CRFB Welcomes Plan to Put Medicare Solvency On the Table

Today, President Biden previewed a new plan to improve the solvency of the Medicare Hospital Insurance (HI) trust fund. The plan would increase the top rate of the HI payroll tax and net investment income tax (NIIT) from 3.8 percent to 5 percent, expand the NIIT to apply to more types of income, and expand the prescription drug pricing reforms enacted under the Inflation Reduction Act. The plan would transfer the new prescription drug savings into the Medicare HI trust fund and would also redirect existing NIIT revenue from the general fund to the HI trust fund.

The following is a statement from Maya MacGuineas, president of the Committee for a Responsible Federal Budget:

We strongly support the Administration’s efforts to strengthen the Medicare trust fund. The HI trust fund is only 5 years from insolvency, and we are pleased that the President has put forward a plan to extend the life of this vital program. Anyone who opposes the measures he suggests to lower prescription drug costs and raise new revenue should put forward their own ideas to address Medicare’s rising costs and looming insolvency.

We do have reservations, however. It would be better for the plan to keep the drug savings in Medicare Part D, where costs remain too high and are rising too quickly. Far more concerning, the Administration’s plan to redirect the NIIT revenue amounts to a large general revenue transfer that would strengthen Medicare on paper without truly improving its financing. Absent offsetting measures, this part of their plan simply robs Peter to pay Paul and, in the process, would worsen the budget outlook outside of the trust fund.

Even without diverting general funds, the President’s plan would generate hundreds of billions of dollars – perhaps even approaching a trillion dollars – to strengthen Medicare. We welcome these proposals and hope others put forward additional ideas to reduce Medicare Part A costs, lower health care costs more generally, rein in excessive payments to providers and insurers, improve incentives for high-value care, and generate adequate funding to support these important programs.

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For more information, please contact Kim McIntyre, Director of Media Relations, at mcintyre@crfb.org.