Thanks to a Republican president and Congress, I’ll pay $1,130 more than the standard premium for doctors' services covered by Medicare this year. But Democrats are responsible for the $372 surcharge on my Medicare prescription drug plan.
I became aware of these income-related charges when I switched from my wife’s private health insurance to Medicare early this year. A little research revealed they were pushed through in 2003 and 2010 respectively, when opposite parties were in power. Whatever their differences on tax policy, it seems that Republicans and Democrats agree on the need for the middle class, as well as the wealthy, to pay more for the government benefits they get. That could be a starting point for negotiations on cutting the costs of entitlements.
Means testing and income indexing won’t solve the nation’s fiscal problems, but they could make a dent. For example, a little-noticed provision in the 2010 health care law nicknamed “Obamacare” will raise an estimated $25 billion from middle class taxpayers between 2011 and 2018, according to the Congressional Budget Office.
How so? Legislation passed by the GOP Congress and signed by President George W. Bush in 2003 required Medicare beneficiaries with adjusted gross income between $85,000 and $214,000 (double that for married couples) to pay a premium surcharge ranging from $530 to $2918 a year for their Part B doctors and out-patient services. The provision catches about 2.5 million of the 45 million Part B beneficiaries. But many more will be snared by the new health care law because it ends the inflation-indexing of the AGI cutoffs.
The health care law also set an income-related surcharge on premiums paid for enrollment in the Part D prescription drug benefit.
So even before negotiations on cutting entitlements get serious, the middle class is paying more without pushing back very hard. (I love my Medicare. There are fewer out-of-pocket costs, less paperwork and no more hassling with private health insurers. I’m happy to pay more to put it on a sounder footing.)
Despite opposition from some Democrats and the American Association of Retired People, the Part B surcharges caused little upheaval when they took effect in 2007. But still more people may have to be targeted for higher premiums if Congress wants to really cut costs, former budget director Robert Reischauer told Congressional Quarterly.
Means testing – limiting eligibility by income -- is standard practice for programs that help the poor, and even in a few programs that benefit the rich. The 2008 farm bill barred farmers with adjusted gross income above $750,000 from getting certain payments, and those with $500,000 or more in non-farm income were prevented from receiving any subsidies. CBO estimated 11-year savings of $250 million. The Bush administration wanted more stringent limits; and Obama has proposed phasing out certain payments altogether to large farmers.
At one time, subsidizing large, wealthy growers made sense. The government wanted them in farm programs so they would participate in federal acreage restrictions to prevent gluts, surplus crops and low prices. But after 1996 Congress abandoned planting controls on all crops except sugar, so the rationale no longer applies.
Other targets for curtailing or charging more for benefits for the well-to-do include veterans programs, the unlimited deduction for mortgage interest, and even Social Security.
The Bowles-Simpson plan for deficit reduction cuts Social Security benefits for people with above average earnings. The Center for Budget and Policy Priorities has charged that this approach undermines the program’s universal appeal, by weakening the link between earnings and benefits.
But columnist Robert Samuelson has countered that “we need to refocus these programs on their original purpose. Social Security was intended to prevent poverty, not finance recipients’ extra cable charges.”
Let the battle over benefits for the wealthy and the middle class begin.
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