How to Raise Revenue without Raising Taxes

By Filed under Medicare on September 15, 2011 with 3 comments

When Medicare was established, it had two parts, A and B. Part A pays for hospitalization and is financed by a payroll tax that all workers pay. Part B pays for doctors’ visits and is voluntary. Its cost is financed by premiums paid by beneficiaries and by general revenues.

Originally, beneficiaries paid for 50 percent of Part B’s benefits. But in 1973, the law was changed and the percentage of benefits covered by premiums fell steadily until 1985, when premiums were fixed at 25 percent of the program’s costs. Thus if beneficiaries still paid as much of Medicare Part B’s costs as they originally were supposed to then federal revenues would be $65 billion higher this year.

And here’s the kicker: higher Part B premiums wouldn’t count as higher revenues, but as lower spending for Medicare. Therefore, it would not be a tax increase, would not violate the sacred pledge and would cut Medicare, which Republicans all say they want to do.

Full Bruce Bartlett column worth reading.

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Comments (3)

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  1. Devon Herrick says:
    September 15, 2011 at 10:03 am

    To Medicare Part A and Medicare Part B, add Medicare Part D — the prescription drug benefit. Like Medicare Part B, seniors only pay about 25% of the true cost. Despite the national debt ballooning (even before Baby Boomers retire), Congress decided to close the Donut Hole in Medicare Part D by 2019.

  2. Virginia says:
    September 15, 2011 at 11:32 am

    Bartlett provides excellent commentary on user fees and taxation. I agree. Raise the premiums.

  3. Don Levit says:
    September 16, 2011 at 11:55 am

    How about this for common sense?
    There are a block of people, enough adherents, that their perspective has a name, the Trust Fund Perspective.
    They believe Part D is fully paid for!
    From a paper entitled “Social Security and Medicare Trust Funds and the Federal Budget,” published by the Treasury:
    Page 13 “From the Trust Fund Perspective, SMI (Parts B and D) is always ‘fully funded’.
    From the Budget Perspective, SMI draws huge transfers.
    Page 17 “Net results for Budget Perspective – Revenues from public less expenses to public.
    Net results for Trust Fund Perspective – Revenues from public less expenses to public PLUS GENERAL FUND TRANSFERS PLUS TRUST FUND ASSETS.”

    Don Levit