GOP’s Repeal of Obamacare Taxes Could Put Medicare Closer to Insolvency
Policy + Politics

GOP’s Repeal of Obamacare Taxes Could Put Medicare Closer to Insolvency


The House GOP drive to wipe out hundreds of billions of dollars of tax increases as part of the repeal and replacement of the Affordable Care Act has rekindled a debate over the long-term solvency of Medicare and the Republicans’ intentions to overhaul the premier federal health insurance program for seniors eventually.

By repealing a 0.9 percent federal payroll surtax for families earning more than $250,000 a year and individuals making more than $200,000, the Republicans would eliminate an estimated $117 billion in revenue over the coming decade for the Medicare trust fund. That would accelerate by nearly four years the timetable for depleting the Medicare hospitalization trust fund would begin to run out of money, potentially curtailing benefit payments unless additional taxes were raised.

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The 2010 Obamacare law effectively extended the life of the Medicare trust fund by more than 11 years through 2028 by increasing the federal payroll tax on wealthier Americans and by reducing reimbursements to doctors, hospitals and other health care providers.

However, House Speaker Paul Ryan (R-WI) and other GOP leaders have targeted the payroll tax increase along with $600 billion of other Obamacare-related tax increases on the health care industry and wealthier Americans to make good on their campaign pledge to eviscerate virtually all the tax increases and mandates imposed by the law.

“We made a promise to the people who elected us we would repeal and replace this law,” Ryan said Sunday on the CBS’s Face the Nation. “And we basically said, this is what we would replace it with. And now we are keeping our word.”

Critics including Democratic lawmakers, senior advocacy groups like AARP, which also sell health insurance, and former Department of Health and Human Services official Andy Slavitt charge that repealing the payroll tax hike will speed up the insolvency deadline and violate President Trump’s campaign pledge to do nothing to cut Social Security or Medicare benefits.

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“This bill breaks a clear Trump promise not to harm Medicare,” Sen. Ron Wyden of Oregon, the ranking Democrat on the Senate Finance Committee, said in a statement last week. “In addition to the bill’s many other harmful provisions, it gives a tax break to the wealthy and steals directly from Medicare’s coffers.”

Citing reports by the Congressional Budget Office and the Social Security and Medicare trustees, Joyce Rogers, senior vice president for governmental affairs at AARP voiced concern that the Republican replacement plan could “hasten the insolvency of Medicare by up to four years and diminish Medicare’s ability to pay for services in the future.”

Trump repeatedly promised during the presidential campaign that he would not cut Social Security or Medicare to control government spending and address long-term deficit problems.

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Privatization of Medicare for younger Americans has long been a central feature of Ryan's persistent calls for entitlement reform that have enjoyed substantial GOP support in the House but never made it past the Senate. Since Trump and the Republicans swept to victory in November, Ryan and other Republican House leaders have said they believe that the election results are a mandate to push a bold agenda including Medicare reform.

Despite Trump’s campaign promise to take Medicare cuts off the table, Ryan told reporters in late February that the issue was still “an open question.” He said that while he and Trump agreed that Medicare coverage for those who are retired or nearing retirement should be preserved, nothing should preclude taking steps to address the program’s long-term costs and impact on the public debt.

“I’ve been a big-time entitlement reformer for a long time because if you don’t start bending the cost curve in the out years, we are hosed,” Ryan told reporters.

Tampering with Medicare for more than 55 million Americans is politically risky at best, and Trump and House Republicans already are hip-deep in controversy over repealing Obamacare, despite the possibility that as many as 15 million people could lose health care coverage over the coming decade.

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Medicare covers much of the cost of hospital care, physician visits and drugs for those 65 and older. Medicare benefit payments totaled $632 billion in 2015 and accounted for 15 percent of the federal budget. It is funded primarily by general revenues, payroll taxes and beneficiary premiums.

While providing hospital and physician care to seniors, Medicare has also been troubled for years by fraud and waste. The Government Accountability Office (GAO) once again included Medicare on its “High-Risk List” of agencies and programs vulnerable to waste, fraud and abuse. CBO has projected that annual Medicare spending will reach $1.3 trillion by 2026.

Slavitt, who was the acting administrator for the Centers for Medicare & Medicaid Services during the last two years of the Obama administration, says he is concerned that Ryan and others are attempting to manufacture a crisis within the Medicare trust fund by repealing the tax, and then using that as an excuse to rush to overhaul the program.

 “I think it’s a smarter play for them to move Medicare closer to a crisis, try to get this bill done, and then build a case about why this crisis needs to be addressed,” Slavitt told TalkingPointsMemo late last week.

Ryan’s office declined to reply to the criticism directly.