No, Acting Quickly on Medicare Premiums Doesn't Reduce The Cost
Lawmakers may be taking action to prevent a steep premium and deductible hike for some Medicare beneficiaries next year, but should make sure to be fiscally responsible in doing so. Although some lawmakers claim acting before October 15 will reduce the cost, in reality it will only hide the cost and thus increase deficits.
As we explained previously, Medicare premiums typically rise every year, but this time it's complicated by the fact that there will likely not be a Social Security cost-of-living adjustment (COLA) for next year. That will will put into motion a "hold harmless" provision that exempts most Medicare beneficiaries from the standard annual premium increase. As a result, other Medicare beneficiaries will shoulder the entire increase that would have been split by everyone, resulting in a 52 percent increase in premiums for those beneficiaries.
Lawmakers are considering options to avert the increase. The cost of any relief should be fully offset, but some lawmakers appear eager to take advantage of a quirk in Congressional Budget Office (CBO) scoring procedures that would allow them to avoid paying for most of the roughly $8 billion cost if they act before October 15. House Minority Leader Nancy Pelosi (D-CA) referred to this in her remarks at a press conference earlier today:
For reasons that I won’t go into – if we act by October 15th, this will cost the taxpayer less in the overall budget. If we act before October 15th, it will have less of an impact on states. We must act so that we stop the pain that will be inflicted upon our seniors.
We will, however, go into the reason. October 15th is the date that the Social Security Administration will officially announce next year's COLA, which is expected to be zero. If lawmakers act before then, legislation limiting the premium and deductible increase for the roughly 30 percent of beneficiaries who are not held harmless will be scored based on old assumptions from March, when CBO thought there would be a 0.9 percent COLA next year and therefore a smaller increase to premiums and deductibles spread across all beneficiaries. Legislation passed before October 15th that averted this smaller increase, then, would falsely be scored as having a lower cost than it really will.
However, if legislation is not passed until after October 15th, it will be scored based on the updated assumption that there is no COLA, premium and deductible increases are higher, and it costs the true amount to avert the increase.
The upshot is that if lawmakers act in the next week, the change will be scored as costing less, but unlike what Pelosi indicates, it won't change the cost in reality. Acting quickly only enables lawmakers to hide the cost of the premium change, not actually reduce it.
Given the modest cost of protecting certain beneficiaries from steep premium and deductible increases, lawmakers shouldn't be looking to gimmick their way out of budget discipline. They should be discussing the many offsets available to them.