Biden Wants To Push Tax Hikes To Fund Medicare

The White House claims that President Joe Biden's budget will help extend the sustainability of a crucial Medicare program for another 25 years by raising payroll taxes for anyone earning over $400,000 annually and giving the government new flexibility to negotiate medication pricing.

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"The budget I am publishing this week would make the Medicare trust fund healthy beyond 2050 without reducing a penny in benefits," Biden wrote in an opinion piece that appeared in the New York Times just before the announcement on Tuesday. In reality, by ensuring that Americans receive good healthcare for the money they pay into Medicare, we can obtain a greater return.

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Although his proposal has little chance of passing, especially since Republicans took over the House in January, it is an essential marker for discussions regarding government spending and gives the president a chance to declare his goals in the open.

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According to a White House fact sheet, the president's budget, which will be unveiled on Thursday, calls for removing a tax loophole used by business owners and higher earners to avoid paying additional taxes and hiking Medicare rates from 3.8% to 5% on income above $400,000. By enabling the insurance program to negotiate prices on more prescriptions and earlier when they are introduced to the market, Biden's plan would also assist strengthen Medicare reserves by investing $200 billion in prescription medication reforms over the following ten years.

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The White House disclosed the Medicare part of a budget plan on Tuesday, and the Washington Post had previously reported it.

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The Obama House is making a concerted effort in front of discussions over the debt ceiling and government money, where Republicans have vowed to demand significant cuts in spending.

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Republican Reaction

The Republican Party, led by House Speaker Kevin McCarthy, has sworn not to change Social Security or Medicare, two programs that enjoy broad bipartisan support, particularly among senior citizens. Yet, Republicans have already attempted to reform the entitlements by limiting eligibility or payouts, as Democrats, especially Biden, have frequently pointed out. White House officials had asked McCarthy to be more specific about where he would pursue cutbacks before the budget was released.

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House Republicans provide cuts they'd support in a debt ceiling agreement.

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Senator Elizabeth Warren of the Democratic Party encouraged Vice President Biden in a letter dated Monday to resist Republican demands for tax rebates and expenditure cutbacks, citing a Moody's Analytics estimate that drastic cuts risk starting a recession and wiping out 2.6 million jobs. 

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The Massachusetts senator warned that the Republican approach to raising the debt ceiling would either cause a catastrophic default as well as an economic downturn or drastic changes to important government programs that would kill millions of jobs. I urge you to maintain this strategy in your budget and stand firm against Republicans' demands for raising the debt ceiling that would harm the economy and eliminate jobs. "I know you are committed to making huge investments in American families as well as to making the wealthy pay their fair share," she said.

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One Year Tout

Democrats are hoping that Biden's budget, which would maintain benefits while cutting the deficit by $2 trillion in just ten years, will provide them a political advantage. More taxes on the rich would be used to offset rising expenditures. Hospital stays, nursing homes, and hospices are covered by Medicare's Hospital Insurance Trust Fund, or Part A. According to the most latest Medicare Trustees report, it is currently anticipated to become insolvent as soon as 2028.

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The Medicare program will remain strong for many years to come thanks to this slight increase in contributions made by people who have the highest earnings. In order to safeguard taxpayers' investment and the program's future, my budget will ensure that money gets straight into the Medicare trust fund.

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In a tweet on Tuesday, Minnesota's Democratic Senator Amy Klobuchar praised Biden's plan and called it "the proper thing to do."

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In the same way as my Medicare Part D negotiating bill does, this idea cuts costs for MORE prescription medications, according to Klobuchar. "Everyone benefits when prices are reduced for 50 million seniors."

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Close the Loophole

Biden's plan would close a loophole that permits some business owners who earn income through a S corporation, a limited liability company, or limited partners to avoid paying Medicare tax on some of their income in addition to the greater Medicare tax rate on income over $400,000.

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The Hospital Insurance Trust Fund would also receive funds from a tax introduced as part of Obamacare, known as the net interest income tax. Since it amounts to redirecting an already-existing revenue stream, doing so would not affect the total federal deficit, but the administration might claim that it is extending the program's solvency.

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According to the White House, proposed improvements to Medicare's capacity to negotiate prescription drug prices will also help seniors on the program by reducing their out-of-pocket expenses. Biden's budget would expressly suggest restricting the cost of certain generic pharmaceuticals, notably those used to treat hypertension and high blood cholesterol, to $2 per prescriptions per month. Additionally, up to three mental health or behavioral health visits per year will no longer be charged a fee under the budget.