Saving Medicare - forget Social Security

While President Bush is busy wasting everyone’s time talking about Social Security privatization, he is totally ignoring the fact that Medicare will face a lack of money this year. He’s busy throwing buckets of water on the barn while the house burns down. The amazing thing is that no one else seems to realize what’s going on.

Part of the problem is the President’s own prescription plan. It simply doesn’t have the funds to be workable. Worse than that, because Medicare is obligated now to pay those prescriptions other Medicare benefits may be jeopardized by overspending in the new Medicare D (that’s the formal name of the prescription plan). So, not only is the house on fire, but the President is the one who set the fire.

But, OOOOOOOHHHHHHH, don’t let the barn burn down!

I won’t inflict all of the numbers on you – although I will inflict some numbers when it can’t be prevented – but I’ve hit upon a very simple way to save Medicare. It won’t be entirely painless for people making over a million dollars a year, but I honestly don’t think they are really hurting from the 3% (roughly) Medicare tax they currently pay. Meanwhile, some several million Americans – including many who are head-of-household – work at least one minimum wage job without any health care benefits at all and pay that same three percent Medicare tax so someone else can go see the doctor when they get sick. To me, this is the single most unfair part of our social service program.

Medicare is split into four programs, which bear the very explanatory labels of Part A, Part B, Part C, and Part D. Part A covers hospitalization expenses. Part D is the aforementioned prescription program. Medicare B operates as a sort of HMO and pays for going to the doctor and some medical expenses outside of hospitalization. Medicare C was an attempt to privatize Medicare by offering HMO plans from outside contractors.

Both Medicare B and C generally require a monthly payment (there are some exceptions) and are automatically “revenue neutral” which means that the cost of these programs is split between the government and the recipient. If costs go up, payments to buy-in to the programs goes up. If costs go down (remember when costs used to go down?), payments go down. Medicare B currently costs about $50 a month for a beneficiary. That represents about 25% of the total cost of providing benefits. The rest is obligated from the general revenues of the government.

My plan has two parts to it – the first half of it is adjusting the Medicare tax and the other half is widening the scope of the program. First, anyone who makes over $90,000 already gets a twelve percent reduction in payroll taxes due to the limits on Social Security taxes. This is a regressive tax that taxes poor people more than rich people. Part of my plan for saving Social Security involves raising that “tax cap” to one million dollars. At that point, the Medicare tax is adjusted and replaces the Social Security tax fully. Basically, it raises the Medicare tax to fifteen percent on incomes over one million dollars per year.

By my calculations, that would provide enough money to pay for the President’s prescription plan as well as keeping all of Medicare afloat. Yes, there are that many people making over one million dollars per year that they alone can save the system if only they are asked to pay the same overall tax rate that those below them are. I call this new philosophy “tax fairness”.

I also suggest that expanding the coverage of Medicare B (and C) to allow every American the opportunity to buy into the program at full price. That means that someone working for minimum wage right now would only have to pay a little more than fifty dollars a week to get basic health care. By offering tax incentives to small employers, this could actually be reduced even further. The bite could be made less painful by allowing a payroll deduction in pre-tax dollars. A minimum wage increase of only a dollar an hour would practically erase the cost of buying into the system for minimum wage workers.

Remember, these people are paying full price, so there would be no transfer from the general revenue fund to cover them. They are paying the full price of the insurance. Plus, it is revenue neutral, so if they drive costs up, they pay more. If costs go down, due to lowered average risk of the entire group, then everyone benefits even more. Allowing people to buy Medicare B (or C) as “gap” insurance would even draw in the underinsured and allow them to be fully insured with no extra cost to the taxpayers.

Just to be clear, using Medicare B or C offers people the option to either utilize a government run HMO (part B) or a private HMO (part C). Those who philosophically oppose “big gubment” could use part C and retain their ideological integrity. Those who can’t afford the slightly higher price of part C would still get coverage through part B. Because it is totally voluntary, no one is “forced” to do anything.

Nor would private HMOs lose any customers. These are already people that aren’t covered. In fact, if they chose part C, it would actually allow them to have more customers. So, it’s good for the government, good for the people, good for the industry, and good for society. What’s not to love about it?