By Ben Ritz
President Biden has used his budget proposal to Congress to position himself as a champion of Medicare and Social Security. Even before the budget’s official release, Biden took to the guest essay pages of the New York Times to outline his plans to tackle Medicare’s looming insolvency.
It’s good that the administration is at least acknowledging the need for action to shore up the finances of these vital social insurance programs and has offered a few concrete proposals to do so. But the specifics of his plan are both convoluted and problematic, and the large shortfalls that would remain even if the president could enact his policy wishlist make clear the need for policymakers to consider a much broader menu of options.
Biden’s Medicare proposals are largely limited to increasing revenue for the Hospital Insurance (HI) Trust Fund, which finances Part A benefits (hospital services, nursing facilities, home health assistance, and hospice care) and is projected to run out of money in just five years. If no action is taken before then, payments would be limited to what can be financed by incoming revenue, resulting in an automatic spending cut of roughly 10%. The Biden budget would increase the dedicated taxes that finance Part A by about 30% — but only for people with annual incomes over $400,000. This is a real revenue increase that would delay the trust fund’s insolvency by several years.
