Nov. 18, 2010 -
Offering the latest tough-love strategy to reduce the nation's debt, a
panel of high-profile Republicans and Democrats on Wednesday recommended
that Medicare beneficiaries pick up far more of their health care costs
and the government substantially curb the amount both Medicare and
Medicaid programs can grow in future years.
The panel, led
by former Republican Sen. Pete Domenici of New Mexico and Alice Rivlin,
the budget director under President Bill Clinton, also calls for a
national debt-reduction sales tax of 6.5 percent, as well as changes in
Social Security and income tax rates.
The debt
reduction task force was created by the Bipartisan Policy Center,
established by former congressional leaders of both parties. Its
recommendations come a week after the chairmen of President Barack
Obama’s commission on controlling the national debt
proposed increasing the age at which people qualify for Social
Security to 68 by 2050.
Backers of the
latest plan said they hoped it would spur a reluctant public and elected
leaders to grapple with painful choices needed to get the country’s
spending under control. But others warned the political prospects of the
plan seemed doubtful — particularly for some of the more far-reaching
ideas, such as limiting the amount the government would spend on
Medicare beneficiaries.
Right now,
premiums account for 25 percent of the cost of Part B, or the physician
component of the program, with the government paying the balance. The
task force would increase beneficiaries’ share to 35 percent.
In addition,
starting in 2018, traditional Medicare would be turned into a "premium
support" program that would limit the rate of increase of federal
spending per beneficiary to one percent above the growth rate of the
economy. Under such a plan, beneficiaries likely would pay more to stay
in traditional fee-for-service Medicare though they could save money by
getting coverage though private health plans that would compete against
each other for business.
Projected
Health Care Savings By 2040
> $10 trillion:
phasing out the tax exemption on employer-provided health benefits.
> $7 trillion:
impact of premium support plan.
> $3 trillion:
changing the way states and the federal government split the costs of
Medicaid.
> $644 billion:
new soda tax.
> $300 billion:
medical malpractice reforms such as caps on damages.
> $123 billion:
increasing Medicare premium costs for beneficiaries.
Source: Debt
Reduction Task Force of the Bipartisan Policy Center
"I think the
premium support is a feasible way of controlling costs," Rivlin said
Wednesday at a press briefing.
But this
approach has never drawn much political support over the years. "It’s
hard to see either party embracing a full blown premium support plan,"
said Henry Aaron, a Brookings Institution expert who helped develop the
idea in the mid-1990s. “The Democrats would be largely against it
because of cuts in benefits and not enough Republicans would have a
stomach for it. It would mean big benefit cuts and a substantial
increase in out of pockets costs."
AARP Executive
Vice President John Rother said his group would oppose premium support.
Of the overall task force report, he said it "raises lots of questions
because of how it shifts more costs to individuals."
The task force
also recommends slowing the growth rate of Medicaid, the joint
state-federal program for the poor and disabled. But the report did not
provide any specifics other than saying the state and federal government
should explore changing the way they split paying the cost of Medicaid.
In addition, the
task force proposes phasing out by 2028 the tax exclusion on
employer-provided health care benefits. The group also would eliminate
the so-called Cadillac tax on high-cost plans, a provision of the new
health law that takes effect in 2018. Taxing employee health benefits
would generate about $10 trillion in savings by 2040, more than any
other revenue generator, according to the report.
Labor unions
have opposed eliminating the tax exemption on health benefits out of
concern it would lead employers to provide stingier benefits, said Paul
Ginsberg, president of the nonprofit Center for Studying Health System
Change and a consultant to the task force.
Michael Cannon,
a health policy expert at the libertarian Cato Institute, said the
premium support change to Medicare would have greater ramifications than
the ideas offered last week by the chairmen of Obama’s commission. Their
report recommended increasing cost-sharing for Medicare beneficiaries,
but didn’t specify an amount, and changing the way doctors and hospitals
are paid to encourage more efficient care.
"You can fiddle
with the price control formulas as much as you want, but the people
whose incomes are determined by those formulas are probably going to
carry the day," Cannon said. He said the plan’s short-term political
prospects were few.
Other
recommendations:
● On Social Security, raise the amount
of wages subject to payroll taxes – now $106,800 -- so that 90 percent
would be covered, and "slightly" reduce the growth in benefits for the
top 25 percent of beneficiaries.
● Establish only two income tax rates,
15 percent and 27 percent; end deductions for mortgage interest and
charitable contributions, replacing them with 15 percent refundable
credits, and lower the top corporate tax rate from 35 percent to 27
percent.
But the task
force also veered sharply in the direction of reviving the economy and
creating jobs with a recommendation for a payroll "tax holiday" in 2011
that would excuse employers and workers from paying the 12.4 percent tax
into the Social Security Trust Fund.
Taking these and
other steps, by 2020 federal spending would be reduced from a projected
26 percent of GDP to 23 percent, and the federal debt would be brought
down below 60 percent of GDP, the task force said.
What others
report…
Co-chairs
Alice Rivlin, the budget director under President
Bill Clinton, and former Republican Sen. Pete Domenici of New
Mexico.
New Deficit Report Recommends Seniors Pay More For
Medicare
Kaiser Health News staff writers Phil Galewitz and Jordan Rau filed this
update: "Backers of the latest plan said they hoped it would spur a
reluctant public and elected leaders to grapple with painful choices
needed to get the country's spending under control. But others warned
the political prospects of the plan seemed doubtful — particularly for
some of the more far-reaching ideas, such as limiting the amount the
government would spend on Medicare beneficiaries" (Kaiser Health News).
Deficit Panels Go Where Politicians Won't
The sponsors of the plans say that the scale of the nation's fiscal
problem is too great to resolve without both raising taxes and cutting
projected spending on Medicare, Medicaid and Social Security, all
popular entitlement programs (The New York Times).
Rivlin-Domenici Put Medicare On A Weight Loss Diet
The latest entry in the deficit reduction sweepstakes from the
Bipartisan Policy Center calls for a major overhaul of Medicare
financing that would turn most of the program over to the private
insurance industry and cap government support (The Fiscal Times).
Deficit Commission Debates Rep. Ryan's Proposal For
Dramatic Changes To Medicare
President Barack Obama's deficit commission on Wednesday debated a
dramatic plan to gradually turn Medicare from a system in which the
government pays most beneficiaries' medical bills into a program in
which seniors would purchase health insurance with government-issued
vouchers (The Associated Press/Los Angeles Times).
Deficit Proposal Draws Mixed Review
A new Wall Street Journal/NBC News poll shows Americans skeptical of
deficit-cutting proposals laid out by the chairmen of a commission
appointed by the White House (The Wall Street Journal).
Bloomberg: "The plan also makes
$756 billion in cuts to health care through 2020, including raising
Medicare premiums from 25 percent to 35 percent over five years, and
starts a premium support program to limit growth in federal spending on
the health-care program for the elderly" (Przbyla, 11/17).
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