Publications & Presentations
March 6, 2017
From Inside Health Policy

By Michelle M. Stein

Democrats blasted the GOP health overhaul package as hurting Medicare, and a Democratic congressional aide pointed to concerns that a provision repealing a Medicare hospital tax levied by the Affordable Care Act on those with incomes over $200,000 could shorten the life of the Medicare Part A trust fund.

Senate Finance Committee ranking Democrat Ron Wyden (OR) said the package “steals money from Medicare to give a massive tax break to the wealthy,” and House Democratic Whip Steny Hoyer (MD) said the legislation “raids the Medicare trust fund, threatening its long-term solvency.”

The Affordable Care Act contained an additional hospital insurance payroll tax of 0.9 percent on high-income earners whose income exceeded $200,000 or $250,000 for joint tax filers. The provision went into effect in 2013.

After the ACA was passed, the Medicare Trustees issued a 2010 report stating: “The short-range financial outlook for the HI trust fund is substantially more favorable than projected in last year’s annual report, primarily as a result of the Affordable Care Act.” The report pointed to productivity adjustments, reduced payments to Medicare Advantage and the increased hospital insurance trust fund payroll tax as reasons why.

The Ways & Means legislative package would repeal that additional Medicare tax starting in 2018, according to a section-by-section breakdown of the bill.

The 2015 House reconciliation bill also included a provision to get rid of that tax, and the Congressional Budget Office said that provision would cost $123 billion over 10 years. However, Julius Hobson, a senior policy adviser at Polsinelli, said that while the provision in the recently released package appears to take funds from the Medicare Part A Trust Fund, without the CBO score for that package -- which has yet to be released -- there is no way to know what the exact effect of the provision would be.

The Democratic congressional aide, however, said there is concern the provision could take two years off of the life of the Part A Trust Fund.

The Committee for a Responsible Federal Budget on its website earlier this month urged lawmakers to retain or replace the additional Medicare hospital insurance tax.

One beneficiary advocate said that while the legislative package is still being reviewed, there are concerns the provision could harm the long-term fiscal health of Medicare. The advocate added that it was reasonable to expect higher earning individuals to contribute more to the program.

Hobson said the provision could set up lawmakers for tackling Medicare reform down the road. The package was released the same day that Office of Management and Budget Director Mick Mulvaney said on a conservative radio show that as soon as the 2018 spending budget is done, he hopes to put together something for President Donald Trump to look at on entitlement spending. During the campaign, Trump had promised not to cut Medicare. But Mulvaney told Hugh Hewitt, according to a transcript of the radio interview: “There are ways that we can not only allow the President to keep his promise, but to help him keep his promise by fixing some of these mandatory programs.”

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