President Joe Biden on Tuesday unveiled his plan to keep Medicare solvent for at least 25 years without cutting benefits, as the insurance program faces a looming funding crisis.
The plan — part of Biden’s 2024 budget proposal set to be released Thursday – would further reduce what Medicare pays for prescription drugs and raise taxes on Americans earning over $400,000.
The future of Medicare, which covers some 64 million people in the U.S., is looking increasingly precarious. A key trust fund that covers inpatient hospital care in Medicare is forecast to run dry in 2028, absent federal action.
Following the go-broke date for the hospital fund, Medicare will pay out 90% of scheduled benefits by relying solely on income, impacting the benefits of senior and disabled Americans.
Legislators are taking a tougher look at government programs, as Democrats and Republicans in Washington spar over the debt ceiling and whether to shrink the nation’s deficit. Biden has made protecting Medicare a priority during the debate, despite promises from Republican leaders that the program won’t be touched.
“The budget I am releasing this week will make the Medicare trust fund solvent beyond 2050 without cutting a penny in benefits,” Biden wrote in an opinion piece published in The New York Times on Tuesday morning.
The president’s plan would increase the net investment income tax from 3.8% to 5% on people earning more than $400,000 annually. It would also close loopholes that have allowed some wealthy Americans to dodge the tax.
The plan also builds on the Inflation Reduction Act passed last year that allowed Medicare to negotiate drug costs for the first time.
It would allow Medicare to negotiate prices for more drugs, and speed up the negotiation process. It would also extend the rule requiring drug companies pay rebates to Medicare when they increase prices faster than inflation to commercial health insurers.
In addition, the plan would lower out-of-pocket costs for drugs that are subject to negotiation and cap co-pays for some generic medications for chronic conditions to $2 a month.
The prescription drug savings would reduce the deficit by $200 billion over 10 years, according to the White House. Biden said he plans to put those savings directly into the Medicare trust fund.
The budget also proposes lowering behavioral health costs in Medicare by eliminating cost-sharing for three mental health visits a year and requiring parity between physical and mental health coverage.
“These are common-sense changes that I’m confident an overwhelming majority of Americans support,” Biden wrote in the op-ed.
Despite the plan, Congress alone has the authority to enact the U.S. budget. However, it’s the latest step in the messaging war between Democrats and Republicans over federal entitlement programs.
Following public pressure, Republican leaders have vowed not to touch Medicare and Social Security during the debt ceiling debate, but haven’t made the same promise for Medicaid.
A number of Republicans support proposals to cap spending in the insurance program for low-income Americans or apply work requirements curtailing eligibility.