For U.S. Republicans, tax reform math hinges on cutting Medicare

From Reuters - November 9, 2017

CHICAGO (Reuters) - U.S. retirement savers dodged a speeding train last week when Republican lawmakers racing toward tax reform dropped their plan to sharply reduce allowable tax-deferred contributions to 401(k) plans. That idea is off the table - at least for now.

But listen carefully and you can hear the whistle blowing on another train barreling down the tracks.

Call it the Slash Medicare Express. The whistle is still a bit faint, but it is sending a clear warning signal.

A 2018 budget blueprint approved by Congress late last month would reduce Medicare spending by $473 billion over 10 years compared with the current baseline projection, and proposes $1.3 trillion in cuts to Medicaid, various Affordable Care Act (ACA) tax credits and cost sharing subsidies and other health spending. Republicans need the spending reductions to make room for $1.5 trillion in tax cuts, mostly for corporations and wealthy households.

The budget plan does not include the specifics on how these cuts will be achieved. But previous Republican plans for Medicaid - the joint federal and state health insurance program for lower-income people and children -would have been disastrous for millions of older Americans.


How about Medicare? Republicans have repeatedly called for two Medicare reforms in the past that would be devastating for older Americans. They would raise the age of Medicare eligibility to 67 from 65, and shift Medicare to a flat premium-support payment, or voucher, that beneficiaries would use to help buy either private health insurance or a form of traditional Medicare.

Proponents of a higher Medicare age like to justify it by pointing to rising American longevity, saying it is needed to fend off looming solvency for Medicare. But rising longevity is not spread evenly across the population - and the most recent data suggests that the gains may be leveling off or falling back. (

Pushing Medicare eligibility back would leave millions of Americans to fend for themselves while they wait to turn 67. Perhaps they will work longer to stay on employer health plans. Perhaps they will obtain coverage through the Affordable Care Act health exchanges - if the marketplaces survive relentless attack from the Trump administration.

Here is a better idea: let them continue to enroll in Medicare when they turn 65 - or even drop the age lower. Medicare offers the most efficient path to providing healthcare for a rapidly aging population. The programs per-capita spending growth was 1.3 percent annually from 2010 to 2015, far less than the 3.2 percent growth rate for commercial insurance during that time, according to an Urban Institute report issued last month.


A higher Medicare age is easy to understand, but premium support is more insidious, because it comes wrapped in the gauzy promise that it will provide enrollees with greater choice. Under premium support, Medicare enrollees would buy health insurance either from traditional fee-for-service Medicare, or plans offered by commercial insurance companies. The federal government would support some portion of the cost of the coverage through an annual payment, or voucher.


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