceptable for retired seniors. Applying this principle
to Medicare Part B would not only be consistent with other federally subsidized
programs, it would be an equitable response to SMI’s unsustainable growth.
Another logical cost saving reform is to match the Medicare eligibility age to
the eligibility age for full Social Security benefits. Changing demographics are
a given. With or without new benefits, the growing number of Medicare
beneficiaries will put substantial strain on the budget. According to the
Medicare Trustees, the cost of the program will rise from 2.6 of the economy
(GDP) to more than 9 percent over the next 75 years. The Congressional Budget
Office estimates that 30 percent of this cost growth is attributable to the
aging of the population.
In 1983, Congress recognized that changing demographics justified a gradual
increase in the eligibility age for full Social Security benefits from 65 to 67
by 2025. The same demographics that led Congress to raise the eligibility age
for Social Security also justify an increase in the eligibility age for
Medicare. Both programs face swelling numbers of beneficiaries as the population
ages, and both are supported by the payroll taxes of a work force with shrinking
numbers of workers per beneficiary. With Americans living longer, it is common
sense to change Medicare along with the changing demographics. The earlier that
action is taken, the better — both to improve Medicare’s fiscal outlook for the
baby boom retirement years and to give future beneficiaries time to plan.
The Concord Coalition is a nonpartisan, grass roots organization dedicated to
balanced federal budgets and generationally responsible fiscal policy. Former
U.S. Senators Warren Rudman (R-NH) and Bob Kerrey (D-NE) serve as Concord’s
co-chairs and former Secretary of Commerce Peter Peterson serves as president.
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