Democratic members of the Senate Budget Committee voiced support for taxing the wealthy and increasing Medicare spending, arguing Republicans want to keep the status quo for corporations enjoying favorable tax breaks, during a hearing Thursday.
The Medicare Fund could become insolvent as early as 2031, according to analysis by the boards of trustees of the Social Security and Medicare Trust Funds, as reported by KFF Health News. If the Medicare Hospital Trust Fund runs out of funds, beneficiaries could face automatic cuts.
“Republicans and Democrats together gave President Biden earned a standing ovation [during the State of Union address] when he declared that cuts to Social Security and Medicare would be off the table,” said Sen. Sheldon Whitehouse, D-Rhode Island, during his opening remarks. He added that such a consensus implies the only way to fix Medicare would be to raise revenue by closing loopholes and making the tax code fairer.
According to Centers for Medicare & Medicaid Services (CMS) Chief Actuary Paul Spitalnic, if Congress passed Whitehouse’s Medicare and Social Security Fair Share Act, Medicare would be solvent for 75 years.
Republicans said the proposal’s revenue projections were not independently assessed by the CMS actuary office. Sen. Chuck Grassley, R-Iowa, disapproved of the plan’s call to raise marginal tax rates to more than 50% and said the proposed capital gains tax is a “revenue loser.” Sen. Ron Johnson, R-Wisconsin, said the biggest issue plaguing the healthcare system is increasing lack of competition in the marketplace.
James Capretta, holder of the Milton Friedman Chair at the American Enterprise Institute, echoed many Republicans Thursday by saying Medicare spending is a large factor in Medicare’s weak financial position. He said that by 2030, Medicare spending will account for 4.9% of GDP, compared to 1.9% in 1990.
“I do think we are headed toward some major dislocation if we don’t get fiscal discipline into our budget process,” Capretta said. He recommended both parties consider the revenue and spending side of the coin rather than focusing on half the issue.
Capretta also vouched for an increase in the payroll tax, though Sen. Ron Wyden, D-Oregon, pointed out payroll taxes are often avoided by the ultra-wealthy.
Experts on the panel in front of the committee emphasized the good Medicare benefits can do for certain populations.
“Since Medicare's inception, life expectancy at age 65 has risen by over 19 years as people have achieved access to lifesaving care,” said Marilyn Moon, a visiting scholar from the Center for Medicare Advocacy. She said past costs to Medicare have resulted in fewer benefits for enrollees, a problem that could worsen if the program is cut more.
Chye-Ching Huang, executive director of Tax Law Center, said the country’s tax base is not broad enough to ensure Medicare’s financial footing, especially as hedge fund and private equity managers can funnel billions of dollars through tax avoidance schemes.
“Some income from vast fortunes is completely carved out of the federal income tax base, and goes untaxed over decades, lifetimes or generations,” she explained. “Large multinationals can still report profits offshore so that they're subject to the law. A rash of other loopholes and preferences shrink the tax base and attract tax avoidance and evasion.”
She noted that Congress should approve policies that maintain IRS discretionary and mandatory funding, bolster reporting tools and reverse corporate tax power.
A pending government shutdown looms over all hearings and potential votes in Washington, D.C., this week. While Medicare and Medicaid would still continue under this scenario, many federal staffers would be furloughed and Medicare enrollment would be halted.