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New legislation introduced in the U.S. House of Representatives seeks to avoid a shortfall in the Medicare Hospital Insurance Fund by closing tax loopholes and redirecting tax revenue in a push to keep the fund solvent by at least another decade.
Introduced this week by Representative Lloyd Doggett, D-Texas, the “Assuring Medicare’s Promise Act” looks to eliminate a loophole by which wealthy Americans can bypass paying net investment income tax (NIIT), and would redirect that revenue to the Medicare Hospital Insurance Fund, which pays for Medicare Part A services. Part A helps pay for services such as inpatient hospital care.
Doggett claimed the move would not raise taxes, but would assure an additional seven years of Medicare solvency. The fund is currently projected to run out of money in 2028.
While that’s two years later than was originally reported last year, the fund’s reserve will run dry at that point, and continuing total program income will be sufficient to pay 90% of total scheduled benefits, according to the Trustees of the Social Security and Medicare trust funds.
“While some Republicans would cut benefits or just wring their hands, we need a real plan,” Doggett said in a statement. “As stewards of the Medicare program and representatives of tens of millions of beneficiaries, Congress has a responsibility to protect the fiscal health of Medicare so that patient health is not at risk.”
WHAT’S THE IMPACT
The bill ensures high-income owners of pass-through businesses have to pay either the 3.8% Medicare employment tax or the 3.8% Net Investment Income Tax. This provision was included in the House-approved Build Back Better Act, though the revenue was not proposed for allocation to Medicare.
Revenue generated from the NIIT would be redirected to the Hospital Insurance Fund. Together, closing the loophole and redirecting NIIT revenue is expected to generate $650 billion and extend Medicare solvency for at least a decade, Doggett said.
“The justifiably acute concern for the future solvency of the Medicare Trust Fund calls for common sense, immediate solutions that do not impose additional financial burdens on beneficiaries,” said Max Richtman, president and CEO, National Committee to Preserve Social Security and Medicare. “The Assuring Medicare’s Promise Act meets both requirements by claiming misdirected tax revenue from the Treasury back to the Medicare Trust Fund. This bill also passes the fairness test by ensuring that wealthy business owners and owners of investment income can no longer avoid paying the 3.8% Medicare tax to fund healthcare. Implementing these strategies is predicted to extend the Medicare Trust Fund’s solvency from 2028 to 2040 and should receive full Congressional support without hesitation.”
THE LARGER TREND
Medicare and Social Security are both facing long-term financing shortfalls under currently scheduled benefits and financing, the trustees found earlier this year. The cost of both programs will grow faster than gross domestic product through the mid-2030s, primarily due to the rapid aging of the U.S. population.
Medicare costs are projected to grow faster than GDP through the late 2070s due to expected increases in the volume and intensity of services provided.
The Supplemental Medical Insurance (SMI) Trust Fund, meanwhile, is adequately financed into the indefinite future because current law provides financing from general revenues and beneficiary premiums each year to meet the next year’s expected costs.
Due to these funding provisions and the rapid growth of its costs, SMI will place steadily increasing demands on both taxpayers and beneficiaries, the trustees found.
By law, there are six trustees, four of whom serve by virtue of their positions in the federal government: the Secretary of the Treasury, the Secretary of Labor, the Secretary of Health and Human Services, and the Commissioner of Social Security. The other two trustees are public representatives appointed by the president, subject to confirmation by the Senate. The two public trustee positions have been vacant since 2015.
ON THE RECORD
“Due to loopholes in the law, the wealthy aren’t paying their fair share into Medicare,” said Alex Lawson, Executive Director of Social Security Works. “The Assuring Medicare’s Promise Act closes these loopholes so that we can expand Medicare and keep it strong for decades to come. Social Security Works is proud to endorse this long-overdue legislation, which will give Medicare beneficiaries much needed peace of mind about the future of their earned benefits.”
Twitter: @JELagasse
Email the writer: jeff.lagasse@himssmedia.com
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