The GOP wants to take money from Medicare's trust fund and give it to the rich

Washington Post

The Republican plan to repeal the Affordable Care Act, also known as Obamacare, would draw on Medicare's financially distressed trust fund to put money back in the pockets of some of the country's richest people.

Republicans would repeal the Medicare tax, a 0.9 percent surcharge on annual salaries of at least $200,000 for individual taxpayers or $250,000 for married couples. The nonpartisan Congressional Budget Office (CBO) projects that over a decade, repealing the tax would forego $117 billion that those wealthy households are currently expected to pay into the trust fund, which is used to cover the costs of health care for elderly Americans.

Repealing the tax would put the fund into "crisis mode," said Andrew Slavitt, a former acting administrator of the Centers for Medicare and Medicaid Services under President Barack Obama. Slavitt said the fund could be exhausted as soon as 2024 because of the changes, when President Donald Trump might still be in office.

Other Democratic experts joined in the criticism of the Republican plan.

"How could you possibly look out at America and decide that the problem is that rich people don't have enough money and the Medicare trust fund is too flush?" asked Jared Bernstein, who was chief economist to Vice President Joe Biden.

Lauren Blair Aronson, the Republican press secretary for the House Ways and Means Committee, argued for other solutions than taxation to Medicare's financial trouble.

"Keeping Obamacare's job-killing taxes that discourage work rather than reward it is not the answer," she said in a statement.

The Medicare tax is one of a number of taxes levied under the Affordable Care Act that Republicans would repeal retroactively in the revised version of their bill. These taxes primarily fall on wealthy households and the health-care industry. For instance, the list includes fees on insurance companies, prescription and over-the-counter medication, and medical devices.

If the tax is not repealed, Medicare's trustees predict that the fund will be exhausted in 2028. Should the fund run out, Medicare would have to rely solely on the money that the Internal Revenue Service withholds from each new paycheck, which would be enough to cover only about 87 percent of its beneficiaries' medical expenses going forward, per the projections.

Aronson said that GOP lawmakers had described their plan for improving Medicare's finances last year in a white paper produced by House Speaker Paul Ryan, R-Wis., and his colleagues.

That document calls for converting Medicare benefits into a system of coupons that recipients could use to purchase private plans. Those in or near retirement, according to the GOP proposal, would have the option of taking Medicare as it exists now. (The GOP plan refers to this reform as "premium support." Slavitt called this kind of system "vouchers," using the term favored by opponents.)

The document also criticizes the Affordable Care Act (ACA) for reducing reimbursements to hospitals and clinics for treating patients on Medicare.

Those reductions should save Medicare about $802 billion over a decade, according to the CBO. The authors of the GOP white paper repeatedly called that ACA provision a "raid," arguing that the reduced payments would discourage doctors from taking patients with Medicare. The GOP bill to undo the ACA, however, would maintain those reductions.

Republicans had initially planned to repeal the surtax beginning next year, but in a series of changes to their bill to undo Obamacare GOP lawmakers announced Monday, the tax would be repealed retroactively to Jan. 1.

The rich, however, already have been paying the Medicare tax in the weeks since the beginning of the year. Employees pay the Medicare tax with every new paycheck, when the amount they owe is withheld from their paychecks.

As a result, that retroactive provision will require the government to refund those taxpayers on the payments they have made. The details of how those affluent taxpayers will be refunded are not specifically addressed in Republicans' amendment to their legislation.

Ed Kleinbard, a legal scholar at the University of Southern California, said that if Republicans are concerned about the political implications of withdrawing money from the trust fund to refund the rich, lawmakers could add a provision to instead pay back those taxpayers using general revenue.

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