Reports have surfaced that conservatives in Congress may propose further increasing income adjustment in Medicare to lessen the program’s insolvency. This is a great idea. While the left continues to argue for higher taxes for the likes of Warren Buffett to maintain the status quo of a costly, failing Medicare program, it makes more sense that Congress should simply stop subsidizing them.
As Congress continues to pursue solutions to the entitlement spending crisis, one question that must be answered is whether the United States should even have universal federal entitlements to begin with. Considering the wreckage of the nation’s finances, the answer is clearly no. It’s not only that we cannot afford it, but the very creation of popular dependency on government itself threatens prosperity.
For wealthier Americans like Buffett, the policy options are clear. The Obama Administration and its allies in Congress are obsessed with imposing higher taxes on them, regardless of the impact on investment in the economy and despite the fact that they already pay the bulk of federal income taxes. The intent behind this course of action is to maintain, largely unchanged, the existing federal entitlement regime.
The alternative is to introduce reform that uses market forces to control costs, part of which would be to reduce or eliminate taxpayer subsidies for entitlement benefits for upper-income Americans while letting more Americans of all income classes keep more of their own money.
Increasing income adjustment in the current program would move Medicare closer to a final transition to a market-based, consumer-driven program like that put forth in Heritage’s Saving the American Dream plan. A major component of this plan is that federal assistance, provided through a defined contribution to private plans chosen by seniors themselves, is targeted to those who need it most.
But income-adjusting higher-income seniors’ Medicare benefits is nothing new. It was first introduced to Medicare Part B in 2007. Under Obamacare, President Obama and liberal Members of Congress increased and expanded income adjustment by applying a new, income-adjusted premium to Medicare Part D, the voluntary prescription drug benefit, by freezing income thresholds until 2019, when they will once again be indexed to inflation.
This means that for the rest of this decade, income-related premiums will apply to a larger percentage of seniors every year until 2019. The President has even proposed freezing the thresholds indefinitely until 25 percent of Medicare enrollees pay a higher, income-related premium.
As Heritage research on Medicare reform explains, “In sharp contrast to the ‘cliff’ effects of current law, in which retiree costs increase over four income categories, the income thresholds for the phaseout of taxpayer subsidies are far more gradual and less disruptive and would be indexed to inflation as measured by the Consumer Price Index.”
Further income-adjusting Medicare is not a partisan proposal, and it’s nothing new. Instead, it is the right step to take to move Medicare one step closer to solvency and toward the transformation necessary to ensure that it will remain viable for future generations.