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New legislation introduced in the U.S. House of Representatives aims to avert a shortfall in the Medicare Hospital Insurance Fund by closing tax loopholes and redirecting tax revenue in an effort to keep the fund solvent for at least a year. another decade.
Introduced this week by Rep. Lloyd Doggett, D-Texas, the “Assuring Medicare’s Promise Act” aims to close a loophole through which wealthy Americans can circumvent paying net investment income tax (NIIT), and would redirect this 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 said the move would not raise taxes, but would secure seven more years of Medicare solvency. The fund is currently expected to run out of money in 2028.
Although this is two years later than originally announced last year, the fund reserve will run out at this time, and the program’s total ongoing income will be sufficient to pay 90% of total benefits. expected, according to Social Security and Medicare administrators. 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 financial health of Medicare so that the health of patients is not at risk.”
WHAT IS THE IMPACT
The bill ensures that high-income mid-tier business owners must 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, although the revenue was not proposed to be allocated to Medicare.
Revenues generated by 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’s solvency for at least a decade, Doggett said.
“The acute and justified concern about the future solvency of the Medicare Trust Fund calls for common sense and immediate solutions that do not impose additional financial burdens on beneficiaries,” said Max Richtman, President and CEO of the National Committee. for the preservation of social security and health insurance. “The Asuring Medicare’s Promise Act meets both requirements by reclaiming misdirected tax revenue from the Treasury to the Medicare Trust Fund. This bill also passes the fairness test by ensuring that wealthy business owners and income owners investment funds can no longer avoid paying the 3.8% Medicare Tax to fund health care Implementation of these strategies is expected to extend the solvency of the Medicare Trust Fund from 2028 to 2040 and should receive the full support of Congress without hesitation.
THE GREAT TREND
Medicare and Social Security both face long-term funding shortfalls under currently scheduled benefits and funding, trustees found earlier this year. The cost of both programs will rise faster than gross domestic product through the mid-2030s, primarily due to the rapidly aging US population.
Medicare costs are projected to rise faster than GDP through the late 2070s due to projected increases in the volume and intensity of services provided.
The Supplementary Medical Insurance (SMI) Trust Fund, on the other hand, is adequately funded for the indefinite future as current law provides for funding from general revenue and beneficiary premiums each year to meet costs. planned for the following year.
Because of these funding arrangements and its rapidly growing costs, the SMI will place increasing demands on taxpayers and beneficiaries, the administrators noted.
By law, there are six administrators, four of whom serve by virtue of their office 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 directors are public representatives appointed by the President, subject to confirmation by the Senate. The two public curator positions have been vacant since 2015.
“Due to loopholes in the law, the wealthy are not paying their fair share to Medicare,” said Alex Lawson, executive director of Social Security Works. “Asuring Medicare’s Promise Act fills these gaps so that we can expand Medicare and keep it strong for decades to come. Social Security Works is proud to approve this long-awaited legislation, which will give Medicare beneficiaries peace of mind. spirit they so badly need for the future. of their acquired services.”