Biden Budget Will Propose Tax Increase to Bolster Medicare
“This debate over entitlements tied to the need to raise the federal debt ceiling has tied the party in knots,” said Larry Levitt, an executive vice president at the Kaiser Family Foundation, a health research group. “And I think President Biden is happy to engage in this debate and put forward proposals to sustain Medicare without cutting benefits or eligibility.”
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Mr. Biden has refused to negotiate with Republicans over the debt limit, though he has said he is willing to discuss fiscal policy more broadly. He repeatedly attacked Republicans on Social Security and Medicare, vowing not to cut the programs and piling on when Republican lawmakers declared them off the table in budget talks.
The president’s budget plan seeks to further that message, in part by employing accounting maneuvers to make Medicare appear more solvent by directly dedicating more federal revenues to its trust fund. The budget will dictate that both the new tax increases and the savings from spending on prescription drugs would be used to increase the trust fund that finances Medicare’s hospital benefits. It will also propose transferring the existing revenue stream from the net investment tax to feed Medicare’s trust fund.
The White House anticipates that together the changes would total about $1.5 trillion over the next decade, ensuring the fund can pay Medicare’s hospital bills for an additional 25 years. The finances for the part of Medicare that pays for doctor’s visits, which is also projected to grow substantially in coming years, would be unaffected.
“The budget I am releasing this week will make the Medicare trust fund solvent beyond 2050 without cutting a penny in benefits,” Mr. Biden wrote in an opinion piece for The New York Times on Tuesday. “In fact, we can get better value, making sure Americans receive better care for the money they pay into Medicare.”
For the first time this year, Medicare will begin regulating the price of prescription drugs, using new powers Congress gave it in the Inflation Reduction Act, the tax, health and climate bill Mr. Biden signed late last summer. The president’s budget highlights the substantial savings that the reforms are expected to generate over time.
The legislation allows Medicare to regulate the price of certain expensive drugs that have been on the market for several years. It also limits the amount all drugmakers can raise prices each year. Those reforms would save Medicare about $160 billion over a decade, according to the Congressional Budget Office.
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