Archive for Medicare
Why Obama Punted on Deficit Reduction
Posted by: | CommentsThe latest Republican talking point is that President Obama is “punting” on his fiscal responsibilities by not proposing deep cuts in Medicare and Social Security. It is true that Obama’s 2012 budget was exceedingly timid when it came to deficit reduction. But Obama’s GOP critics ooze hypocrisy when they accuse him of fiscal irresponsibility.
This, after all, is the party that just last year, in its zeal to defeat “Obamacare,” demonized as “death panels” the president’s modest effort to constrain future cost growth in Medicare. And it is the party that continues to demand the 2001 and 2003 tax cuts be made permanent for all.
As usual, Republican message discipline is impressive: “We got a punt,” said House Budget Chairman Paul Ryan (R-WI) of the Obama fiscal plan. “When it comes to the real issues facing our country, he just punted,” said House Speaker John Boehner. “Obama Punts the Debt to the GOP” read a headline in the GOP mouthpiece The Weekly Standard. And so on.
The Republican death panel argument has taken on a curious double-meaning. Initially, it was their criticism of a provision in the 2010 health law that allowed Medicare to pay doctors for end-of-life discussions. Then, it morphed into the GOP’s objection to an independent board created to recommend Medicare cost savings to Congress.
The combined messages were a huge political winner for the GOP in 2010. In the non-presidential election year of 2006, voters 65 and older split evenly between Republican and Democratic congressional candidates. In off-year of 2010, GOP candidates won this group by 21 percentage points. The major reason according to pollsters: seniors’ fear of Medicare cuts under Obamacare, a worry aroused by the same GOP leaders who now criticize the president for not proposing Medicare cuts.
Obama is no fool. In the wake of 2010 election debacle, it is absurd to expect him or congressional Democrats to stick out their necks again on Medicare—to say nothing of Social Security. By choosing to trash the health law’s Medicare constraints for short-term political gain, Republicans dealt a serious blow to deficit reduction efforts.
How steep a hill must those who want to trim Medicare climb? According to a recent poll by the Kaiser Family Foundation, nearly half of those surveyed oppose any reductions to the program, which accounts for one-sixth of all government spending.
Obama may have a bit more room to maneuver on taxes, but not much. Polls suggest Americans support tax increases on high-earners to reduce the deficit. But the public opposes other new revenues. And last December, of course, Obama seemed unwilling to engage on the tax issue at all. The president, who vows to never raise taxes on individuals making less than $200,000 (or couples making less than $250,000) agreed with the GOP to extend the Bush-era tax cuts for all for two more years.
The GOP leadership, boxed in by its own “no new taxes” pledges and pressure from the tea party, shows no sign of budging on revenues. Obama has boxed himself in on taxes. And why would any but the most naive Democrat unilaterally propose unpopular Medicare cuts without so much as a hint of GOP movement on revenues?
Thus, Obama and the GOP do budget battle on the exceedingly narrow ground of non-security domestic spending—roughly 12 percent of government. In this environment, small-government, anti-regulatory Republicans get what they want: big cuts in highly visible (though relatively small) programs. And Hill Democrats get what they want—the opportunity to rip the GOP for allegedly increasing the suffering of those in need.
A small bipartisan group of senators is struggling mightily, with quiet White House backing, to find a way out of this maze. But given recent political history, it is hard to see how they’ll succeed.
Obama’s Medicare UnPayroll Tax
Posted by: | CommentsPresident Obama’s proposal to boost the Medicare tax is a key element of the compromise health bill that looks increasingly as if it is going to become law. The Joint Committee on Taxation estimates it would generate over $180 billion over the next decade. And exactly as intended, the tax increase would fall almost entirely on the top 1 percent of taxpayers, according to a new analysis by my Tax Policy Center colleagues.
The Tummy Tax & More: How Senate Dems Would Pay for Health Reform
Posted by: | CommentsSenate Majority Leader Harry Reid (D-Nev.) has pulled together a health bill that relies on three major revenue sources (and many smaller ones) to help support the cost of new insurance subsidies for those with low- and moderate-incomes.
Redi proposes $370 billion in new tax revenues over the next decade. $150 billion would come from a 40 percent excise tax on high-cost employer-sponsored insurance. Fees on makers of branded drugs and medical devices and on insurance companies would raise another $100 billion. Boosting the Medicare payroll tax by 0.5 percent on wages in excess of $200,000 ($250,000 for couples) would bring in another $55 billion. Among the cats and dogs: $15 billion from an increase in the floor on deductible medical expenses from 7.5 percent to 10 percent, and $6 billion from an excise tax on cosmetic surgery (the tummy tuck tax).
Reid picked very different revenue sources than the House. It would raise far more in taxes—about $540 billion through 2019. And 85 percent–$460 billion– would come from a 5.4 percent surtax on incomes in excess of $500,000 ($1 million for couples).
A few thoughts on these proposals:
As I have written in the past, the House bill troubles me because it requires a few hundred thousand taxpayers–fewer than 1 percent–to pay for the bulk of health reform. That is bad economics and even worse governance. The Senate bill divides the burden somewhat more. While insurers would pay the excise tax on expensive employer-sponsored insurance, they would pass on much of the cost to workers. And the JCT estimates that middle-class employees would bear a substantial share (at least in an earlier version of the bill). Similarly, those taxes on drug and device makers as well as insurers will also be passed on, at least in part, to their customers, who are us.
The higher Medicare rate in the Senate bill is merely another way to tax the wealthy. I’m a bit surprised that senators who so strongly opposed the income surtax are so quiet about the Medicare surtax. Thus, we’ve learned that the Senate is OK with a $55 billion tax hike on the wealthy but not with a $460 billion increase. It doesn’t take a rocket scientist to figure that the tab for the top brackets will come in somewhere between those two numbers when the final law is written. The neighborhood of $200 billion sounds about right.
The Senate would raise the floor on deductible medical expenses to 10 percent, except for seniors who’d get to keep the 7.5 percent floor. Anybody want to explain why catastrophic health costs are harder on a retiree than on a working family?
Finding the revenue to pay for health reform was always going to be a huge challenge. It still is, but we are beginning to see the outlines of a deal—a little income tax surcharge here, a dollop of insurance premium excise tax there, and more than a few cats and dogs. It may not really pay for the cost of insurance reform over next decade, but it will pass muster with the scorekeepers. And in Washington these days, that’s all that matters.